Mortgage Approval Factors:
What Lenders Actually Look At
If you've ever wondered whether you'll qualify for a mortgage — or why a lender said yes to someone and no to someone else — the answer comes down to a handful of financial factors that lenders evaluate together. Mortgage approval factors include your credit score, income, debt-to-income ratio, and how much you're putting down. No single number makes or breaks an application, but understanding how they interact can tell you a lot about where you stand and what, if anything, you might want to adjust before you apply.
This page walks through each factor plainly — what it is, how lenders use it, and what the real-world ranges look like.
The Four Core Mortgage Approval Factors at a Glance
| Factor | What Lenders Measure | Why It Matters |
|---|---|---|
| Credit Score | Your history of managing debt | Affects eligibility and interest rate |
| Income | Stable, documented earnings | Determines how large a loan you can support |
| Debt-to-Income (DTI) | Monthly debts vs. gross monthly income | Shows whether you can handle added housing costs |
| Down Payment / Equity | Cash at closing or home equity held | Affects loan-to-value, rate, and program options |
Credit Score: What Ranges Actually Mean for Your Application
Lenders pull a credit score — typically a FICO score — to assess how reliably you've managed debt over time. Higher scores generally translate to better interest rates and more loan options. But "good enough to qualify" and "good enough to get the best rate" are two different thresholds.
According to myFICO's credit education resources, FICO scores range from 300 to 850, with most mortgage programs requiring a minimum in the mid-600s or higher. FHA loans, backed by the federal government, allow scores as low as 580 with a 3.5% down payment — or as low as 500 with 10% down — making them a common path for buyers with credit blemishes. Conventional loans typically require a minimum of 620, though scores below 680 may come with higher rates or additional conditions.
| Credit Score Range | Typical Impact on Mortgage |
|---|---|
| 760+ | Best available rates — strongest pricing across most loan types |
| 720–759 | Strong — competitive rates, most loan programs available |
| 680–719 | Good — minor rate adjustments may apply on conventional loans |
| 640–679 | Eligible but limited — higher rate, fewer program options |
| 580–639 | FHA-eligible — conventional approval unlikely without strong compensating factors |
| Below 580 | Difficult — very limited options; credit rebuilding typically needed first |
One thing worth understanding: your score at the time you apply is what matters, not what it was six months ago. If you've recently paid down balances or had errors corrected, those changes can show up quickly.
Income Requirements: It's About Stability, Not Just the Number
Lenders aren't just asking how much you earn — they're asking whether that income is stable, documentable, and likely to continue. A salaried employee with two years at the same company is easy to evaluate. A consultant who had a great year followed by a slow one takes more analysis.
What types of income count?
Most lenders will consider: base salary or hourly wages, overtime and bonuses (typically averaged over 24 months), self-employment income (net, not gross), rental income, retirement or Social Security income, alimony or child support (if it will continue for at least three years), and certain investment or asset income.
The key phrase in lending is "qualifying income" — which means it has to be documented and stable. If you're self-employed or have income that doesn't show up cleanly on a W-2, that doesn't disqualify you. It just means the documentation process is different. Our page on working with self-employed and complex income situations covers that in more detail.
How much income do you need?
There's no set dollar amount — what matters is the ratio of your income to your debts and proposed housing costs. That's where DTI comes in.
Debt-to-Income Ratio: The Number Lenders Watch Most Closely
Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes toward monthly debt payments. It's calculated in two parts:
- Front-end DTI: Just your proposed housing payment (principal, interest, taxes, insurance, HOA if applicable) divided by gross monthly income
- Back-end DTI: All monthly debt payments — housing plus car loans, student loans, credit cards, etc. — divided by gross monthly income
Back-end DTI is what lenders focus on most. Per Fannie Mae guidelines, the standard limit for a conventional loan is 45%, though automated underwriting systems can approve DTIs up to 50% when other factors — like reserves, strong credit, or a larger down payment — provide additional strength. FHA loans generally allow back-end DTIs up to 43–50% depending on compensating factors.
To get a rough sense of how DTI plays out with a specific home price, our mortgage calculator can help you run the numbers before a formal application.
A common mistake: people forget to include minimum credit card payments and student loan payments in their DTI estimate. Even if you're paying more than the minimum, lenders use the minimum payment listed on your credit report.
Down Payment and Home Equity: More Than Just Getting to the Table
How much you put down affects more than whether you can buy — it shapes your loan options, your interest rate, and your monthly payment for years.
According to the National Association of Realtors [STAT NEEDED — verify current year's buyer survey], the median down payment for first-time homebuyers has historically been around 6–7%, far below the 20% figure many buyers assume is required. Several loan programs require even less:
- FHA loans: 3.5% minimum (with a 580+ credit score)
- Conventional loans: 3–5% minimum (with private mortgage insurance)
- VA and USDA loans: 0% down for eligible borrowers
- Jumbo loans: Typically 10–20% minimum
Putting less than 20% down on a conventional loan means you'll pay private mortgage insurance (PMI), which is added to your monthly payment until you reach 20% equity. That's not necessarily a deal-breaker — for many buyers, it makes more sense to buy now with PMI than to wait years to save a larger down payment while home prices and rates shift.
For homeowners refinancing rather than buying, equity plays the same role. Lenders typically want at least 5–20% equity remaining after a refinance, depending on the type of transaction and loan program. Our mortgage refinance page covers how that works in more detail.
How These Factors Work Together
No lender evaluates these factors in isolation. A strong score can sometimes offset a higher DTI. A large down payment can compensate for thinner credit history. This is why two people with the same income and credit score might qualify for very different loan amounts — or why someone with a 700 credit score might get a better rate than someone with a 690, depending on everything else in the file.
Lenders run your application through automated underwriting systems — Fannie Mae's Desktop Underwriter (DU) or Freddie Mac's Loan Product Advisor (LPA) — that weigh all these factors together and return an approval recommendation. That recommendation isn't the final word, but it's a strong signal of where you stand.
A Real-World Example (Anonymized)
A buyer in Colorado — let's call her Dana — came to us with a 682 credit score, steady W-2 income of $78,000/year, about $22,000 saved for a down payment, and $520/month in existing debt payments (a car loan and student loans).
At a purchase price of $375,000 with 8% down ($30,000, using gift funds from family to supplement her savings), her back-end DTI came out to roughly 44%. Her score made a conventional loan possible, though she wasn't getting the best pricing tier. We ran her through both conventional and FHA scenarios — FHA carried a lower rate for her score range, but the mortgage insurance premium added cost over time. After walking through both options side by side, she chose conventional with a plan to refinance out of PMI once she hit 20% equity.
No single factor made her application strong or weak. It was the full picture — and knowing the trade-offs — that led to a loan she felt good about.
Who This Page Is Really For — and Who Might Need Something Different
✓ This is useful if you're...
- Wondering whether you'll qualify before talking to anyone
- Trying to understand why you were denied or quoted a high rate
- Planning to buy in the next 6–18 months and want to know what to improve
- Comparing loan programs and unsure which fits your situation
✗ You might need a different starting point if...
- You're actively under contract and need fast pre-approval turnaround
- You already know your numbers and want rate quotes — our loan programs page may be more direct
- Your income situation is complex enough that a quick conversation will tell you more than any page can
Get Honest Answers From Someone Who Knows
Mortgage approval factors get complicated fast — especially when your situation doesn't fit a tidy box. A real conversation with a loan officer will tell you more in 15 minutes than another hour of reading.
Ask a Real QuestionCommon Questions About Mortgage Approval
It depends on the loan type. FHA loans allow scores as low as 580 with 3.5% down. Most conventional loans require a minimum of 620, though scores below 680 may result in higher rates or tighter conditions. The score you need to qualify and the score that gets you the best rate are two different things — scores of 740 or higher tend to unlock the most favorable pricing on conventional loans.
Divide your total monthly debt payments by your gross monthly income (before taxes). Lenders look at two versions: front-end (just the housing payment) and back-end (all debts, including housing). Back-end DTI is what typically determines eligibility. For most conventional loans, lenders prefer back-end DTI below 45%, though automated systems sometimes approve up to 50% with strong compensating factors like good credit or reserves.
Yes — not because one type is better, but because each is documented differently and may carry different requirements for how it's averaged. W-2 employees are the most straightforward. Self-employed borrowers typically need two years of tax returns and business documents, and qualifying income is based on net income after deductions — which can be lower than what was actually earned. Hourly and commission earners may have overtime or variable income averaged over 24 months. If this applies to you, our page on complex income situations goes deeper on the documentation side.
No. The 20% figure comes from the threshold at which private mortgage insurance (PMI) is no longer required on conventional loans. But many buyers put down 3–10% and carry PMI until they build equity. FHA loans require 3.5% down for borrowers with 580+ credit scores. VA and USDA loans allow 0% down for eligible borrowers. Putting less down has trade-offs — higher monthly payment, PMI costs — but it's a legitimate path for many buyers and often makes more financial sense than delaying a purchase by years.
Often, yes — within limits. Lenders and automated underwriting systems look at the full picture. A higher credit score can sometimes support a higher DTI. A large down payment can sometimes compensate for a thinner credit history. Strong cash reserves — money in the bank after closing — can also help offset other borderline factors. That said, every loan program has hard minimums (a credit score floor, a maximum DTI ceiling) that can't be compensated away. A loan officer can tell you quickly whether your specific mix of factors is workable, and with which programs. The CFPB's homebuying resources are also a solid reference for understanding the broader process.