Can You Buy a House? The Answer May Surprise You!

1. What is the highest debt-to-income ratio that you can have and still potentially qualify for a home loan?

• 20-25%
• 30%
• 40%
• 45-50%

Correct answer: 45-50%

While the specific requirements for approval depend on the type of loan that you are applying for, you could have up to a 45-50% debt-to-income ratio and still potentially qualify for a mortgage (though approval at 46-50% is rare). Remember, that is the maximum amount allowed. If you’re getting a “Jumbo Loan” for a considerable amount (over $548,250 in the Phoenix metro as of 2021)², the debt-to-income ratio requirements are stricter.

Credit Score

Your credit score tells lenders how creditworthy you are — that is, how likely you are to be able to repay the loan and how much of a risk it would be to lend money to you. There are several companies that will provide creditors with your credit score on request, typically as part of a larger credit report.

2. How low can your credit score be in order to still qualify for a mortgage?

• 540
• 620
• 680
• 700

Correct answer: 620

This one isn’t as black-and-white as you might think. Nearly a third of those surveyed chose 620, while 14% thought a minimum score of 680 is required.

While some lenders will qualify buyers with a FICO score as low as 550³, that’s not the norm. For example, the government sponsored Fannie Mae — a national lending powerhouse — requires a minimum FICO score of 620.⁴

At Desert Financial, buyers with a score of 620 and above who meet our other loan qualifications (income requirements, debt-to-income ratio, etc.) could potentially qualify for a conventional home loan. The Federal Housing Administration (FHA) does allow for lower credit scores depending on other factors, but that would depend on your individual situation. Meet with a loan officer about lower-credit alternatives; even if you don’t qualify now, we can provide info on ways to increase your credit score.

Down Payment

Typically, you will make a down payment on a home you are purchasing, along with paying closing costs that can include things such as a home inspection. Sometimes, potential homeowners can find specials like our Participating Broker Program, which includes a credit of up to $5,000 toward your closing costs.⁵

3. What is the minimum down payment you will need?

• 0%
• 3.5%
• 6-10%
• 20%

Correct answers: 0% and 3.5%

This one has two correct answers — and many respondents to the Fannie Mae survey didn’t choose either one of them. Despite what 13% of those surveyed said, you don’t always need to save up for a 20% down payment. The 1 in 5 who chose 6-10% were slightly closer. Potential homebuyers can apply for conventional financing with less than 20% down. The Federal Housing Administration (FHA), Veterans Affairs and the USDA also offer select loan programs with even lower down payment requirements.