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Bottom Line Up Front

  • Before you can get a mortgage loan, you’ll need to prove that you’re a capable borrower.
  • Lenders will look at a variety of qualification criteria, including credit, income and assets.
  • There are steps you can take to improve your odds of approval and securing a great rate.

Time to Read

4 minutes

August 4, 2022

Few people can afford to buy a home outright. Instead, most homebuyers finance their home by applying for a mortgage. To qualify for a mortgage, you’ll need to prove to a lender that you’re a responsible borrower and that you’re capable of making consistent payments for the life of the mortgage. That means putting a magnifying glass up to your personal finances.

To determine if you qualify for a mortgage, lenders will examine everything from your credit score and employment history to your personal cash flow and any assets. Homebuyers whose financial pictures are favorable are more likely to walk away not only with a mortgage, but also a great rate. Here’s what you need to consider and how to improve your odds.

Qualification Factors

Lenders look at several factors when deciding whether to loan someone money. These include:

  • Credit score: This is a reflection of how well you manage money and debt. Many lenders require a score of at least 700. At Navy Federal, we consider your banking history with us as well as your credit score.
  • Debt-to-income (DTI) ratio: This is a comparison of your monthly debt, including the new home, to your monthly income. Many lenders prefer borrowers with a low DTI ratio because it means you’re more likely to be able to afford your monthly mortgage payments.
  • Employment history: Job stability of 2 years or more indicates that you have a stable income and can pay off debt. If you’re self-employed or have gaps in your employment, talk to your lender about other ways to provide proof of stable income or earning ability.
  • Personal assets: Lenders like to see that you’re conscientious about setting aside money into savings and retirement accounts, as well as investments. Already owning a home, property or other collateral, like a car, also may be a plus.

Getting a Good Rate

These tactics can bolster your chances of qualifying for a loan with a good interest rate:

  • Check your credit report. You can get a free copy of your credit report from each of the 3 credit bureaus every 12 months via Verify the accuracy of your name, address, date of birth, Social Security Number, employment history and credit information. Immediately report any discrepancies to the reporting credit bureau.
  • Pay off debt. Decrease a high DTI ratio by working to pay down debt. Focus on “bad” debt first, like credit cards. In some cases, it might be smart to consolidate debt to take advantage of a lower interest rate. Lower interest rates and extra payments will help you chip away at debt quickly.
  • Build good credit. If your credit history is lacking or needs a boost, consider using a credit card for monthly expenses or opening a secured credit card while paying off your balance on time each month. Don’t apply for too many cards or credit at once, however. Too many inquiries on your credit history can make a lender wary.
  • Save for a down payment. Your down payment amount depends on several variables, including the house price and loan type. For a conventional loan, you’ll want to set aside 15-20% of a home’s selling price as the down payment, if possible. Other loans—such as VA loans—require a smaller amount up-front, or no down payment at all.

Prepare Before You Apply

One of the best things any prospective homebuyer can do to qualify for a mortgage and get a great rate is to examine their finances before they start looking for homes. Understanding your financial picture will be important when it comes to answering qualifying questions or providing documentation to a mortgage lender.

Ready to apply for a mortgage? Navy Federal is ready to help and will make the process simple, so you can focus on the excitement of becoming a homeowner!

Next Steps Next Steps

  1. Request a free credit report at Your credit report will give you a first-hand look at what mortgage lenders see as they assess your qualifications for a loan.
  2. Take steps to improve your credit score, set aside savings and collect financial documents. Being on-the-ball will speed up the qualification and underwriting process for a mortgage loan.
  3. Before you set out to buy a home, contact Navy Federal for mortgage preapproval. This will help you understand your budget, so you can get a clear picture of how much you can borrow and how much you’ll need for a down payment.


This content is intended to provide general information and shouldn't be considered legal, tax or financial advice. It's always a good idea to consult a tax or financial advisor for specific information on how certain laws apply to your situation and about your individual financial situation.