What Do Lenders Look At When You’re Buying a Home? (Las Cruces 2025 Guide

If you’re planning to buy a home in Las Cruces this year, one of the biggest steps in the process is getting approved for a mortgage.

But what exactly do lenders look at when deciding whether to approve your loan?

Let’s break it down in plain English 👇

💳 1️⃣ Your Credit Score

Your credit score is one of the first things lenders review. It tells them how reliable you are when it comes to paying back debt.

• Most conventional loans require a credit score of 620+.
• FHA loans allow lower scores — sometimes as low as 580 with a stronger down payment.
• VA loans are flexible, often approving buyers with scores in the mid-600s or even lower.

💡 Pro Tip: Before applying, check your credit report for errors, pay down revolving balances, and avoid opening new credit accounts. Even small changes can boost your score and improve your rate.

💰 2️⃣ Your Income & Employment History

Lenders want to know that you have a stable income and a consistent job history. Typically, they’ll look for:

• At least two years of steady employment
• W-2s, pay stubs, or tax returns
• Reliable income if you’re self-employed (through bank statements or 1099s)

If you’ve recently changed jobs but stayed in the same field, that usually won’t hurt you — especially if it’s a step up in pay.

🧾 3️⃣ Your Debt-to-Income Ratio (DTI)

Your debt-to-income ratio is one of the most important factors in loan approval. It compares your total monthly debt payments to your gross monthly income.

• Most lenders want to see your DTI below 43%
• FHA and VA loans may allow slightly higher ratios

💡 Example:

If you earn $6,000 per month and your total monthly debts (credit cards, auto loan, future mortgage) equal $2,400, your DTI is 40% — well within range.

The lower your DTI, the better your approval odds and the more favorable your interest rate.

💵 4️⃣ Your Down Payment

While 20% down used to be the standard, today’s buyers have more flexibility than ever:

• Conventional loans: As low as 3–5% down
• FHA loans: Minimum 3.5% down
• VA loans: Often 0% down (for qualified veterans and active-duty buyers)

In Las Cruces, many buyers also use down payment assistance programs through the New Mexico Mortgage Finance Authority — which can help with upfront costs or closing fees.

🏠 5️⃣ The Property Itself

Believe it or not, lenders also review the home you’re buying. They’ll order an appraisal to make sure the property’s value matches (or exceeds) your loan amount.

They also check for basic safety and condition requirements — especially for FHA and VA loans, which have stricter property standards.

📑 6️⃣ Your Assets & Savings

Lenders want to see that you have some financial cushion. They’ll look at:

• Bank statements
• Retirement accounts
• Savings or investment balances

Even if you’re using a low down payment loan, having cash reserves shows you can comfortably handle homeownership expenses like maintenance and property taxes.

⚖️ 7️⃣ Loan Type & Program Fit

Finally, lenders consider which loan program fits your financial situation best:

• Conventional: Great for buyers with strong credit and down payments
• FHA: Ideal for first-time buyers or moderate credit scores
• VA: Perfect for qualified military buyers — often with no down payment
• USDA: Available for certain rural or suburban properties near Las Cruces

A knowledgeable Realtor (that’s me 😉) and a good lender can help match you with the program that saves you the most money.

✅ The Bottom Line

When it comes to buying a home, lenders are really looking for one thing — confidence that you can comfortably afford your loan.

That means a mix of steady income, manageable debt, decent credit, and some financial stability.

📲 Ready to buy your home in Las Cruces? I’ll connect you with trusted local lenders, walk you through pre-approval, and help you find the perfect home — with no guesswork or surprises.

#LasCrucesRealEstate #HappyLifeRealEstate #HomeBuyingTips #LasCrucesHomes #MortgageTips #FirstTimeBuyer

FAQ

Q1: What credit score do I need to buy a home in Las Cruces?

Most conventional loans require a credit score of at least 620, while FHA loans may go as low as 580 with a higher down payment. VA loans are often more flexible for qualified military buyers.

Q2: What is a good debt-to-income ratio for mortgage approval?

Most lenders prefer a DTI (debt-to-income ratio) of 43% or less, meaning your monthly debts shouldn’t exceed 43% of your gross income. A lower DTI often leads to better loan terms.

Q3: How much down payment do I need?

You don’t always need 20%!

• Conventional: 3–5% down
• FHA: 3.5% down
• VA: 0% down for eligible buyers
  There are also New Mexico assistance programs that help with down payments and closing costs.

Q4: Do lenders look at the property itself?

Yes — lenders order an appraisal to confirm the home’s value meets the loan amount. FHA and VA loans may also check that the property meets certain safety and condition standards.

Q5: What documents do I need for pre-approval?

Most lenders will ask for:

• Recent pay stubs and W-2s
• Two years of tax returns
• Bank statements
• Photo ID
• Proof of debts or liabilities

Q6: What can I do to improve my chances of approval?

Pay down credit cards, avoid new debt, and make all payments on time. Having steady income, good savings, and a clear financial picture will make you a stronger applicant.