Key Takeaways
- Buyers may qualify with a credit score as low as 580.
- Proof of income includes pay stubs and W-2s for salaried employees.
- Some buyers are eligible for zero-down mortgages.
- Pre-approval simplifies the home buying process and strengthens offers.
Article Summary
Credit requirements depend on the loan type and lender, but buyers can often qualify with a score as low as 580. Many first-time buyers worry their [credit score](/learn/credit-score) might be too low to qualify for a mortgage, but that's often not the case.
Ready to stop renting and buy a home? You might be surprised how simple it is. There are just seven key things you need to get started:
- A qualifying credit score
- Proof of job and an income
- Cash for a down payment
- A realistic budget
- A mortgage loan program
- A mortgage pre-approval
- A knowledgeable real estate agent
Once you gather these essentials, the mortgage pre-approval experience becomes straightforward. Start by taking time to shop mortgage lenders to find the right fit for your needs. Here's everything you'll need to make homeownership a reality.
1. A Qualifying Credit Score
Credit requirements depend on the loan type and lender, but buyers can often qualify with a score as low as 580. Many first-time buyers worry their credit score might be too low to qualify for a mortgage, but that's often not the case.
FICO scores range between 300-850, with the national average near 710. Check your credit score for free at AnnualCreditReport.com, or get pre-approved for a mortgage and ask your lender to share your score.
2. Proof of Job and an Income
Mortgage approvals don't come with rigid income requirements, but as part of your mortgage application, you'll need to show your lender:
- Proof of employment
- Your monthly income
- Your monthly recurring debts
If you're a salaried employee, providing pay stubs and W-2s is a standard way to clear this step or allow digital verification of your income and employment. By contrast, self-employed buyers may need to show recent tax returns and business documents.
Your debt-to-income ratio (DTI) is also a factor. Low debt-to-income ratios are more likely to be approved, but lenders often approve higher DTI for buyers with offsetting strength like extra savings or larger down payments.
3. Cash for a Down Payment
You don't always need a large down payment. Programs like USDA and VA loans allow for no down payment. Even low-down-payment loans, available to most credit scores, can help with as little as 3% down.
Down payment assistance programs can cover your closing costs, too. For a $350,000 home with a 3% down payment and 1.5% closing costs, you'd need around $15,750, or $0 if you qualify for assistance.
4. A Realistic Budget
Establishing and sticking to a home-buying budget keeps you in control during your negotiations for a home.
Elements of your budget include:
- How much money you want to spend on a down payment
- How much cash you have for paying closing costs
- The size of your ideal monthly mortgage payment
Use our home affordability calculator to determine your maximum home price based on your income and desired monthly payment. Factor in PITIA: Principal, Interest, Taxes, Insurance, and Association dues (if any). Lenders may approve you for a larger loan size than you're comfortable borrowing, so stick to monthly payments that fit your current and future budget.
5. A Mortgage Loan Program
More than 9 out of 10 home buyers finance their home with a mortgage. Only rarely are homes bought with just cash.
The five main loan types that home buyers use to finance are:
- Conventional
- FHA
- VA
- USDA
- Jumbo
Conventional mortgages are used by more than 60% of home buyers with home financing. The next most common loan is the FHA mortgage.
6. A Mortgage Pre-Approval
A mortgage pre-approval is essential to house hunting. Pre-approvals help you find how much home you can afford to buy, and also show home sellers that you're serious enough to get qualified.
A pre-approval is typically good for 90 days. When it expires, you can refresh it.
Remember: pre-qualifications and pre-approvals are different. Only a pre-approval will verify your application for employment and financial qualifications, so being pre-approved is the surer way to go.
7. A Knowledgeable Real Estate Agent
Take time to find a knowledgeable agent to help with everything from finding homes to negotiating with sellers. Be cautious with dual agency, where one agent represents both buyer and seller — it's usually not in the buyer's best interest. Instead, get your own agent to represent you fairly.
Final Thoughts
With a pre-approval in hand and a great agent by your side, you're ready to find your dream home. Start exploring open houses and remember to stay focused on what's important to you — your must-haves, nice-to-haves, and deal breakers.
