The material presented here is for educational purposes only, and is not intended to be used as financial, investment, or legal advice.
Can You Buy a House? The Answer May Surprise You!
Most renters say they want to buy a home someday — but many think they wouldn’t qualify for a mortgage. If you’re in this group, or if you’re a current homeowner looking to upgrade and you’re worried you can’t get financing, you might not have all the facts.
A study conducted by Fannie Mae1 found that the majority of consumers responded incorrectly to questions about down payment requirements, debt-to-income limits and the minimum credit score needed to get a mortgage. So, if you’re wondering, “Can I buy a house?” The takeaway is this: There’s hope even if you don’t have perfect credit or if you have a giant student loan hanging over your head.
Ready to see how your home buying knowledge stacks up? Answer these three quick questions to see how your ideas line up with the realities of qualifying for a mortgage.
Debt & Income
Your debt-to-income ratio is calculated by dividing your monthly debt payments by your monthly gross income. This number, shown in a percentage, gives lenders an idea of your ability to manage your debt payments once a mortgage is added to the mix.
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%
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
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%
Will you qualify for a home loan?
Contact a mortgage loan officer who can help you get an estimate of how much you can borrow!
GET PRE-APPROVAL1https://singlefamily.fanniemae.com/media/21466/display
2https://www.fhfa.gov/Media/PublicAffairs/Pages/FHFA-Announces-Conforming-Loan-Limits-for-2021.aspx
3https://www.cnbc.com/2019/06/11/majority-of-consumers-are-wildly-wrong-about-mortgages.html
4https://selling-guide.fanniemae.com/Selling-Guide/Origination-thru-Closing/Subpart-B3-Underwriting-Borrowers/Chapter-B3-5-Credit-Assessment/1041363231/What-is-the-minimum-credit-score-requirement.htm
5Participation in the Real Estate Broker Program is voluntary. Desert Financial Credit Union and its subsidiary Define Mortgage Solutions LLC do not receive any benefit, monetary or otherwise, from the Participating Broker under this program. Participating Brokers are non-affiliated third parties of Define Mortgage Solutions LLC and Define Mortgage Solutions LLC makes no warranties or representations about the service provided by the Participating Brokers. To participate in this program, the member does not have to finance the mortgage loan with Define Mortgage Solutions LLC. Amount of credit will vary and is based on 25% of the buyer’s agent’s commission up to a maximum of $5,000. For full program details, see the Real Estate Broker Program Notice.