5 Financial Steps to Take Before You Talk to a Lender

A lot of homebuyers do things in the wrong order. They find a house they love and call a lender. Then they find out their credit needs work. Or their debt load is too high. Or their savings fall short. At that point, they're scrambling — or walking away from a house they wanted.

Getting mortgage-ready before you call a lender puts you in control. Here are five steps to take first.

1. Know Your Credit Score — and What's Behind It

Lenders look at your credit score first. But the score alone doesn't tell the whole story. What drives it matters just as much.

Pull your full credit reports from all three bureaus — Equifax, Experian, and TransUnion — at AnnualCreditReport.com. Look for errors, old accounts, or collections you forgot about. One wrong collection account can drop your score by 40 to 80 points. Disputing it can take months.

For a conventional loan, lenders want a score of 620 or higher. To get the best interest rates, aim for 740 or above. A 20-point gain before you apply can mean a lower rate for the life of the loan.

2. Calculate Your Debt-to-Income Ratio

Your debt-to-income ratio (DTI) compares your monthly debt payments to your gross monthly income. Lenders use it to judge whether you can handle a mortgage on top of what you already owe.

Most lenders want a DTI of 43% or lower. Some programs go up to 50%. Either way, lower is better — for your terms and your application strength.

To find your DTI, add up your monthly minimums — car loans, student loans, credit cards, personal loans. Divide that total by your gross monthly income. If the number surprises you, that's good to know before you sit down with a lender.

3. Get Your Down Payment and Reserves Ready

Most buyers focus on the down payment. But lenders also check reserves — the money still in your accounts after closing. They want to see two to three months of mortgage payments in savings after you've handed over the down payment.

How much you need upfront depends on the loan type. Conventional loans can go as low as 3% down. Putting less than 20% means paying private mortgage insurance (PMI). FHA loans need 3.5% with a qualifying score. VA loans — for eligible veterans and active-duty members — need no down payment at all.

Know your number before you start touring homes. It keeps your search grounded and stops you from falling for a house outside your real range.

4. Don't Make Big Financial Moves Before You Apply

Lenders review the last two years of your financial history. They look hardest at the most recent 90 to 120 days. Some moves can hurt your application — even ones that seem smart.

Opening new credit adds a hard inquiry and lowers your average account age. Switching jobs creates paperwork headaches. Large deposits without a clear source raise red flags. Paying off a collection right before applying can even drop your score temporarily before it helps.

Keep your finances stable in the months before you apply. That's the simple rule.

5. Know the Full Cost of Owning — Not Just the Payment

The mortgage payment is just one piece. Property taxes, homeowner's insurance, HOA fees, utilities, and upkeep all add to the real monthly cost. A good rule of thumb: budget 1% of the home's value each year for repairs. On a $350,000 home, that's about $292 a month.

Build a full budget before you apply. It shows what price range fits your life — not just what a lender will approve. Those two numbers are often different. The gap is where buyers end up stretched too thin.

Ready to Know Where You Stand?

These five steps give you a clear picture before a lender ever pulls your credit. Want help working through them? I can review your credit, run your DTI, build a savings plan, and put real numbers on a target price. That's what mortgage readiness coaching does.

You don't need to have it all figured out first. That's what the coaching is for.