Getting a mortgage approved can feel complex, but it boils down to a few key factors lenders prioritize:
- Credit Score: Aim for a FICO® Score of at least 620 for most loans. Higher scores (670+) can secure better rates.
- Debt-to-Income (DTI) Ratio: Keep your DTI under 43% – ideally below 36%.
- Income and Employment: Stable, consistent income is critical. Provide pay stubs, W-2s, or tax returns (especially if self-employed).
- Down Payment: Requirements vary by loan type – 3.5% for FHA loans, 5% for conventional loans, or 0% for VA/USDA loans.
- Cash Reserves: Lenders like to see 2–6 months of mortgage payments saved.
- Property Appraisal: The home’s value must match or exceed the loan amount.
Quick Tip: The entire process, from pre-approval to closing, typically takes 6–8 weeks. Budget for closing costs (2–5% of the home price) to avoid surprises.
How to Get Approved for a Mortgage Step-By-Step (in 2025)
What Lenders Check in Your Mortgage Application
When you apply for a mortgage, lenders dig into several aspects of your financial situation to determine whether you’re a good candidate for a loan. Knowing what they look at can help you prepare and avoid common mistakes that might hurt your chances.
Credit Score Requirements
Your credit score, particularly your FICO score (ranging from 300 to 850), plays a major role in whether you’re approved and what interest rate you’ll get. Lenders use this score to gauge how risky it is to lend to you[4].
Different types of loans have different minimum credit score requirements. For instance:
- Conventional loans usually require at least a 620 score.
- FHA loans are more lenient, accepting scores as low as 580 with a 3.5% down payment, or even 500 if you can put down 10%[3].
- VA loans don’t have a set minimum, but most lenders prefer scores of 620 or higher.
- USDA loans also lack a federal minimum, though many lenders look for scores of 640 or more[3].
Your credit score doesn’t just determine approval – it also affects how much you’ll pay over time. Take a look at how mortgage APRs and payments varied by credit score in early 2025[4]:
| FICO Score Range | Mortgage APR | Monthly Payment | Total Interest (30 Years) |
|---|---|---|---|
| 760-850 | 7.242% | $2,746 | $585,730 |
| 700-759 | 7.449% | $2,803 | $606,168 |
| 680-699 | 7.555% | $2,832 | $616,696 |
| 660-679 | 7.609% | $2,847 | $622,075 |
| 640-659 | 7.711% | $2,875 | $632,264 |
| 620-639 | 7.838% | $2,911 | $645,004 |
For example, someone with an excellent score (760-850) could save about $165 per month – and over $59,000 in interest – over the life of their loan compared to someone with a score between 620 and 639.
To improve your credit score, check for errors in your report, dispute inaccuracies, pay down debt, make payments on time, and avoid opening new accounts before applying for a mortgage[4].
Debt-to-Income Ratio Limits
Your debt-to-income (DTI) ratio is another critical factor lenders evaluate. This ratio shows how much of your gross monthly income goes toward paying debts, and it gives lenders a sense of your ability to handle mortgage payments[2].
There are two types of DTI ratios:
- Front-end ratio: Includes only housing-related costs like your mortgage payment, property taxes, homeowners insurance, and HOA fees[5].
- Back-end ratio: Includes all monthly debt payments, such as credit cards, car loans, student loans, and child support, in addition to housing costs[5].
Most lenders prefer a back-end DTI below 43%, though many aim for closer to 36%. The average DTI for mortgages closed in April 2025 was 40%[2]. Lenders focus on recurring debts, so one-time expenses like medical bills usually don’t count[6].
"Most people don’t realize the monthly payments go into the debt-to-income ratio, and not the amount of debt." – Tom Tevis, Fairway loan officer[5]
Here’s an example of how DTI is calculated:
| Debt Type | Monthly Payment |
|---|---|
| Car payment | $500 |
| Student loan payment | $100 |
| Credit card payments | $25 |
| Estimated mortgage payment | $2,000 |
| Total monthly debts | $2,625 |
| Total monthly income | $6,000 |
| Back-end DTI | 43% |
If your DTI is too high, you can work on lowering it by increasing your income, paying down debt, or opting for a less expensive home with lower monthly payments[7].
"It is important that you are exploring all options with a certified mortgage advisor so they can help you structure your debt in the most cost-effective manner." – Rebecca Carr, Fairway loan officer[5]
Job History and Income Proof
Your employment and income stability are also key factors lenders evaluate. They want to ensure that your income is steady, predictable, and likely to continue[8].
Here’s what lenders typically require:
- Pay stubs covering at least 30 days, showing year-to-date earnings.
- W-2 forms from the last two years.
- Tax returns for the past two years, especially for self-employed applicants[8].
If you’re self-employed or have variable income, you’ll need to provide additional documentation, such as federal tax returns (including all schedules and attachments). If you haven’t filed taxes for the most recent year, a signed extension will be required.
Employment gaps need to be explained, and lenders may contact your employer directly for verification if needed. The rise of gig work – now accounting for about 36% of U.S. workers – adds complexity to income verification for many borrowers[9].
For those with fluctuating income, showing a consistent earnings history through detailed records can strengthen your application[8].
Down Payment and Cash Reserve Rules
Lenders also evaluate your down payment and cash reserves to ensure you’re financially prepared. The required down payment depends on the type of loan:
- Conventional loans: Typically require at least 5%, but putting down 20% eliminates private mortgage insurance (PMI).
- FHA loans: Require 3.5% down for credit scores of 580 or higher, or 10% for scores between 500 and 579[3].
- VA loans: Allow 0% down for eligible veterans and service members.
- USDA loans: Also allow 0% down for qualified rural borrowers[3].
In addition to the down payment, lenders look for cash reserves – extra funds available after closing. Most lenders like to see 2-6 months’ worth of mortgage payments in reserves, depending on the loan type and your financial profile.
Funds must be documented through recent bank statements (usually covering the last 60 days). Large deposits need to be explained with proper documentation. Gift funds from family members are allowed if accompanied by a gift letter stating the money doesn’t need to be repaid.
Acceptable down payment sources include savings accounts, checking accounts, investment accounts, and retirement accounts. However, funds from personal loans or cash advances aren’t allowed for down payments.
The Mortgage Approval Process Step by Step
Knowing how the mortgage approval process works can help you stay prepared and avoid surprises along the way. Typically, the process takes about 6–8 weeks, with the average closing time being 44 days as of October 2024 [1][11].
Getting Pre-Approved and Submitting Documents
The first step is pre-approval, which determines how much you can borrow before you start looking for a home. To get pre-approved, you’ll need to provide key financial documents like pay stubs, W-2 forms, tax returns, and bank statements [1]. If you’re self-employed, expect to submit additional paperwork, such as complete tax returns with all schedules and attachments.
HomeLoanAgents simplifies this step by offering both digital and advisor-supported application options. You can securely upload your documents online or work directly with a mortgage professional for guidance. Getting pre-approved not only shows sellers you’re a serious buyer but also helps you avoid falling for a home that’s out of your price range [11]. Once your documents are submitted, the process moves to underwriting.
Underwriting Review and Property Appraisal
During underwriting, your financial information, loan details, and the property’s value are reviewed in detail to determine final approval [12]. This stage can take over a week and involves a thorough evaluation of three main areas: your ability to make mortgage payments, your credit history, and the value of the property you’re buying [13].
A property appraisal is also conducted during this phase to ensure the home’s value matches the purchase price [10]. If the appraisal comes in lower than expected, it could delay or complicate the process since lenders won’t approve loans for more than the appraised value. Common issues that can slow down underwriting include incomplete documents, credit concerns, changes in your financial situation, or appraisal discrepancies [12]. Roughly 8% of mortgage applications are denied, often due to problems uncovered during this review [14].
To keep the process on track, respond quickly to any requests for additional information, avoid taking on new debt, and stay in close communication with your lender [12][13]. Once underwriting and the appraisal are complete, your application moves to the final approval stage.
Final Approval and Closing Day
After underwriting, you’ll receive a Closing Disclosure at least three business days before your closing date. This document outlines your finalized loan terms, monthly payments, and closing costs, which typically range from 2% to 5% of the home’s purchase price [1]. Review it carefully and compare it to your initial loan estimate to ensure everything matches. You’ll also want to complete a final walk-through of the property within 24 hours of closing to confirm that any agreed-upon repairs have been made and the home is in the condition you expect [15][17].
On closing day, bring a government-issued ID, proof of homeowners insurance, your Closing Disclosure, and either a certified check or proof of a wire transfer for the funds you owe [15][16][18]. HomeLoanAgents offers tools to make closing more convenient, including eClosing options for digital document signing. Once you’ve signed the necessary paperwork and completed the fund transfer, you’ll receive your keys and officially become a homeowner [18].
Stay organized, respond promptly to your lender’s requests, and don’t hesitate to ask questions to ensure the process goes as smoothly as possible.
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How to Fix Common Mortgage Approval Problems
Running into issues during the mortgage approval process can be frustrating, but most problems have solutions. Whether you’re facing credit challenges, a high debt-to-income (DTI) ratio, or complications with self-employment income, there are steps you can take to improve your chances. Let’s break down some practical strategies to tackle these common hurdles.
Raising Your Credit Score
A low credit score can be a major obstacle, but there are ways to improve it.
Start by reviewing your credit reports for errors and disputing any inaccuracies. Even small mistakes can hurt your score unnecessarily [19][22]. Keep your credit utilization low – aim to use less than 30% of your available credit [19]. If you’re carrying high balances, you might request a credit limit increase to improve your utilization ratio without immediately paying down debt.
To avoid missed payments, set up autopay or use calendar reminders [19]. Consistent on-time payments will gradually rebuild your credit, even if you’ve had delinquencies in the past [21]. Paying off delinquent accounts and focusing on reducing revolving debt, like credit cards, can also help [21][22]. Keep paid-off accounts open to maintain a higher total credit limit.
If you’re new to credit or rebuilding after financial difficulties, consider becoming an authorized user on a family member’s credit card. This can help you benefit from their good credit history [20].
Once your credit score improves, it’s time to address your overall debt.
Lowering Your Debt-to-Income Ratio
If your DTI ratio is too high, you’ll need to either reduce your debt or increase your income [7].
Start by paying off smaller debts that you can clear quickly [23][24]. Focus on credit cards and personal loans, as these often have higher monthly payments relative to their balances. Debt consolidation might also be worth exploring – it can help lower your monthly payments by moving high-interest debt to a lower-interest option [25].
On the income side, look for ways to supplement your earnings. Lenders often accept additional income sources as long as they’re well-documented and consistent. Just be careful not to take on new debt while working to lower your DTI [23].
According to Brandt Stone, a Home Loan Originator at AgSouth Mortgages:
"Typically, conventional home loan programs prefer a debt to income ratio of 45% or less but it’s not necessarily a hard stop as other factors can influence the decision (like loan to value and credit profile)." [25]
Getting Approved with Self-Employment Income
For self-employed borrowers, securing a mortgage requires thorough documentation of income. With over 16 million self-employed individuals in the U.S., lenders have systems in place to evaluate non-traditional income sources [27].
The key is understanding how lenders calculate your income. Loan expert John Meyer explains:
"Loan officers will use the worst-case scenario. So if you made less in the most recent year, we will use a 12-month average, and if increasing year-over-year, then a 2-year average." [26]
Keep your business and personal finances separate by using different bank accounts and credit cards. This makes it easier for lenders to understand your financial situation [28][29]. Be prepared to provide two years of personal and business tax returns, as well as current profit and loss statements and bank statements, to verify your income [26].
Making a larger down payment can also improve your chances. Rob Heck, Vice President of Mortgage at Morty, says:
"Increasing your down payment can also help lower your loan-to-value ratio, and hence show lenders that you’re a lower-risk borrower. As a person with a non-traditional source of income, you’ll have an easier time securing a mortgage if you have significant savings put away, or if you’re able to put at least the traditional 20% down." [27]
If verifying your income is a challenge due to business write-offs or fluctuating earnings, look into alternative loan options like bank statement loans or non-QM (non-qualified mortgage) products [26][27]. Some lenders, such as HomeLoanAgents, offer programs tailored to self-employed borrowers.
Working with a CPA can help you organize your finances effectively. Local community banks may also offer more flexible underwriting and have a better understanding of area businesses [26][29]. Keith Hall, President of the National Association for the Self-Employed, notes:
"The typical mortgage broker has a checklist. They want to see how long you’ve been at your existing job, as well as two years’ worth of pay stubs." [29]
Lenders generally look for at least two years of steady self-employment history, a credit score of 620 or higher, and a DTI below 43% [26]. Strengthening these areas not only improves your application but also aligns with what lenders expect.
Getting Ready for Mortgage Approval Success
Understanding what lenders look for can make the mortgage process feel less daunting. Freddie Mac puts it well: "By learning what lenders look at when deciding whether to make a loan, you’ll be more confident in navigating the mortgage application process" [33]. Armed with this knowledge, you can turn what might seem overwhelming into a clear set of steps to follow.
Start by focusing on the basics. Aim for a credit score of 780 to qualify for the best conventional mortgage rates [30]. Keep your debt-to-income ratio within the recommended range and allocate no more than 28% of your net income to housing costs [32]. Gather your financial documents, use a home affordability calculator to estimate your budget, and reach out to at least three lenders for rate quotes to compare your options [30]. Getting pre-approved not only signals to sellers that you’re serious but also gives you a better idea of what you can afford [30][31].
Once you’ve laid this groundwork, it’s important to maintain financial discipline during the mortgage process. Avoid opening or closing credit accounts and steer clear of major job changes while your application is under review [30][31][32]. Additionally, save for both your down payment and closing costs, which typically fall between 2% and 6% of the loan amount [30].
For those seeking a smoother experience, HomeLoanAgents offers AI-driven underwriting tools and a wide range of loan options. Their licensed professionals provide step-by-step guidance, combining technology with personalized support to help make homeownership more accessible.
FAQs
How can I quickly boost my credit score to get better mortgage rates?
Improving your credit score in a short time can make a big difference when it comes to securing better mortgage rates. Here are a few practical steps to help you get started:
- Pay your bills on time: Your payment history plays a huge role in determining your credit score. To stay on track, consider setting up automatic payments or reminders so you never miss a due date.
- Reduce credit card balances: Keeping your credit utilization ratio below 30% of your total available credit can give your score a boost. Focus on paying down those balances as much as possible.
- Review your credit reports for errors: Mistakes on your credit report can drag your score down. Regularly check your reports and dispute any inaccuracies you find.
By sticking to these strategies, you can improve your credit score and put yourself in a better position to snag a more favorable mortgage rate.
What can I do to improve my chances of mortgage approval if my debt-to-income ratio is too high?
If your debt-to-income (DTI) ratio is higher than it should be, don’t worry – there are practical steps you can take to improve your financial standing and increase your chances of getting approved for a mortgage.
Start by tackling your existing debt. Focus on paying off high-interest obligations, like credit cards, to reduce your monthly payments. Consolidating your debts into a single loan with a lower interest rate may also help simplify your finances and make payments more manageable.
Consider ways to boost your income as well. This could involve asking for extra hours at work, picking up a side hustle, or exploring freelance work. Pair this with a strict budget to create more room for paying down debt faster.
Lastly, hold off on taking on any new debt while you’re in the mortgage application process. Adding new loans or credit lines can increase your DTI ratio, which could hurt your chances of qualifying. By focusing on these strategies, you’ll be in a stronger financial position to move forward with your mortgage plans.
How does being self-employed impact my ability to get a mortgage, and what documents will I need to provide?
Being self-employed can make getting a mortgage a bit trickier because lenders usually ask for extra documentation to confirm steady income. You’ll likely need to provide two years of personal and business tax returns, profit and loss statements, bank statements, and proof of business ownership (such as state licenses or client contracts).
Since self-employment income often fluctuates, lenders may see it as a higher risk. To boost your chances of approval, work on keeping your credit score strong, save for a larger down payment, and make sure your financial records are accurate and well-organized. These steps can help you build a convincing case for lenders.
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