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

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

• 20-25%
• 30%
• 40%
• 45-50%

Correct answer: D

If your loan is underwritten through an automated underwriting system, 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 your loan is manually underwritten, or you’re getting a “Jumbo Loan” for a considerable amount (over $484,350 in the Phoenix metro as of 2019), 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. One of the most commonly known is FICO^®. Your FICO^® score is a three-digit number that ranges from 300 to 850.

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

• 540
• 620
• 680
• 700

Correct answers: B

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 550 and above according to this CNBC article², that’s not the norm. For example, the government sponsored Fannie Mae — a national lending powerhouse — requires a minimum FICO score of 620. The Federal Housing Administration (FHA) does allow for lower credit scores depending on other factors, but that would depend on your individual situation.

At Desert Financial, buyers with a score of 620 and above who meet our other loan qualifications (income requirements, debt-to-income ratio, etc.) would be likely to qualify for a home loan. Have a credit score under 620? Meet with a loan officer about lower-credit alternatives; even if you don’t qualify now, they 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 for a home inspection and closing costs. Sometimes, potential homeowners can find specials like our Participating Broker Program, which includes $500 toward your closing costs.³

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

• 0%
• 3.5%
• 6-10%
• 20%

Correct answers: A and B

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 need to save up for a 20% down payment. The 1 in 5 who chose 6-10% were slightly closer.

At Desert Financial, potential homebuyers can get conventional financing with as little as 3% down! FHA loans require just 3.5% down, and some buyers can even qualify for zero-down options through Veterans Affairs or the U.S.D.A.