Buying a home is a big step, and understanding mortgage requirements can make the process smoother. Whether you're a first-time buyer or a seasoned investor, knowing what lenders look for can help you get the best financing options.
Lenders consider several factors when approving a mortgage:
Credit Score: Most lenders require a 620+ credit score for conventional loans, but FHA loans may allow scores as low as 500-580 with a higher down payment.
Debt-to-Income Ratio (DTI): Your DTI should typically be 43% or lower, meaning your monthly debt payments (including your new mortgage) shouldn’t exceed 43% of your income.
Employment & Income Stability: Most lenders require at least 2 years of steady employment and proof of stable income.
Down Payment: Conventional loans often require 3-20% down, while FHA loans allow as little as 3.5% down. VA and USDA loans may offer 0% down for eligible buyers.
Assets & Reserves: Lenders may check your savings and investment accounts to ensure you have funds for closing costs and mortgage payments.
Conventional Loans – Ideal for buyers with good credit and a stable income. Down payments start at 3% for first-time buyers.
FHA Loans – Great for buyers with lower credit scores. Requires a 3.5% down payment for scores 580+ and 10% for scores between 500-579.
VA Loans – For eligible military members and veterans, offering 0% down and no private mortgage insurance (PMI).
USDA Loans – Designed for rural homebuyers, offering 0% down for eligible properties and income levels.
Jumbo Loans – For loans exceeding the conventional limit ($766,550 in most areas for 2024). Requires strong credit and financials.
Getting pre-approved shows sellers you’re a serious buyer. Here’s what to expect:
Submit a Mortgage Application – Provide personal and financial details.
Credit Check – Lenders will check your credit score and history.
Income & Employment Verification – You’ll need W-2s, tax returns, and recent pay stubs.
Debt Analysis – Lenders assess your current debts to determine affordability.
Pre-Approval Letter – If approved, you’ll receive a letter stating the loan amount you qualify for.
Improve Your Credit Score – Pay down debts and avoid new credit inquiries.
Save for a Down Payment & Closing Costs – The more you save, the better your loan terms.
Get Pre-Approved Early – This strengthens your offer when house hunting.
Avoid Large Purchases Before Closing – Don’t buy a new car or open new credit accounts.
Work with a Trusted Lender – Having the right mortgage professional can make a big difference.
Whether you're buying, refinancing, or exploring your options, Troy Lawrence is here to guide you every step of the way.
