To qualify for a mortgage, you have to meet basic eligibility requirements.
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Each type of mortgage has its own requirements for what credit score you need to qualify.
Government-backed mortgages typically have more lenient requirements than conventional mortgages.
A lender may understand if an aspect of your finances is a little weak if other parts are strong.
When you apply for a mortgage, you have to meet basic eligibility requirements for a lender to approve your application. There are several types of mortgages, and each one has its own rules about who gets the green light.
To determine your eligibility, lenders look at three main factors: your credit score, debt-to-income ratio (DTI), and down payment. There may be other factors to consider, too, depending on the kind of mortgage.
We're providing the general rules of thumb for mortgage requirements, but in some cases, the eligibility is up to the lender. For example, a lender may decide it requires a 640 credit score for a conforming loan instead of the usual 620. Or it may approve you with a lower credit score if you have a high down payment.
A conventional mortgage simply means one that isn't backed by the US government. It's typically a little harder to get a conventional mortgage than a government-backed mortgage (which we'll cover later).
There are two types of conventional mortgages: conforming loans and non-conforming loans.
Government-backed mortgages
A government-backed mortgage is insured or guaranteed by a federal agency. If you fail to make your mortgage payments, the agency will compensate the lender. This makes government-backed mortgages a little easier to qualify for because they're less risky for lenders.
There are three main types of government-backed mortgages: FHA, VA, and USDA loans.
Knowing which mortgage types you qualify for can help you determine which one is the best fit. There may be some flexibility, though. For instance, a lender may approve you with a high DTI ratio if you have an excellent credit score and sizeable down payment. If you're set on a certain type of mortgage but don't think you qualify, call a lender to ask about your options.