Signs You’re Ready for a Mortgage and How to Prepare if You’re Not
Buying a home is one of the biggest financial commitments you’ll ever make, so it’s natural to wonder whether you’re really ready to take on a mortgage. According to Freddie Mac, there are some clear signs that you may be in good shape to move forward.
One of the most important is your credit score. A score of 661 or higher generally places you in the “creditworthy” range, while a score between 600 and 660 suggests you’re close but may need more work. If your score is under 600, it’s a strong signal that you should wait. Your debt-to-income (DTI) ratio is another big factor. Ideally, your projected mortgage payment should be no more than 25 percent of your income, and your total debt should fall under 36 percent — with 43 percent usually being the upper limit for lenders. You’ll also need a clean credit history with no recent bankruptcies or foreclosures and a track record of making payments on time.
It’s worth noting that you don’t have to check every box perfectly to get approved. Lenders may still consider you if your credit score or DTI isn’t ideal, but that could stretch your finances and make it harder to reach other goals.
How to Strengthen Your Finances Before Applying
Mortgage lenders look at the big picture when reviewing your application. That includes your credit history, income, debt levels, employment stability, and savings. If you’re not where you want to be yet, here are three steps to get closer:
1. Review and improve your credit
Pull your free credit reports from Equifax, Experian, and TransUnion at AnnualCreditReport.com and check for errors. Correcting mistakes such as inaccurately reported late payments can boost your score. Even a 20-point increase could save you thousands over the life of your loan. Most lenders require at least a 620 score, but the best rates typically go to borrowers with scores of 740 or higher.
2. Reduce your debt load
Consistently making payments on time is the fastest way to build credit health. To lower your balances, consider strategies like the debt snowball or avalanche method, or even debt consolidation if it makes sense. Lowering your debt will improve both your credit score and your DTI ratio, two areas that carry significant weight in a mortgage application. At the same time, avoid taking on new loans, which can increase your debt burden and lower your score.
3. Build up your savings
Beyond monthly payments, homeownership comes with big upfront costs. You’ll need cash for the down payment, closing costs, and moving expenses, as well as reserves for furniture, repairs, and emergencies. While the median down payment in April 2025 was over $56,000, many first-time buyers put down closer to 9 percent of the purchase price. Setting aside money in a high-yield savings account and cutting unnecessary expenses are great ways to build your fund. One helpful strategy is to make “practice payments”: if you’re paying $1,500 in rent and expect a $2,500 mortgage, start putting the extra $1,000 into savings each month.
Not everyone is ready to buy a home right away, and that’s perfectly normal. If your credit, debt, or savings aren’t where they need to be, the best move might be to wait. In the meantime, focus on maintaining good financial habits: pay bills on time, avoid unnecessary debt, and save consistently. Even if homeownership isn’t possible right now, the steps you take today will position you for a stronger application in the future.