Last reviewed by Ken Clark Jr., Certified Mortgage Advisor, NMLS #225375, on May 17, 2026.
Credit, income, debts, and assets, the four pillars of mortgage qualification, demystified.
If you've been Googling "do I qualify for a mortgage," you've probably read 100 pieces of conflicting advice. The truth: lenders look at four things. Once you understand each one, qualification stops feeling mysterious.
FHA and conventional do not have a hard credit score requirement, the bigger picture (income, assets, payment history, and overall file strength) tells the real story. That said, the higher the score, the better the rate and the lower the PMI. The biggest score-movers are recent late payments, high credit card utilization, and collections that can be paid off.
This is the percentage of your gross monthly income that goes toward debt payments, including the new mortgage. Most programs cap DTI between 45% and 50%. The fastest way to qualify for more home is often to pay down a credit card before applying, not save for a bigger down payment.
Two-year history of stable income is the standard. W-2 employees, salaried workers, and union members tend to qualify easily. Self-employed borrowers, commission earners, and 1099 contractors often need either two years of tax returns or an alternative-doc program (bank statement, P&L only, etc.).
Many programs require zero reserves, but sometimes you will need at least 1 month of mortgage payments held in the bank after closing. Down payment can come from savings, gift funds (with proper documentation), retirement loans, or DPA. The source matters, "seasoning" of funds is a real thing.
Pre-approval. A real one, not a rate quote. Pre-approval means we've reviewed credit, income, and assets and know what you actually qualify for. It takes about 15 minutes and gives you the leverage to make offers.
Common questions on this topic, answered by Ken Clark Jr., Certified Mortgage Advisor.
Lenders evaluate four primary factors: credit score (typically 580+ for FHA, 620+ for conventional), debt-to-income ratio (usually 43 to 50 percent maximum), employment and income stability (2-year history preferred), and reserves and down payment (3 to 3.5 percent minimum on first-time buyer loans).
FHA loans require 580 for 3.5 percent down. Conventional loans require 620 minimum. VA and USDA loans typically require 580-620. Best rates come at 740+ on conventional and 680+ on FHA. Down payment assistance programs often require 640 to 680 minimum credit.
DTI is your total monthly debt payments (including the new mortgage) divided by your gross monthly income. FHA allows up to 56.99 percent DTI with compensating factors. Conventional typically caps at 43 to 50 percent. The lower your DTI, the more home you can afford.
Most first-time buyers need 3 to 3.5 percent of purchase price for down payment, 2 to 5 percent for closing costs, and 2-3 months of mortgage payments in reserves. On a $500,000 home with DPA assistance, your out-of-pocket can be as low as $5,000 to $10,000.
Lenders prefer a 2-year history in the same line of work. Gaps under 6 months are usually fine. New graduates and career changers can qualify with college transcripts or pay stubs documenting field-relevant work. Self-employed borrowers typically need 2 years of tax returns or bank statement programs.
Yes. FHA, VA, and Conventional all have different rules for how student loans are calculated in DTI. Income-driven repayment plans, deferred loans, and the actual payment versus 1 percent of balance can all affect the calculation. A loan officer can show you the lowest-counting option.
2 most recent pay stubs, 2 years of W-2s, 2 years of tax returns (if self-employed), 2 months of bank statements, driver's license, and authorization to pull credit. Self-employed borrowers may need P&Ls, business bank statements, and CPA letters.
Yes. A pre-approval validates your buying power, makes your offer stronger, and locks in your loan terms before you tour homes. In competitive Sacramento and New Jersey markets, sellers often won't review offers without a current pre-approval.
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Schedule a free discovery call with Ken Clark Jr. and get clarity on your buying power, programs, and next steps.
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