Key mortgage guidelines in the US
- Debt-to-Income (DTI): Most lenders look for a DTI of 43% or below — meaning your total monthly debt payments (including the new mortgage) should not exceed 43% of your gross monthly income. Some loan programs allow higher ratios with strong compensating factors.
- Down payment: Conventional loans typically require 5–20% down. Government-backed options (FHA) allow as low as 3.5%. A larger down payment generally means better rates and no private mortgage insurance (PMI).
- Loan-to-Value (LTV): This is your loan amount divided by the property value. LTV affects your rate and whether PMI is required. Bringing it below 80% avoids PMI on conventional loans.
Credit score
Your credit score plays a significant role in mortgage approval and the rate you receive. Most conventional lenders look for a score of 620 or higher; FHA programs may accept lower scores with a larger down payment. Reviewing and improving your credit before applying can make a meaningful difference.
What else affects your approval
Beyond ratios and credit, lenders assess your overall financial position:
- Stable employment history: Two or more years with the same employer (or in the same field) is typically preferred.
- Existing debt: Car loans, student loans, and credit card balances all factor into your DTI calculation.
- Savings and reserves: Lenders often want to see funds covering the down payment plus 2–6 months of mortgage payments in reserve.
Useful starting points
- Use a mortgage pre-qualification tool from a bank or credit union to get an early estimate of what you may be able to borrow.
- Compare rates from multiple lenders — even a small rate difference compounds significantly over a 30-year term.
- For official guidance, see the Consumer Financial Protection Bureau (CFPB) at consumerfinance.gov.
