What Are Your Chance of Getting Approved for a Mortgage? (2024)

Can I get approved 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 stack the odds in your favor.

In this article (Skip to…)

• Mortgage approval odds
• Approval process
• Conventional loan approval
• FHA loan approval
• VA loan approval
• Increase your odds
• FAQ
• Today’s rates

How do I know if I’ll get approved for a mortgage?

You can usually get a feel for whether you’re mortgage-eligible by looking at your own personal finances and assessing your financial situation.

You’ll have the best chances at mortgage approval if:

• 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.

Mortgage approval process

Most borrowers get preapproved before shopping for a home.

Then, once you have a signed purchase agreement and you’ve chosen a mortgage lender, you’ll follow up with a full mortgage approval. This is a little more involved than the preapproval process.

Approval and underwriting

Mortgage approval is mostly a waiting period for home buyers. Once the seller has accepted your offer, your mortgage lender will order an appraisal of your new home and begin underwriting your mortgage loan.

During this underwriting process, your lender will take a comprehensive view of your finances.

Be prepared to provide the following information, if you have not already done so during the preapproval process.

• Proof of monthly income
• Proof of assets
• Employment history
• Credit history
• Debt-to-income ratio (DTI)

You also need to provide financial documentation to assist your loan underwriter — again, if you haven’t already provided items during mortgage preapproval.

• W-2 forms (or 1099 forms if self employed)
• Tax returns
• Pay stubs
• Bank statements
• Government-issued identification, like a valid driver’s license
• Social Security number

It’s important to respond to any requests from your mortgage lender immediately during the approval process. Failure to do so could extend the time it takes to get approved.

Additionally, using a mortgage approval checklist will help you organize your home buying process.

Credit check

Your lender will order hard inquiries of your credit reports with the major credit-reporting bureaus to ensure your credit score hasn’t changed since preapproval. However, if your credit was processed during the preapproval and is less than 90 days old, an additional credit check will not be necessary.

“After initial approval, regardless of the age of the credit report, there is always a soft pull reverification to confirm that nothing significant has changed,” says Jon Meyer, The Mortgage Reports loan expert and licensed MLO.

Your loan officer will double check your creditworthiness and take note of any changes to your credit history, such as opening new credit cards, taking out car loans or student loans, new monthly debt, or any debt payments that are outstanding.

It’s recommended that you do not open new lines of credit or take out any loans during the underwriting process. If you’ve done the hard work of establishing good credit, then any borrowing before mortgage approval may affect the final outcome.

Approval vs preapproval

While similar to loan approval, mortgage preapproval is when your lender approves you for a specific loan amount after verifying your credit score and financial documentation.

Your loan officer will issue you a preapproval letter, which is typically good for 60-90 days.

Preapproval generally happens at the beginning of the home-buying process.

Having a pre-approval letter in hand is helpful when you’re house hunting because it signals to real estate agents and sellers that you are a serious buyer. Plus, preapproval establishes the price range of homes you can afford.

Preapproval vs prequalification

Mortgage prequalification and prepproval are both useful tools to buyers preparing for a home purchase and homeowners looking to refinance.

When you’re prequalified by a lender, you’re given a general estimation on the size of the loan you could qualify for. Mortgage prequalification is based on self reporting of your monthly income, credit history, and other financial details.

On the other hand, mortgage preapproval is a rigorous verification of your financial life that yields a specific loan amount that your lender is willing to finance.

Conventional mortgage approval: Fannie Mae and Freddie Mac

Freddie Mac and Fannie Mae loans (also called conforming mortgages) allow FICO scores as low as 620. They also approve mortgages with loan-to-value ratios as high as 95% or 97%. That means you need to make a down payment of at least 3-5%.

In addition, the two corporations will buy mortgages with maximum debt-to-income ratios of 45% under their standard guidelines.

However, this does not mean that you can get approved with a low down payment and a high DTI and a poor credit score.

If your credit score is on the lower end, for instance, you might need a bigger down payment or extra cash reserves. A larger down payment amount can also help you get approved if your debt-to-income ratio is on the high end (above 36%).

According to the ICE Mortgage Technology Origination Insights Report, the average borrower using a conventional loan has a credit score in the mid-700s and more than 20% down.

Average profile for conventional loan approval

• FICO score: 755
• LTV ratio: 81%
• Down payment: 19%
• DTI: 35%

*Purchase loan approval data from the September 2021 ICE Mortgage Technology Origination Insights Report. Averages may have changed by the time your read this

Mortgage approval with FHA loans

The Federal Housing Administration’s guidelines for FHA loans are much less restrictive. They allow loan approval with a FICO score as low as 580 and just 3.5% down, and a score down to 500 with 10% down.

However, there is a difference between allowing a low credit score and actual bad credit. If your score is low because you have little credit history, too many accounts, or bad history that’s at least a year old, FHA may give you a shot.

But if you’re missing payments all the time or have multiple collections, you’re too risky. You may have to prove that you can manage a monthly mortgage payment, and that means paying your bills on time for at least 12 months.

“You will have the opportunity to provide explanations for missed payments, but too many can hurt your chances,” says Meyer.

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.

Average profile for FHA loan approval*

• FICO score: 676
• LTV ratio: 95%
• Down payment: 5%
• DTI: 43%

*Purchase loan approval data from the September 2021 ICE Mortgage Technology Origination Insights Report. Averages may have changed by the time your read this

Mortgage approval with VA loans

Like FHA loans, VA loans are backed by the federal government. Thanks to this insurance from the U.S. Department of Veterans Affairs, VA loans can offer more flexible approval standards than conventional conforming loans.

Once again, the differences can be seen in the average loan approval for a VA mortgage. VA borrowers have lower credit, lower down payments, and higher DTIs than conventional loan borrowers.

Average profile for VA loan approval

• FICO score: 720
• LTV ratio: 97%
• Down payment: 3%
• DTI: 41%

*Purchase loan approval data from the September 2021 ICE Mortgage Technology Origination Insights Report. Averages may have changed by the time your read this

It’s a balancing act

Understand that there is a close relationship between mortgage approval and your FICO, DTI and LTV — your credit score, debt-to-income ratio and your down payment.

If you are weak in one area, you’ll need to make it up somewhere else.

In mortgage-speak, this balancing act is known as “compensating factors.”

For instance, a big down payment or extra cash reserves can be compensating factors for a lower credit score.

If you’re not sure whether you’d qualify for a mortgage, it’s worth talking to a loan officer. They can help you look at your personal finances through the lens of mortgage approval.

Even if you don’t qualify for a home loan right now, your mortgage loan officer will help you understand exactly what needs to change before you can a mortgage preapproval letter and how to get there.

How to improve your chances of mortgage approval

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. You need to start “practicing” for homeownership now, and this will put you in a better position to buy and even obtain better loan terms.

Using our Home Affordability Calculator, determine how much house you want to buy and what payment you’ll have to make each month.

“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.

Mortgage approval FAQ

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.