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Mortgage Basics

What Lenders Look For When Approving Your Mortgage

Jul 5, 2025
7 min read
By Clint Graves
What Lenders Look For When Approving Your Mortgage

What Lenders Look For When Approving Your Mortgage

When you apply for a mortgage, lenders evaluate you based on four key factors. Understanding these upfront helps you prepare and increases your chances of approval.

The Four Pillars of Mortgage Approval

1. Income & Employment History

Lenders want to see stable, consistent income. They'll verify:

  • Your current salary or hourly wage
  • Employment history (typically 2+ years in the same field)
  • Any additional income sources (bonuses, freelance work, rental income)
  • Job stability and likelihood of continued employment

    • 2. Credit Score & History

    Your credit score is a snapshot of how well you manage debt. Most lenders prefer:

  • Conventional loans: 620+ credit score
  • FHA loans: 580+ credit score (3.5% down) or 500+ (10% down)
  • VA loans: No minimum, but most lenders prefer 620+

    • 3. Debt-to-Income Ratio (DTI)

    This compares your monthly debt payments to your gross monthly income. Most lenders want:

  • Front-end DTI: Housing costs ≤ 28% of gross income
  • Back-end DTI: Total debt payments ≤ 36-43% of gross income

    • 4. Down Payment & Assets

    Lenders want to see you have:

  • Enough for the down payment (3-20% depending on loan type)
  • Closing costs (2-5% of home price)
  • Emergency reserves (2-6 months of mortgage payments)

    • Pro Tips for Approval Success

  • **Start Early**: Begin preparing 6-12 months before applying
  • **Document Everything**: Keep detailed records of income and assets
  • **Avoid Major Changes**: Don't switch jobs or make large purchases
  • **Build Reserves**: Save beyond just the down payment
  • **Check Your Credit**: Review reports and fix errors early

    • Remember: The stronger you are in each category, the better your chances of approval and favorable terms.

    About the Author

    CG

    Clint Graves

    Senior Loan Officer with 15+ years experience in mortgage underwriting

    Tags

    #mortgage approval#credit score#DTI#down payment#income requirements

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