Boost your approval odds for a mortgage
Most mortgage applications are not perfect, with many prospective borrowers wondering if they can even get approved for a mortgage.
Home buyers have three levers to pull to increase their chances of a mortgage approval: income and debts, credit score, and assets.
When you’re strong in all three categories, you’re more than likely to be approved for a mortgage.
If you’re weak in one area but strong in others, you still stand a good chance of approval. The rules are often flexible and you won’t know if you’re qualified until you apply.
Here’s how to improve approval odds for a mortgage.
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Signs your loan will be approved
You can usually get a feel for whether you’re mortgage-eligible by looking at your own personal finances and assessing your financial situation.
Here are some strong signs your loan will be approved:
- Your credit score is above 620
- You have a down payment of 3-5% or more
- Your existing debts are low
- You’ve had a stable job and income for at least two years
But keep in mind that rules for mortgage approval are not set in stone. Far from it.
In fact, every mortgage loan program has different eligibility requirements. And mortgage lenders can set their own rules, too; some are far more lenient than others when it comes to loan approval.
So if you’re not sure whether you’d qualify, your best bet is to check in with a lender.
You can usually get an answer on your eligibility — what’s known as the mortgage preapproval process— for free within 1-3 days. That way you’ll know for sure which loan program(s) you’re qualified for and how much you can borrow for your home purchase.
How hard is it to get approved a home loan?
Getting approved for a home loan can vary in difficulty based on several factors, including your credit profile, income, and the type of loan you’re applying for.
By familiarizing yourself with the specifics of each option, you can navigate the mortgage approval process more effectively and find the best path to homeownership.
Conventional mortgage approval
Conventional loans, backed by Fannie Mae and Freddie Mac, typically require a higher credit profile. Borrowers may qualify with a minimum FICO score of 620, making a down payment of 3-5% (with LTV ratios up to 95% or 97%). However, a high debt-to-income ratio may necessitate a larger down payment or extra cash reserves.
Here’s the average profile for conventional loan approval*:
- FICO score: 755
- LTV ratio: 81%
- Down payment: 19%
- DTI: 35%
*Purchase loan approval data from the ICE Mortgage Technology Origination Insights Report. Averages may have changed by the time your read this.
FHA mortgage approval
FHA loans offer more lenient approval standards, accepting FICO scores as low as 580 with a 3.5% down payment and 500 with 10% down. While FHA guidelines are flexible, borrowers with a history of missed payments may face challenges.
Data from the Origination Insights Report shows that FHA loan approval is more lenient than conventional loan approval.
On average, FHA borrowers get approved with lower credit scores, lower down payments, and higher debt-to-income ratios than conventional loan borrowers.
Here’s the average profile for an FHA loan approval*
- FICO score: 676
- LTV ratio: 95%
- Down payment: 5%
- DTI: 43%
*Purchase loan approval data from the ICE Mortgage Technology Origination Insights Report. Averages may have changed by the time your read this.
VA mortgage approval
VA loans, insured by the U.S. Department of Veterans Affairs, provide flexible approval standards. They generally accept lower credit scores and down payments compared to conventional loans, benefiting eligible veterans and service members.
Here’s the average profile for VA loan approval*:
- FICO score: 720
- LTV ratio: 97%
- Down payment: 3%
- DTI: 41%
*Purchase loan approval data from the ICE Mortgage Technology Origination Insights Report. Averages may have changed by the time your read this.
How to improve approval odds for mortgage
If your debts are too high or your credit score too low, maybe home buying is not the best move right now. But it could be in a year. Or even six months.
To improve your approval odds for mortgage, you should start “practicing” for homeownership now. This proactive approach will put you in a better position to buy and secure more favorable loan terms.
Check your mortgage approval odds. Start here“Note that if you are currently paying rent, you may not be held to the monthly maxes that are set with mortgages and may be at a lowering max payment for purchases,” adds Meyer.
- Subtract the difference between that new payment and what you currently pay for housing now
- Take that difference, use it to pay your debts down to a manageable amount
- Once your debt is under control, put that amount into your savings to boost your down payment
This accomplishes several things. It teaches you what you’ll have to live on once you buy your house, so your spending stays under control. It also helps increase your credit score. And it makes you less likely to fall into that dreaded Low Credit Profile category — the one mortgage lenders shy away from.
FAQ: Can I get approved for a mortgage?
If you’re wondering how hard is it to get approved for a home loan, most borrowers need at least 3-5% down to get approved for a home loan. If you qualify for a VA loan or USDA loan, though, you might get approved with no money down at all.
FHA loans have the lowest credit score minimum of any loan program. You can typically get approved via FHA with a credit score as low as 580. To get a conventional conforming loan, you generally need a credit score of 620 or higher.
There’s no minimum income to get approved for a home loan. Lenders care more about your debt-to-income ratio than your income level. So someone with low income but no monthly debt could have an easier time getting approved than someone with high income and large monthly debt payments. Lenders also want to see a consistent income history. To get approved, you usually need a two-year history of steady income and employment in the same role or industry.
A number of things could stop you from getting mortgage-approved. Borrowers might be denied because of a low credit score, inconsistent income or employment history, or an insufficient down payment. Rules vary by lender and type of loan, though, so you should shop around for the program that best suits your financial profile.
The mortgage approval process can vary in duration, typically taking around 30 to 45 days. However, it can be shorter or longer depending on several factors such as the complexity of the application, document verification, and the workload of the lender.
To increase your approval odds for mortgage, consider improving your credit score, minimizing debt, having a stable income and employment history, and saving for a down payment. Getting pre-approved before house hunting can also strengthen your offer.
Yes, self-employed individuals can obtain mortgage approval. However, it may involve additional documentation to verify income and stability. Lenders typically look for a stable income history and proof of consistent earnings.
It might be more challenging to get mortgage approval with bad credit, but it is not impossible. Some lenders offer programs for borrowers with lower credit scores or provide options for improving credit before applying.
If your mortgage application is denied, you can work with the lender to understand the reasons for denial and address any issues. You may need to improve your credit score, lower your debt-to-income ratio, or save for a larger down payment. Alternatively, you can consider applying with a different lender.
Today’s mortgage rates
Qualifying for a home loan is possible, and when you bring a good credit score and a sizable down payment to closing, you’ll get approved with a lower interest rate than other first-time home buyers.
Begin your home buying journey today by checking your lowest mortgage rates with multiple lenders. Who knows? Mortgage approval may be closer than you think.
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