What’s keeping you from applying for a mortgage? Maybe you’re worried that your credit score isn’t high enough or you have too much debt. Perhaps you’re afraid that mortgage lenders will require a large down payment that you won’t be able to afford.
Here’s a surprise: Qualifying for a mortgage isn’t as difficult as you may think. A 2018 study by Fannie Mae found that most consumers overestimate the requirements for getting a mortgage, particularly in regard to credit scores and down payments — and that gap between perception and reality largely holds true today.
If you’re worried that your finances aren’t strong enough for a mortgage, don’t fret. You might be more qualified for a home loan than you think.
Mortgage Loan Qualifications
Qualifying for a mortgage means that a borrower meets the criteria set by lenders to be approved for a home loan. These criteria measure a borrower’s ability to repay the loan and how much house you can afford.
Qualification requirements vary by lender, but many use similar benchmarks depending on the loan type. Here are four key factors that lenders use to evaluate your application:
- Credit Score – FICO credit scores, which most mortgage lenders rely on, range from 300–850. Credit scores help lenders assess a borrower’s risk and the likelihood that they will repay the loan. Most importantly, credit scores directly affect your mortgage interest rate. The higher the credit score, the lower the rate you can qualify for.
- Income and Employment – Lenders evaluate your income and employment history through pay stubs, tax returns, and verification letters. Lenders want to see a stable source of income, so most require a minimum of two years of steady employment.
- Debt-to-Income Ratio (DTI) – DTI is the ratio of your monthly debt payments to your gross monthly income. Most lenders want to see a DTI below 45%, and obtaining a loan with a DTI above 50% can be difficult.
- Down Payment – Down payments help reduce a lender’s risk by lowering the amount you owe. A larger down payment may increase your chances of qualifying and typically results in better mortgage terms, such as lower interest rates. Down payments range from 0% to 20% or more, depending on the mortgage type.
How Hard Is It To Get a Mortgage?
How hard it is to get a mortgage largely depends on your financial health. Your ability to qualify will also vary depending on the mortgage type — and individual lender requirements add another layer of variation.
Here’s a look at the qualification standards for common loan types:
| Qualification Standards by Mortgage Type | ||||
| Minimum Credit Score | Down Payment | Maximum Debt-to-Income Ratio | Consistent Employment | |
| VA | 620* | $0 | 41% | 2 years |
| USDA | 640 | $0 | 41% | 2 years |
| FHA | 500 | 3.5%+ | 43% | 2 years |
| Conventional | 620 | 5%+ | 45% | 2 years |
*The Department of Veterans Affairs (VA) does not set a minimum credit score, but lenders do.
Can You Qualify For a Mortgage Without a Job?
It’s possible to qualify for a mortgage without a job as long as you have other sufficient sources of income. When calculating how much you can afford, lenders look at your “residual income” — how much is left over after paying your other bills and expenses.
Compensating Factors
Strength in one requirement area can help offset weakness in another. Some lenders offer qualification flexibility through “compensating factors” — positive attributes or circumstances that help balance out a weaker part of your financial profile, such as a lower credit score or higher debt-to-income ratio.
For example, if you have a “very good” credit score (740+), some lenders may consider that a compensating factor for a higher DTI. This is one reason why applying with multiple lenders is so important when exploring your options.
Qualification eligibility varies by mortgage type — but before committing to any loan program, it’s worth considering factors beyond the four core standards (credit score, DTI, down payment, employment).
How Hard Is It To Get a VA Loan?
A VA loan is an attractive option — it typically offers lower rates than conventional mortgages and requires no down payment. However, not everyone can qualify, even if they meet the financial requirements.
VA loans have service requirements set by the Department of Veterans Affairs that borrowers must meet to be eligible.
Service Requirements
VA loans are generally available to active-duty service members, Veterans, and National Guard and Reserve members who meet service length and discharge status standards, as well as some surviving spouses.
Occupancy Requirements
VA loans are designed to finance primary residences. Borrowers must generally occupy the home within 60 days of purchase and reside there for at least two years. Exceptions exist for active-duty service members who must relocate due to ETS orders.
Mortgage Insurance
VA loans don’t require mortgage insurance, but they do include a mandatory funding fee — a one-time payment made at purchase. Depending on down payment size, it ranges from 1.25% to 2.15% of the loan amount for first-time VA loan users, and 1.25% to 3.3% for repeat borrowers. Veterans who receive service-connected disability compensation are exempt from the funding fee.
How Hard Is It To Get an FHA Loan?
FHA loans are widely regarded as one of the more accessible mortgage programs. The FHA sets a minimum credit score of 500, which is lower than most other loan programs. They also require a smaller minimum down payment than conventional mortgages.
That said, the FHA’s minimums aren’t universal. Private lenders are permitted to set stricter requirements — known as “lender overlays” — and most do. Refi.com requires a minimum 620 credit score for FHA loans.
Minimum Down Payment
FHA down payment requirements are tied to credit score. A down payment of 3.5% is required for borrowers with a credit score of 580 or higher. If your score falls below 580, you may still qualify, but you should expect to put down 10% or more.
Mortgage Insurance Required
FHA loans require two types of mortgage insurance (MIP):
- Upfront Mortgage Insurance Premium (UFMIP): Equal to 1.75% of the loan amount; most borrowers roll it into the loan.
- Annual Mortgage Insurance Premium (MIP): An ongoing annual premium that varies based on your loan term, loan-to-value ratio, loan size, and down payment amount.
Here’s how your down payment affects the annual MIP you’ll owe:
- Down payment less than 10%: Annual MIP is required for the entire loan term, regardless of your loan-to-value ratio.
- Down payment of 10% or more: Annual MIP is required for a minimum of 11 years. After that — and once your LTV reaches 78% — MIP is canceled.
- Down payment of 22% or more: Annual MIP is not required.
You can also cancel FHA mortgage insurance by refinancing your FHA loan into a conventional loan once you’ve reached 20% equity. If you refinance into another FHA loan, you may be eligible for a partial UFMIP refund through the FHA streamline refinance or the FHA cash-out refinance.
Occupancy Requirements
Like VA loans, FHA loans are designed for primary residences. Buyers must occupy the home within 60 days of closing and live there for at least one year.
How Hard Is It To Get a USDA Loan?
Getting a USDA loan can be more challenging than other home loan options because the program is specifically designed to assist low-to-moderate income homebuyers in rural areas. That said, it offers valuable benefits — including a $0 down payment and no monthly mortgage insurance.
Location Restrictions
USDA loans are intended for properties in rural or eligible suburban areas. The property you’re purchasing must be in a USDA-eligible location to qualify.
Income Limits
USDA loans have income limits — your household income cannot exceed 115% of the median income for your area. These limits also vary based on the number of people in your household.
Mortgage Insurance
USDA loans do not require mortgage insurance. Instead, they carry a “guarantee fee” — currently 1% of the loan amount upfront and 0.35% annually.
How Hard Is It To Get a Conventional Loan?
Outside of programs like Fannie Mae and Freddie Mac‘s first-time homebuyer options, conventional loans can be harder to qualify for than government-backed mortgages like FHA and USDA — primarily because they have stricter credit and down payment requirements.
On the upside, conventional loans typically offer higher loan limits (without crossing into jumbo loan territory) and more flexible loan terms than government-backed programs.
Credit Score
Conventional loans typically require higher credit scores than FHA loans. The program minimum is 620, but many lenders — including Refi.com, which requires a 620 minimum — prefer scores above 700 for better rates and terms.
While most loan types increase rates as credit scores drop, conventional loans apply the steepest rate increases below 740. These increases start small but compound quickly — by the time your score falls into the mid-600s, you could be paying a rate a full 2% higher than a borrower with excellent credit.
Private Mortgage Insurance
The cost of Private Mortgage Insurance (PMI) on conventional loans depends on several factors, including the loan amount, down payment, credit score, and lender terms. PMI typically costs between 0.58% and 1.86% of the original loan amount annually.
Down Payment
A minimum down payment of 3% is required for some conventional loan programs, though most require 5% to 20% depending on your creditworthiness and the specific program.
If your down payment is less than 20%, you’ll likely need to pay PMI until you’ve built at least 20% equity. PMI can typically be canceled once your loan-to-value ratio reaches 78% through regular monthly payments.
Understanding mortgage qualifications is an important first step toward homeownership — whether you’re exploring FHA, conventional, or another loan program. Requirements vary by lender, so it pays to shop around and speak with a mortgage professional who can help you find the right fit.
Already own a home and looking to lower your rate or tap your equity? Start your refinance application at Refi.com — our team specializes in helping homeowners find better mortgage terms.
