The Main Things You Need To Buy A House
6 minute read
July 9, 2022


If you’re like most people, buying a home is one of the most expensive purchases you’ll make during your lifetime. But, other than money, what do you need to buy a house?

In this blog, we’ll look at the ins and outs of the main things you need to buy a house and help you make the best decision for you and your family.

What are the requirements to buy a house?

There are several questions you should answer first when it comes to buying a home, including:

  • Is it still a good idea for me to buy a house?
  • What income do I need?
  • What is the minimum down payment required?
  • How can I figure out how much home I can afford?
  • What is a mortgage pre-approval letter?
  • What debt-to-income ratio is needed to buy a house?
  • What are the minimum credit score requirements to buy a house?

Let’s look at each one of these important questions in detail below.

Is it still a good idea to buy a house?

The good news is that despite contemporary challenges, like inflation, talk of recession, or pandemic hangover, buying a home is still a good investment. 

In a recent Forbes survey carried out last month, 57% of real estate and finance experts surveyed thought buying a home was still a good long-term investment. 

They also noted that homeownership contributed to a “wealth-building mindset” with far-reaching positive effects.

What kind of income do I need?

Your income requirement can vary depending on where you live and the type of property you are interested in purchasing

There’s no set minimum income needed to buy a home or be approved for refinancing.

What you will need, however, is proof of income. While there aren’t mandatory employment requirements for every mortgage lender, most lenders require consistent employment and steady income when considering a mortgage application.

Mortgage lenders need to ensure you can repay the money you are loaned. 

To do this, many mortgage lenders look for two years of consistent employment or self-employment to qualify for a mortgage. That’s why most lenders will ask for supporting documentation such as:

  • Tax returns, pay stubs, or W-2s for the previous two years
  • Employment letter or proof of employment
  • Bank statements

Additionally, be ready to answer questions about your credit history and credit score and provide information (and documentation) about your monthly income and any recurring debts you may have.

What is the minimum down payment required?

When you buy a home, you pay a portion of the total home price at closing, and your mortgage lender pays the remainder of the home’s price. 

The portion you pay is called the down payment, and what’s left over is the mortgage loan amount you’ll be asking to borrow. 

The minimum down payment you’ll need to come up with will depend on a few things, such as:

  • The price of the home
  • The type of mortgage

Government-backed loans, like the Federal Housing Administration‘s FHA loan programs, allow eligible service members, veteran, or surviving spouses to get a mortgage with as little as 3.5% of the home’s value. 

And conventional loans can offer down payments as low as 3% of the house’s purchase price. 

Some down payment assistance programs can also help borrowers get the funds needed for a down payment. 

How can I figure out how much home I can afford?

According to the FDIC, two to three times your annual household income is how much a borrower can afford to spend on a mortgage. 

For example, if your annual income is $40,000, you might comfortably afford to pay back a mortgage between $80,000 (2x$40,000) and $120,000 (3x$40,000). But it’s important to remember, that this is just a rough estimate. 

Getting pre-approved for a mortgage is a great alternative if you want a more accurate understanding of what you can afford.

With mortgage pre-approval, a lender carefully assesses your finances and presents you with a written estimate of how much you could expect to borrow from them.

What is a mortgage pre-approval letter?

Your mortgage pre-approval letter tells home sellers that you are a serious buyer and can pay for the house. In competitive markets, many sellers will only accept an offer to buy accompanied by a mortgage pre-approval letter for both seasoned and first-time buyers.

A lender will carefully review your finances to determine your pre-approved eligibility. The pre-approval process starts with an application you can complete over the phone, or start an application online. 

Plan on providing information about your income, expenses, debt, assets, etc. Some of the main factors that play a role in how much a mortgage might qualify for include

  • Total family monthly income from all sources, including:
    • Employment
    • Government benefits
    • Alimony or child support payments
  • Recurring or continuing debts, such as student or car loans, credit cards, etc.
  • Credit history and credit score

What is the debt-to-income ratio is needed to buy a house?

Your total monthly income and recurring debts are used to calculate your debt-to-income ratio (DTI). 

Lenders use your DTI when evaluating a potential borrower’s ability to repay a mortgage. DTI is calculated by dividing the total amount of your continuing debt—including the mortgage you are applying for—by your income. 

A DTI of 36% is considered good, but every lender is different. Some mortgage lenders will work with borrowers with a DTI up to 43%.

What are the minimum credit score requirements to buy a house?

Your credit score will not only impact whether or not you will qualify for a mortgage, but it also plays a role in what interest rate you’ll be eligible to receive.

A lower credit score doesn’t mean you aren’t eligible for a mortgage loan. 

It’s important to understand that borrowers with reduced credit scores represent an increased risk to lenders. That increased risk can mean borrowers with lower credit scores may need larger down payments, co-signers, etc. to qualify for a mortgage.

According to Experian, the average American FICO credit score jumped to 714 last year. However, many lenders work with borrowers with scores below that. 

Additionally, different loan programs have individual credit requirements. 

For example, an FHA loan requires a credit score of at least 580, some lenders could allow credit scores as low as 500 if the borrower has at least 10% for a down payment. 

And while VA loans (backed by the Department of Veterans Affairs) don’t have a preset minimum credit score, most lenders look for a minimum of 620.

If you’re unsure of your credit score, you can request a free copy of your credit report once a year, from each of the three credit bureaus.

Assist Home Loans can guide you through the home-buying process

If you’re ready to start your mortgage application or have questions about the home buying process, get in touch with Assist Home Loans today. 

Whether you’re looking for a conventional loan or refinancing, our loan officers have the experience and skills to help you achieve your home buying needs.

Photo by RODNAE Productions