Loan Requirements for Denver Buyers

What Lenders Actually Look At

When you apply for a mortgage, lenders evaluate five core metrics to decide whether to fund your purchase. These aren't guidelines—they're hard gates. Miss the threshold on one and you don't close.

Credit score measures your track record repaying debt. Debt-to-income ratio (DTI) measures how much of your gross monthly income flows to existing debt payments. Down payment determines loan-to-value (LTV) and whether you'll pay mortgage insurance. Loan type (conventional, FHA, VA, jumbo) carries its own approval thresholds. Loan term (15 or 30 years) affects the monthly payment and the DTI calculation.

Get one of these wrong and you'll either be denied or forced to restructure your offer.

Credit Score

Your credit score is a three-digit snapshot of how reliably you've repaid debt in the past. Lenders use it as a proxy for future behavior.

Minimum credit scores by loan type:

• Conventional conforming: 620
• FHA: 580
• VA: 600
• CHFA first-time homebuyer: 620
• Jumbo: 700
• Private lending: varies (no official minimum, but lenders are selective)

If your score is below 620, you're limited to FHA loans, and even then you'll face higher rates and PMI costs. If you're sub-580, you'll need to improve your score before applying.

Debt-to-Income Ratio (DTI)

DTI tells lenders what percentage of your gross monthly income goes to debt payments. Here's how it works:

Add up all monthly debt payments (car loans, student loans, credit cards, existing mortgages, plus your new mortgage payment including property taxes and insurance). Divide by your gross monthly income (before taxes, 401K, healthcare deductions). The result is your DTI.

Example

John earns $4,000 per paycheck twice per month ($8,000 gross monthly).

His monthly debt obligations:

• Car payment: $200
• Student loans: $500
• New mortgage payment (with taxes and insurance): $2,000
• Total debt payments: $2,700

DTI: $2,700 ÷ $8,000 = 0.3375 or 33.75%

John qualifies under most loan types (all allow 43–55% DTI). If his new mortgage payment were $3,500 instead, his DTI would be 47.5%, which exceeds conventional lending limits (50% cap) but falls within FHA and VA limits (55% cap).

DTI limits by loan type

• Conventional conforming: 50%
• FHA: 55%
• VA: 55%
• Jumbo: 43%
• CHFA first-time homebuyer: 55%

If your DTI exceeds your loan type's limit, you'll need to either increase income (harder), reduce other debt payments (pay down credit cards, pay off car loans), or lower your target purchase price.

Down Payment and LTV

Down payment directly affects whether you pay mortgage insurance and how much.

Minimum down payments by loan type:

• FHA: 3.5%
• VA: 0% (eligible veterans only)
• CHFA first-time homebuyer: 3%
• Conventional conforming: 3%
• Jumbo: 15%
• Private lending: 20%

If your down payment is less than 20%, you'll pay mortgage insurance (PMI on conventional loans, MIP on FHA loans). This insurance protects the lender if you default—not you. It's an additional monthly cost that disappears once your loan balance drops below 80% of the home's value (on conventional loans) or after 11 years on FHA loans with a down payment over 10%.

Loan Types: Trade-offs

Each loan type serves a different buyer profile. Pick the one that matches your situation.

Conventional Conforming

Most common for buyers with solid credit and 10%+ down. Loan limits are $766,550 in most of the Denver metro (higher in some counties). PMI drops off once you reach 80% LTV.

FHA

For first-time buyers or those with lower credit scores (580+) or limited down payment (3.5%). FHA loans carry an upfront mortgage insurance premium (1.75%) rolled into your loan amount, plus ongoing monthly MIP. Upfront premium stings on a $500K purchase—that's an extra $8,750 in borrowed funds.

VA

For eligible military and veterans. Zero down, no PMI, lower rates. If you qualify, this is the strongest loan type available.

Jumbo

For purchases above $766,550. Higher credit score required (700+), lower DTI tolerance (43%), higher down payment (15%). Rates on jumbo loans run 30–50 basis points higher than conforming rates.

Private Lending

For borrowers who don't fit conventional, FHA, VA, or jumbo boxes—self-employed income, recent job changes, lower credit, or unique income documentation. Private lenders are flexible on structure but charge materially higher rates (typically 1–3 percentage points above prime) and require 20%+ down.

Mortgage Insurance (PMI and MIP)

Mortgage insurance protects the lender, not you. You pay for it.

PMI (Conventional Loans)

Costs 0.3%–1.5% of your loan amount annually, paid as a monthly add-on to your mortgage. A $400,000 loan with 1% PMI costs about $400 per month extra. PMI cancels automatically once your loan balance reaches 80% of the home's value (or you can request it once that threshold is hit).

MIP (FHA Loans)

Includes an upfront premium of 1.75% (rolled into your loan) plus ongoing monthly MIP (0.4%–0.9% annually). On a $400,000 FHA loan, that's $7,000 upfront plus roughly $130–300 per month ongoing. MIP is permanent on FHA loans if your down payment was less than 10%. If you put down 10%+ on an FHA loan, MIP cancels after 11 years (once your balance is below 78% LTV).

Action: Get Pre-Approved Before You Search

Don't start looking at homes until you have a pre-approval letter in hand. A lender will pull your credit, verify income, and confirm your maximum purchase price. This takes 2–3 days and saves you from falling in love with a home you can't actually buy.

When you meet with a lender, ask specifically: "What's my max purchase price given my credit, income, and down payment?" and "Will PMI apply and for how long?" The pre-approval letter answers both.

If you're closing within the next 90 days and want to know whether your situation qualifies for the strongest loan terms—or if you're unsure which loan type fits your profile—send me your target price band and I'll give you the blunt read on your path to approval.