Get mortgage ready before you shop

Before you look at a single home, line up your money. An unrepresented buyer who shows up with a real pre-approval looks more serious than a represented buyer without one, and that credibility is part of what your offer is selling.

Pre-qualification is not pre-approval

A pre-qualification is a quick, informal estimate based on numbers you tell a lender. A pre-approval is a lender actually reviewing your income, credit, and assets and committing, in writing, to a loan amount. Sellers know the difference. When you have no agent to vouch for you, the pre-approval letter does that job.

What lenders look at

Four things drive your approval and your rate: your income, your existing debts measured against that income, your credit, and your down payment and cash reserves. You can improve the picture before you apply by paying down balances, leaving old accounts open, and not financing a car or furniture in the months before you buy.

The debt measure has a name worth knowing: your debt-to-income ratio, the share of your gross monthly income that goes to monthly debt payments once the new mortgage is added. There is no single legal cutoff, and the limit varies by loan program and by how the loan is priced. As a working reference, the Qualified Mortgage standard centered on keeping that total at or below 43 percent of gross monthly income, and many financial planners suggest aiming lower. Treat 43 percent as a common target rather than a guaranteed ceiling, and know that paying down a revolving balance before you apply lowers the exact ratio the lender measures.

How much cash you actually need

You can estimate your cash to close before your lender’s official figures arrive, so the Loan Estimate confirms rather than surprises.

Buyers often picture one pile of money and run two together. The down payment is one pile. The closing costs are a second, and the fear of getting to the table and coming up short is real. The fix is to budget both at once.

Start with the down payment, and let go of the idea that you need 20 percent. Minimums vary by program. Conventional loans can go as low as 3 percent down. FHA loans require 3.5 percent down with a credit score of 580 or higher; scores of 500 to 579 need at least 10 percent down, and individual lenders may set stricter requirements of their own. VA-backed purchase loans require no down payment at all for eligible service members and veterans when the price is at or below the appraised value. None of this is exotic. In the National Association of Realtors’ 2025 buyer survey, the median down payment was 19 percent for all buyers and just 10 percent for first-time buyers, the highest first-time figure since 1989.

Then add the closing costs, which are paid separately from the down payment. They typically run about 2 to 5 percent of the loan amount and cover items like the lender’s origination charges, title insurance, recording fees, and prepaid taxes and insurance. The lender will also order an appraisal, usually paid by you, that typically runs about 300 to 600 dollars and more for FHA or VA loans or larger homes. Pages 2 and 3 of your Loan Estimate itemize these costs, so read them and plan your cash as down payment plus closing costs together, not the down payment alone.

Plan for PMI, and plan to drop it

Putting less than 20 percent down on a conventional loan usually means private mortgage insurance. It is worth being clear about who it protects: PMI protects the lender, not you, if you stop paying. The fear that it is a permanent penalty keeps some buyers from using a low-down-payment program that would otherwise work for them. It is not permanent.

Treat PMI as a temporary cost you actively retire. You can ask your servicer to cancel it once your loan balance is scheduled to reach 80 percent of the home’s original value, with a good payment history. The servicer must terminate it automatically once the balance is scheduled to reach 78 percent of the original value, as long as you are current on your payments, and at the loan’s amortization midpoint if you are current then.

Shop several lenders, the right way

Before you compare quotes, see the monthly payment at today’s rate so you know what a quarter point is worth on your numbers.

Rates and fees vary more between lenders than most buyers expect, and the best way to know is to ask several. Get a Loan Estimate from at least three. Rates offered to similar borrowers can differ meaningfully from one lender to the next, and even a quarter to half a percent compounds over a 30-year loan. That difference is exactly why the standardized Loan Estimate exists, so you can lay the offers side by side.

The credit-score worry that stops people is mostly unfounded, and it is bounded by a real number. Multiple mortgage credit checks made within a focused shopping window are treated as a single inquiry on your credit report. The newer FICO models used in mortgage lending fold those checks into one inquiry within a 45-day window; older FICO models and VantageScore use a 14-day window. So if you keep your shopping inside a couple of weeks, you are generally protected under either rule, and the small effect of an extra inquiry is not a reason to skip comparing.

Read the Loan Estimate

When you apply, the lender must give you a Loan Estimate within three business days. It is a three-page form, and every lender uses the same one on purpose, so you can lay them side by side. Compare the interest rate, the monthly payment, and the total closing costs, not just the rate on the front. A low rate with high fees can cost more than a slightly higher rate with low fees.

Keep your file clean until you close

Once you are approved, do not disturb the picture the lender approved. Avoid opening new credit, changing jobs, or making large unexplained deposits between approval and closing. Lenders often re-check right before funding, and a surprise there can delay or sink a deal you have already won.

Sources used on this page

Every legal, tax, and process claim on this page traces to one of these. We re-check them on a schedule and date the page when anything changes.

1. What is a Loan Estimate?Consumer Financial Protection Bureau · consumerfinance.gov
2. What kind of credit inquiry has no effect on my credit score?Consumer Financial Protection Bureau · consumerfinance.gov
3. Contact multiple lendersConsumer Financial Protection Bureau · consumerfinance.gov
4. What happens when a mortgage lender checks my credit?Consumer Financial Protection Bureau · consumerfinance.gov
5. When can I remove private mortgage insurance (PMI) from my loan?Consumer Financial Protection Bureau · consumerfinance.gov
6. What is a debt-to-income ratio?Consumer Financial Protection Bureau · consumerfinance.gov
7. Qualified Mortgage Definition under the Truth in Lending Act (Regulation Z): General QM Loan DefinitionConsumer Financial Protection Bureau · consumerfinance.gov
8. Does FHA require a minimum credit score and how is it determined?U.S. Department of Housing and Urban Development · answers.hud.gov
9. 97% Loan to Value OptionsFannie Mae · singlefamily.fanniemae.com
10. Purchase loanU.S. Department of Veterans Affairs · va.gov
11. 2025 Profile of Home Buyers and SellersNational Association of Realtors · nar.realtor
12. Publication 523 (2025), Selling Your HomeInternal Revenue Service · irs.gov
13. Closing Costs: What Are They And How Much Are They?Bankrate · bankrate.com
14. How Much Does A Home Appraisal Cost?Bankrate · bankrate.com

Common questions

Does shopping multiple lenders hurt my credit?

Barely, if you do it in a short window. Multiple mortgage credit checks within a focused shopping period are recorded as a single inquiry, so getting Loan Estimates from several lenders close together protects your score while saving you money.

What credit score do I need to buy a home?

It depends on the loan program, and there is no single cutoff. Higher scores get lower rates and more lender choices. The practical move is to check your credit early, fix obvious errors, and avoid new debt before you apply.

How long is a pre-approval good for?

Usually sixty to ninety days, since lenders rely on recent income, credit, and asset information. If your search runs longer, you refresh it. Keep your finances steady so the refresh is easy.

How much cash do I actually need beyond the down payment?

More than the down payment alone. Buyer closing costs typically run about 2 to 5 percent of the loan amount, covering items like the lender's origination charges, title insurance, recording fees, and prepaid taxes and insurance. The home appraisal the lender orders usually runs about 300 to 600 dollars and is commonly paid by the buyer. Your Loan Estimate spells these out on pages 2 and 3, so add them to your down payment when you plan your cash. Sources: Bankrate, Closing Costs; CFPB, What is a Loan Estimate?

Do I really need 20 percent down to buy?

No. That is one of the most common myths, and it stops people who could already qualify. Conventional loans can go as low as 3 percent down, FHA loans 3.5 percent with a 580 credit score, and VA-backed loans zero down for eligible service members and veterans. In NAR's 2025 buyer survey the median first-time-buyer down payment was 10 percent, not 20. The tradeoff with less than 20 percent down on a conventional loan is private mortgage insurance, which you can later have removed. Sources: Fannie Mae 97% LTV Options; HUD FHA credit requirements; VA Purchase Loan; NAR 2025 Profile.

What is PMI, and how do I get rid of it?

Private mortgage insurance protects the lender, not you, and is typically required on conventional loans when you put down less than 20 percent. You are not stuck with it. You can ask your servicer to cancel PMI once your balance is scheduled to reach 80 percent of the home's original value, and the servicer must cancel it automatically at 78 percent, as long as you are current on payments. Plan for it as a temporary cost, not a permanent one. Source: CFPB, When can I remove private mortgage insurance (PMI) from my loan?

What debt-to-income ratio do lenders want to see?

There is no single legal cutoff, and limits vary by loan program. As a working reference, the Qualified Mortgage standard centered on keeping total monthly debt, including the new mortgage, at or below 43 percent of gross monthly income, and many planners suggest aiming lower. The practical move before you apply is to pay down revolving balances and avoid financing a car or furniture, which lowers the ratio the lender measures. Sources: CFPB General QM Loan Definition; CFPB, What is a debt-to-income ratio?