Get Mortgage Ready

Before you look at homes, understand what you can comfortably afford — not just what you might qualify for. These are two different numbers, and the gap between them matters.

A common starting point is keeping total housing costs (principal, interest, taxes, insurance, and HOA) at or below 28% of your gross monthly income. Your total debt payments — including housing — are often evaluated against 43–50% of gross income depending on the loan program.

Use our mortgage calculator to model different purchase prices, down payment amounts, and rates. Run scenarios at a rate slightly above current market to stress-test your comfort level.

Different loan programs have different minimum down payment requirements. VA and USDA loans offer 0% down for eligible borrowers. FHA requires 3.5% with qualifying credit. Conventional loans start at 3% for some programs, with 20% eliminating private mortgage insurance (PMI).

Beyond the down payment, plan for closing costs — typically 2–5% of the loan amount — and cash reserves. Many lenders want to see 2–3 months of mortgage payments in savings after closing.

Gift funds from family members are allowed on many loan programs, subject to documentation requirements. Down payment assistance programs may also be available depending on your income, location, and first-time buyer status.

Your credit score affects both your loan eligibility and your interest rate. Most conventional loans require a minimum 620 score; FHA allows as low as 580 with 3.5% down. VA and USDA loans have no official minimum but lenders typically require 620+.

Pull your free credit reports from AnnualCreditReport.com and review them for errors. Dispute inaccuracies with the reporting bureaus — errors are more common than most people expect.

To improve your score: pay down revolving balances (aim for under 30% utilization on each card), avoid opening new credit accounts in the months before applying, and make all payments on time. Even a modest score improvement can meaningfully affect your rate.

Most purchase loans require: two years of W-2s and federal tax returns, 30 days of recent pay stubs, two months of bank and asset statements (all pages), a government-issued photo ID, and landlord contact information if you currently rent.

Self-employed borrowers typically need two years of personal and business tax returns, a year-to-date profit and loss statement, and business bank statements. Bank statement loan programs may allow alternative documentation.

Start gathering these documents now — even if you are months away from applying. Having them organized reduces stress and speeds up the process when you are ready.

Student loan debt affects your debt-to-income ratio (DTI), which lenders use to evaluate your ability to carry a mortgage payment. How your student loans are counted depends on the loan program and your repayment status.

For conventional loans, lenders typically use the actual payment shown on your credit report. For income-driven repayment (IDR) plans with a $0 payment, some programs use 0.5–1% of the outstanding balance as a payment estimate.

If student loan debt is a concern, discuss your specific situation with a loan officer before assuming you do not qualify. Program rules vary, and there may be options worth exploring.

Many down payment assistance programs and some first-time buyer loan programs require completion of an approved homebuyer education course. These are typically available online, take a few hours, and cost little or nothing.

HUD-approved housing counseling agencies offer free or low-cost guidance on budgeting, credit, and the homebuying process. Find a local agency at hud.gov/counseling. Counseling is required for HECM (reverse mortgage) borrowers.

Even if not required for your loan program, homebuyer education is worth the time. Understanding the process reduces surprises and helps you make more confident decisions.