Get Mortgage-Ready: A 12-Month Plan

Before a lender gives you a mortgage (a loan to buy a home), it wants to know that you can make the payments for many years. Lenders look at four main things:

• Credit: your credit reports and scores show how you have paid bills and loans in the past.
• Income: how much you earn, and whether you can prove it.
• Debts: what you already pay each month, compared with your income.
• Savings: money for the down payment, the closing costs, and emergencies after you move in.

You cannot change these in one month. But in a year, you can make real progress. This lesson gives you a plan.

For debts, the key number is your debt-to-income ratio (DTI). It is all your monthly debt payments, including the new home payment, divided by your gross monthly income (your income before taxes). Each loan program and lender sets its own DTI limit. For example, in September 2026 the DC Open Doors program listed a maximum DTI of 50%, or 45% for some FHA loans. A lower DTI leaves more room in your budget for food, transportation, and surprises.

Months 12 to 9: check and clean up your credit

• Get your free credit reports from all three credit bureaus at AnnualCreditReport.com. You can check them for free every week.
• Look for mistakes, such as accounts that are not yours or late payments you did not make. Dispute errors in writing. Our lesson on reading your credit report shows how.
• Pay every bill on time. Set up automatic payments or reminders.
• Pay down credit card balances. Using less of your credit limits can help your score. See what affects your credit score.
• No credit history yet? Start now with our lesson on building credit. Some loan programs, such as FHA loans, have rules that let a lender look at other records, such as rent and utility payments.

The score a mortgage lender uses may not match the free score in your banking app. As of September 2026, lenders who sell loans to Fannie Mae and Freddie Mac may use a Classic FICO score or VantageScore 4.0, based on reports from all three bureaus. So check all three reports.

Months 9 to 6: save for three things

• Down payment: some loans need as little as 3% or 3.5% of the price. Programs in DC, Maryland, and Virginia may help.
• Closing costs: fees for the loan, title, taxes, and prepaid items. Your lender will list them on a Loan Estimate.
• Emergency savings: money you still have after you move in, for repairs and surprises.

Keep your savings in a bank or credit union account. Lenders usually ask for recent bank statements, and they may ask where large deposits came from. Cash kept at home is hard for a lender to count, because it cannot see where the money came from. Deposit it early and keep records. If a family member will give you money, ask the lender what papers it needs, such as a signed gift letter.

This is also the time to look for help with your down payment. See Down Payment Help and Loan Types in DC, Maryland, and Virginia.

Lenders must check that your income is real and likely to continue. Start a folder, on paper or on your phone, and add papers as you get them.

Papers most lenders ask for

• Photo ID, such as a driver's license or passport
• Your Social Security number or ITIN
• Pay stubs from the last 30 days
• W-2 forms from the last two years
• Federal tax returns from the last two years
• Bank statements from the last two months, with every page
• Proof that you pay rent on time, such as bank records or your landlord's contact information
• A list of your debts and monthly payments

Self-employed, gig, and cash workers

If you drive for an app, clean houses, run a small business, or do contract work, you need more proof. Fannie Mae, which buys many U.S. mortgages, generally looks for two years of self-employment income on your tax returns. Many lenders ask for:

• Personal federal tax returns for the last two years, with all schedules
• Business tax returns, if your business files its own
• 1099 forms from the companies that paid you
• A profit and loss statement for this year so far
• Business bank statements, if you have a separate account

Important: for self-employed people, lenders usually count the income on your tax returns after business expenses, not your total sales. If you earn cash and do not report it, a lender cannot use it to help you qualify. See our lesson on taxes for gig and self-employed workers.

Borrowers with an ITIN

An ITIN (Individual Taxpayer Identification Number) is a tax number from the IRS for people who cannot get a Social Security number. Some banks, credit unions, and community lenders make mortgages to ITIN borrowers. These loans may need a larger down payment or cost more, so compare offers carefully. Lenders often ask for:

• Your ITIN letter from the IRS
• A passport or other government photo ID
• Federal tax returns filed with your ITIN, often for two years
• Proof of steady work and income, such as pay records or bank statements
• Records of on-time rent and utility payments

Make sure your ITIN is still active. The IRS says an ITIN expires if it is not used on a federal tax return for three tax years in a row. Also know that since May 25, 2025, FHA loans are no longer open to non-permanent residents, such as people on work visas. U.S. citizens and lawful permanent residents (green card holders) can still apply.

Since June 2026, federal regulators have asked banks to look more closely at customers who use an ITIN. They have also said that mortgage lenders may look at your immigration status when they decide whether you can repay a loan. Some may ask for more documents or say no, so ask before you apply. A housing counselor can help you find lenders that still make ITIN loans.

Take a homebuyer education class

Many programs require a class. For example, Maryland Mortgage Program loans and many Virginia Housing loans require an approved class before closing. Fannie Mae requires homeownership education for some low down payment loans when all the buyers are first-time buyers. HUD-approved housing counseling agencies teach these classes, often for free or a small fee. Virginia Housing offers a free class, online or in person.

Pre-qualification and pre-approval

Lenders use these words in different ways. A pre-qualification is often a quick estimate based on what you tell the lender. A pre-approval usually means the lender has checked your credit and some documents. Neither one is a guaranteed loan. Sellers and real estate agents often ask to see a pre-approval letter with your offer.

Set your own price limit

A lender may approve you for more than you can comfortably pay. Count the full monthly cost of owning: the loan payment, property taxes, homeowners insurance, condo or homeowners association (HOA) fees, utilities, and money for repairs.

1. Use your spending plan to find the most you can pay for housing each month.
2. Ask your lender or housing counselor what home price matches that payment, with taxes, insurance, and fees included.
3. Look only at homes at or below that price, even if your pre-approval is higher.

A HUD-approved housing counselor can review your credit and budget, make a plan with you, explain loan offers, and tell you about local down payment programs. They can give you independent advice about whether a loan is a good fit for you. Help is often free or low-cost.

• Call HUD at 800-569-4287 to find an agency near you.
• Search by ZIP code with the CFPB housing counselor search.
• Ask for a counselor who speaks your language, and ask if they meet by phone or online.