What lenders check before they say yes to a mortgage
Mortgage lenders look at five main things: your credit score, your income and employment history, how much debt you already carry, how much money you have saved for a down payment, and the property itself. There is no single "mortgage score" — lenders weigh these factors differently depending on the loan type and their own rules. A lender might approve you for one loan program but not another, even on the same day.
The process starts with a pre-qualification conversation (which costs nothing and takes minutes) and moves to a formal pre-approval (which involves paperwork and a credit check). Pre-approval tells you what amount a lender is willing to lend you based on what you report. The final approval happens after the property appraisal and a deeper review of your documents.
Key Takeaways
- Lenders examine your credit score, income, existing debt, savings, and the property value — not just one of these things.
- Different loan types (conventional, FHA, VA, USDA) have different rules about credit scores, down payment size, and debt limits.
- A pre-approval letter shows what you might borrow but is not a may provide; final approval depends on the appraisal and document verification.
- Your debt-to-income ratio — the percentage of your monthly income that goes to debt payments — is often the deciding factor when you are on the borderline.
Credit score and payment history
Your credit score is usually the first filter. Conventional loans (the most common type, sold to Fannie Mae or Freddie Mac) typically want a score of 620 or higher, though 740+ gets you better interest rates. FHA loans, backed by the Federal Housing Administration, often go down to 580. VA loans for military members and USDA loans for rural properties have their own minimums, which vary by lender.
Lenders pull your full credit report, not just the score. They look for late payments, collections, foreclosures, and how long ago they happened. A late payment from five years ago hurts less than one from last year. If you have missed payments recently, most lenders want to see at least two years of on-time payments before they will consider you — though some programs are more flexible.
Lenders also check your credit mix: credit cards, car loans, student loans, and other installment debt. Having only credit cards looks riskier than having a mix. If you have no credit history at all, some lenders will work with you using alternative data (utility payments, rent history, insurance payments), but you will need to ask about this specifically.
Income, employment, and tax returns
Lenders want to see that your income is stable and likely to continue. They usually ask for your last two years of tax returns, your most recent pay stubs (usually the last two months), and a verification of employment letter from your employer. Self-employed people need to provide more: typically two years of business tax returns, profit-and-loss statements, and sometimes a CPA letter.
The income itself does not have to be high — it has to be verifiable and consistent. If you changed jobs recently, lenders want to see that your new job is in the same field and pays the same or more. A job change to a completely different industry can slow things down, even if the pay is higher. Bonus income, commission, and overtime are counted only if you have received them for at least two years.
Lenders also check for gaps in employment. A three-month gap five years ago is usually fine. A recent gap of a few weeks is usually fine if you have a written offer letter for your new job. Longer unexplained gaps raise questions and may require a written explanation.
Debt-to-income ratio and existing debts
Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes to debt payments. Most conventional lenders want this to be 43% or lower, though some go to 50% if your credit score and down payment are strong. FHA loans often allow up to 50% or slightly higher.
Here is how it works: if you earn $5,000 per month before taxes, your maximum debt payments (including the new mortgage) should be around $2,150. This includes your car payment, student loans, credit card minimums, child support, and the new mortgage payment. The lender calculates the mortgage payment using a standard interest rate and term, not the actual rate you will get.
Paying down credit cards and car loans before you apply can lower your DTI and improve your chances. Closing credit card accounts does not help — lenders look at the balances and limits, not whether the account is open. Paying off a $5,000 balance on a card with a $10,000 limit helps more than closing the account.
Down payment and savings
The amount you can put down depends on the loan type. Conventional loans usually require 3% to 20% down. FHA loans go as low as 3.5% down. VA loans often require 0% down. USDA loans also often require 0% down for rural properties. The lower your down payment, the higher your interest rate and the more you will pay in mortgage insurance.
Lenders want to see that you have saved the down payment yourself — they do not want to see that you borrowed it. If a family member is giving you money, most lenders require a gift letter stating that the money does not need to be repaid. Some lenders also want to see that you have reserves: money left over after the down payment and closing costs. This is less common with FHA and government-backed loans, but conventional lenders often prefer it.
The source of your down payment matters. Lenders will ask where the money came from and may want to see bank statements going back two months to verify it is yours. Large deposits that cannot be explained can slow down approval.
The property appraisal and title
The property itself has to be worth what you are paying for it. The lender orders an appraisal, which is a professional estimate of the home's value. If the appraisal comes in lower than the purchase price, you have a few options: renegotiate the price, put more money down, or walk away. The lender will not lend more than the appraised value.
The lender also checks the title to make sure the seller actually owns the property and there are no liens or claims against it. Title insurance protects you if a problem shows up later, but the lender wants to know about problems now. If there is a lien (a claim by someone who is owed money), it usually has to be paid off at closing before you get the keys.
Loan type and program rules
The type of loan you pursue changes what lenders look at and how strictly they look at it. A table of the main types:
| Loan Type | Minimum Credit Score | Minimum Down Payment | Who It Is For |
|---|---|---|---|
| Conventional | 620 (usually) | 3% | Anyone with decent credit and income |
| FHA | 580 | 3.5% | First-time buyers, lower credit scores |
| VA | No set minimum | 0% | Military members, veterans, surviving spouses |
| USDA | No set minimum | 0% | Rural property buyers with moderate income |
Each program has its own rules about what counts as income, how old late payments can be, and how much debt you can carry. A VA lender might approve you when a conventional lender would not, or vice versa. Shopping with multiple lenders (within a two-week window) does not hurt your credit score the way multiple applications normally would.
What happens after pre-approval
Pre-approval means a lender has reviewed your documents and is willing to lend you a certain amount — but it is not final. After you make an offer on a house and it is accepted, the lender orders the appraisal and does a more detailed review of your finances. This is when they verify your employment by calling your employer, pull updated credit reports, and review your bank statements more carefully.
If anything has changed since pre-approval — a job loss, a new car loan, a missed payment, a large deposit you cannot explain — tell your lender immediately. Waiting until the final review is worse. Most lenders also do a final credit check a few days before closing, so new debt or late payments in that window can still cause problems.
Frequently Asked Questions
What credit score do I need to get a mortgage?
Conventional loans usually require 620 or higher, though 740+ gets better rates. FHA loans go down to 580. VA and USDA loans have no set minimum, but lenders vary. The higher your score, the lower your interest rate and the easier approval becomes.
Can I get a mortgage if I was denied before?
Yes. A denial usually means one or more factors were not strong enough at that time. Paying down debt, raising your credit score, saving a larger down payment, or waiting for late payments to age can change the outcome. Different lenders also have different rules, so trying another lender is worth doing.
Do I need a perfect credit history to be approved?
No. Lenders expect most people to have some credit issues. A late payment from years ago is usually fine. Recent late payments (within the last year or two) are harder to overcome, but not impossible — especially if you can explain what happened and show you have paid on time since.
What if my income is irregular or I am self-employed?
Self-employed borrowers need two years of tax returns and profit-and-loss statements. Lenders average your income over that period. If your income is growing, that helps. If it is dropping, lenders may use a lower average. Commission and bonus income count only if you have received it for at least two years.
Can a co-signer help me get approved?
Yes. A co-signer with stronger credit or income can improve your chances, but they are responsible for the loan if you do not pay. Their debt counts toward their own debt-to-income ratio, so they cannot use that money to borrow elsewhere. Lenders treat co-signers seriously — they will verify their income and credit just as they do yours.