Before you apply

Mortgage readiness: know where you stand before you shop

Readiness is the gap between hoping you qualify and knowing what still needs work. Here are the four areas lenders check, and what you can do about each.

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At a glance

CreditScore and historyRecent lates hurt most

Debt-to-income43% benchmarkMinimum payments, not balances

IncomeDocumentableTwo years for bonus and commission

SavingsDown payment and reservesPlus what is left after closing

Member FDIC · Equal Housing Lender In partnership with federally chartered banks and lenders Licensed in all 50 states · Licensing & disclosures

Readiness signals

What to check before you shop

4Factors lenders weighAssessed together

43%Debt-to-income benchmarkCommon qualified limit

2moReserves commonly wantedAfter closing

2-6Months to move a scoreStart early

Mortgage readiness is how close your finances are to supporting a loan a lender will actually approve. It is the gap between hoping you qualify and knowing what still needs work.

Nobody checks this for you. Most buyers find out where they stand during an application, which is the worst possible moment.

The four readiness signals

What to look at before you shop

Running your savings to zero at closing fails the reserves test on its own.

The four areas

What lenders look at

Readiness comes down to four things. Knowing where you sit on each tells you what to work on.

Credit history

Your score, and the pattern underneath it. Recent late payments hurt more than old ones you have recovered from.

Check: Pull your own report and fix errors early

Debt-to-income

Your monthly debt payments against your gross income. Lenders count minimum payments, not balances.

Common benchmark: 43% for qualified mortgages

Income stability

Documentable, ongoing earnings. Self-employed borrowers qualify on net income after deductions, not gross revenue.

Usually needs: Two years of history for bonus, overtime and commission

Down payment and reserves

Where the money came from, and what is left after closing costs. Gift funds need a letter.

Also matters: How long the funds have sat in the account

Before you apply

How to improve your readiness

Small moves in the right order. Some work in weeks, some take longer.

Do this first

Pull your own credit

Check for errors and dispute them early, because corrections take weeks. Checking your own credit does not affect your score.

Weeks

Pay down revolving balances

Credit card balances inflate your ratio. Clearing the card with the highest minimum payment frees up the most room, even if it is not the largest balance.

Until you close

Avoid new debt and job changes

New cars, store cards and job moves right before you apply all cause problems. Employment is re-checked days before closing.

If self-employed

Talk to your accountant early

Aggressive write-offs lower your taxable income, and lenders qualify you on net income after deductions. Plan this in the years you intend to buy.

Guessing is expensive

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Self-check

How ready are you right now?

Tick what is true today. Nothing is saved, and this does not touch your credit.

Readiness check

Eight things lenders look for

0/8

Work through the checks below

Tick each one you can answer yes to. Nothing is saved and nothing is sent.

I have checked my own credit report this yearAnd disputed anything that looked wrong on itNo missed payments in the last 12 monthsRecent lates weigh more than old onesMy credit cards are below about a third of their limitsHigh balances push up your ratioMy monthly debt payments are under about a third of my incomeCar loans, cards, student loans, minimum payments onlyI have been in the same line of work for two yearsOr can prove my income another way if self-employedI have a down payment saved and sourcedGift funds need a letter saying it is not a loanI will still have savings left after closing costsThese are called reserves, usually 2 to 5% of the priceNo collections, judgments or tax liens outstandingThese usually have to be settled before a file moves

Your readiness

Early days

Tick the boxes above.

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This is a guide, not a decision. A real pre-approval uses your actual income and savings. See the actual requirements →

Questions

Common questions

What does mortgage readiness mean?

Mortgage readiness is how close your finances are to supporting a loan a lender will actually approve. It covers four areas: credit history, debt-to-income ratio, income stability, and your down payment and reserves.

How long does it take to become mortgage ready?

It depends what is holding you back. Paying down a credit card can move your ratio in one billing cycle. Building a two-year record of self-employed income takes two years. Most problems are timing, not permanent.

Should I check my credit before applying?

Yes. Pull your own report early and dispute anything wrong, because errors take weeks to correct. Checking your own credit does not affect your score.

Will paying off debt help me qualify for more?

Usually. Lenders count your minimum monthly payments, not your balances, so clearing a card with a high minimum can free up more room than clearing a larger balance with a small one.

Can I be ready with a low credit score?

Often, yes. FHA loans allow scores from 580 with 3.5 percent down. Readiness is about knowing where you stand across all four areas, not one number.

Keep reading

Related guides

How to qualify

The requirements themselves, and what usually blocks people.

Read →

Will I get approved?

Your odds, and the difference between pre-approval and final approval.

Read →

Mortgage pre-approval

What is inside the letter and how to use it on offer day.

Read →

Preqly LLC is not a lender, creditor or mortgage broker. Loan products are offered in partnership with federally chartered banks and lenders. Member FDIC · Equal Housing Lender · Licensed in all 50 states. Program minimums and lender requirements are set by the applicable agencies and lenders and change over time. Nothing here is a commitment to lend. View licensing & disclosures.

Independent sources

Consumer Financial Protection Bureau — preparing your finances before you apply

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