How to Qualify for a Mortgage | Requirements and Guidelines

how to qualify for a mortgage loan

Buying a home can seem like a daunting process, and in some cases it is.

We will try to help you understand the process better so you will know if you qualify for a mortgage and which type of loan is best for you.

In this article we will go over down payment and credit score requirements, debt to income ratios, qualifying income, and more.

It’s important to remember that each mortgage program has different requirements to qualify.

Check if you qualify for a loan and get current rates

How much of a Down Payment do I need?

For the most part gone are the days of needing a large 20% down payment to qualify for a home. There are several types of mortgages that require a low down payment, or no down payment at all. You don’t have to be a first time home buyer to qualify for these programs either.

FHA loans are one of the most popular types of mortgages used today, this is because of the flexible requirements. You just need a 3.5% down payment for FHA in most cases. For each of the programs listed below you can use gift funds for the down payment.

Down payment guidelines for each loan type:

What Credit Score do I need for a Mortgage?

tips to improve your credit score

One of the biggest factors in determining if you qualify for a mortgage or not, is your credit score. If you have great credit, there is no reason to worry. However, if you have bad credit, it will be much more difficult to get approved for a home loan. Ideally you want a 680 credit score or higher. Some lenders require a 640 credit score while others can accept lower scores.

There are set minimum qualifying credit score requirements for each loan program. However, lenders don’t have to follow them and will typically set their own credit score guidelines. If you do have poor credit scores, make sure you get a copy of your report.

You can read this post on how to improve your credit scores. Here are lowest credit score requirements you can generally find for each type of mortgage.

Minimum Qualifying Credit Scores:

  • VA Loans – 620 credit score (Some lenders may be able to approve a 580+ score)
  • USDA Loans – 620 credit score
  • FHA loans – 580 credit score
  • 203k Loans – 640 credit score
  • Conventional 97 – 620 credit score
  • Conventional Loans – 640 credit score

Income Guidelines for a Mortgage

In order to qualify for a home loan you will need to be able to prove your income is sufficient and consistent. If you are paid a salary then this should be easy. However, self employed borrowers and  commission based jobs are more difficult.

You should have at least 2 years of documented income from the same company, or in the same industry to qualify. If you earn commissions you just need to average your income from the last 2 years of tax returns.

Qualifying Income

  • W-2 Income/Salary
  • Income from part-time jobs
  • Income from a second Job
  • Overtime and Bonuses
  • Seasonal jobs
  • Self-employed Income
  • Alimony and child support (Documentation required)

Non-Qualifying VA Income

Required Mortgage Documents

There are several documents your loan officer will need to process your loan. Save yourself some time and have these documents ready to send to your lender.

  • W2’s from the past 2 years
  • 3 months worth of pay-stubs
  • Bank statements (past 3 months)
  • Previous 2 years of tax returns
  • List of your debts and assets
  • Divorce decree
  • Additional income documentation

Mortgage FAQ

How to qualify for a mortgage?

To qualify for a home loan you will need a credit score of at least 580. 2 years of consistent verifiable income with w2’s and tax returns. You will also need a down payment, however there are several low down and no down payment loan options available.

What credit score do you need for a home loan?

FHA loans allow borrowers to have a credit score of 500-579 with a 10% down payment. However, most lenders will not be able to process a loan with a credit score in this range. If you have at least a 580 credit score, you will have better odds of getting approved with a 3.5% down.

How much of a down payment do you need to buy a house?

VA and USDA loans require no down payment. FHA loans, which are the most popular type of mortgage require a 3.5% down payment.

Check if you qualify for a loan and get current rates