To check mortgage eligibility for a home purchase, begin by reviewing your credit score, which must typically exceed 620 for most lenders. Calculate your debt-to-income (DTI) ratio by dividing total monthly debt payments by gross monthly income; it should ideally be below 43% for conforming loans. Determine your budget using a mortgage calculator, considering down payment size, loan term, and interest rate. Secure a pre-approval letter from a lender, which outlines the loan amount they are willing to offer. Finally, verify documentation such as proof of income, employment, assets, and tax returns. Lenders may also assess your loan-to-value (LTV) ratio, requiring a minimum down payment (e.g., 3.5% for FHA loans or 5% for conventional loans with mortgage insurance).

The steps above are critical because mortgage eligibility directly impacts borrowing capacity and loan terms. A credit score below 620 often results in higher interest rates or denial, as lenders view higher-risk borrowers. For example, the Consumer Financial Protection Bureau (CFPB) reports that 60% of mortgage applications with scores below 580 are denied. A DTI exceeding 43% disqualifies applicants from conforming loans (Fannie Mae/Freddie Mac), which account for 90% of U.S. mortgages. Lenders use DTI to gauge repayment ability; those with DTIs above 50% are 3x more likely to default (Federal Reserve, 2022). Pre-approval letters increase offer acceptance by 50% (National Association of Realtors, 2023), as sellers prefer pre-qualified buyers. Down payment size affects LTV ratios and mortgage insurance costs. A 20% down payment eliminates PMI for conventional loans, saving $100 monthly on a $300,000 mortgage (Bankrate, 2023). FHA loans with 3.5% down require a 580+ score, while VA loans offer 0% down but demand a Certificate of Eligibility. Data from the Urban Institute shows that 75% of first-time buyers use pre-approval to narrow their search, reducing time spent shopping by 30%. Thus, systematically addressing these factors ensures alignment with lender criteria and optimizes loan terms.