Here’s Why You Might Struggle to Get a Mortgage Even if Your Credit Is Excellent

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Strong credit could help you qualify for a mortgage. But read on to see why that’s just one of several factors lenders will consider. 

You’ll often hear that if you’re looking to apply for a mortgage, it’s important to focus on your credit score. It takes a minimum credit score of 620 to qualify for a conventional mortgage. But some mortgage lenders may insist on a higher score than that. And the higher your credit score is, the more competitive an interest rate you’re likely to get on your mortgage.

Meanwhile, Experian, one of the three major credit bureaus, says that a credit score of 800 or above is considered excellent. So if you have a credit score that falls into that category, you might assume that your mortgage application is bound to get approved.

But you should know that your credit score is only one of several factors that mortgage lenders consider when evaluating loan candidates. And while a higher credit score will certainly help your case, you might struggle to get approved for a mortgage regardless of having excellent credit.

Your credit score alone isn’t enough

Your credit score tells lenders how risky you are as a borrower. A strong credit score sends the message that you commonly pay bills on time. That’s something mortgage lenders like to see since they typically write loans for hundreds of thousands of dollars.

But your mortgage lender will also look at other factors to determine whether you’re eligible for a home loan. And it’s important to know what those are.

One such factor is your debt-to-income ratio, which measures your existing debt relative to your income. Citizens Bank says that most mortgage lenders require a debt-to-income ratio of 43% or less — meaning, you’ll spend a maximum of 43% of your gross monthly income on debts, including your new mortgage payment.

If you’re worried about your debt-to-income ratio, you can try paying off some existing loan or credit card balances before applying for a mortgage. You can also seek out a lower mortgage amount, though doing so might require you to readjust your expectations on the home-buying front.

Another factor that mortgage lenders look at is income. There’s no such thing as a minimum income required to get a mortgage. That’s determined on a case-by-case basis, since the income needed for a $200,000 home loan is apt to differ from the income needed for a $600,000 mortgage. But all told, your lender will run its numbers to make sure your salary can support your ongoing payments.

However, having a certain income isn’t enough. Mortgage lenders also tend to want to see evidence of income stability.

If you’re new to a job, a lender might hesitate to write you a loan because it wants to see that you’ve been earning an income consistently for quite some time. Lenders generally want to see a minimum of two years of steady income before writing loans.

Look at the big picture

Boosting your credit is a great way to set yourself up to qualify for a mortgage. But it’s not the only step to take if you want to get a lender to write you a giant loan. You may also need to work on paying down debt and boosting your earnings (which you can do via a second job) to be able to qualify for a mortgage.

One factor you can’t control is the length of your work history. If you graduated college in May 2022 and got a full-time job in September of that same year, you can’t yet present a two-year history of full-time work on a mortgage application.

In that case, though, you can ask your employer to write a letter that speaks to the stability of your job. That may be enough to get a mortgage lender to agree to give you a loan despite that one missing piece of the puzzle.

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