Buying a house is a mess. It’s a mountain of paperwork, a lot of jargon that sounds like it was invented to confuse you, and a constant feeling that you might be doing something wrong. Honestly, most people focus on the wrong things. They obsess over the perfect granite countertop while ignoring the fact that their debt-to-income ratio is screaming for help. If you want to actually get the keys, you need to understand that requirements for a home loan aren't just a checklist—they are a story you are telling a bank about how much they can trust you.
Lenders aren't your friends. They are risk managers. They want to know, with mathematical certainty, that you aren't going to vanish into the night with their money.
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The Credit Score Myth
Everyone talks about the 620 minimum. Sure, for a standard conventional loan, 620 is the baseline. But if you walk into a bank with a 622, you aren't getting the "advertised" rate you saw on a billboard. You’re getting the "we might let you borrow this but it’s going to cost you an arm and a leg" rate.
FHA loans are a bit more forgiving. You can technically get in with a 580 score and 3.5% down. If you have a 500 score, you might still get a loan, but you'll need 10% down. It’s a trade-off. The lower the score, the more "skin in the game" the bank demands.
Most people don't realize that your "mortgage score" is different from the one you see on your banking app. Lenders usually use a specific FICO version—often FICO Score 2, 4, or 5. These versions are much more sensitive to high credit card balances than the VantageScore you see on Credit Karma. If you’ve been maxing out your cards but paying them off every month, your "mortgage score" might actually be lower than you think because of the reporting dates.
Debt-to-Income: The Number That Actually Matters
Your income is great, but the bank cares way more about what's left over. This is the Debt-to-Income (DTI) ratio.
Basically, they take all your monthly minimum debt payments—car loans, student loans, credit cards—and add your projected new mortgage payment. Then they divide that by your gross monthly income. Most conventional lenders want to see this under 43%. Some will push it to 50% if you have huge cash reserves, but that’s the exception.
I once saw a guy who made $200,000 a year get rejected for a $400,000 house. Why? Because he had two $1,200 truck payments and $150,000 in private student loans. His DTI was a train wreck. Income is only half the battle.
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Employment History and the "Two-Year Rule"
Lenders love stability. They want to see that you’ve been in the same line of work for at least two years.
You don't necessarily have to be at the same company for two years, but if you jump from being a nurse to being a freelance graphic designer, the clock resets. Freelancers and 1099 workers have it the hardest. If you’re self-employed, the requirements for a home loan get significantly more invasive. You’ll need two years of tax returns, and here’s the kicker: they look at your net income after deductions. If your accountant is "too good" at his job and wipes out your taxable income through deductions, the bank will think you’re broke.
You can’t have it both ways. You can’t tell the IRS you made $30,000 to save on taxes and then tell the bank you made $100,000 to buy a mansion.
The Paperwork Nightmare
Get a folder. A big one. Or a very organized Google Drive. You are going to need:
- Two years of W-2s.
- Two months of bank statements (every single page, even the blank ones).
- Thirty days of pay stubs.
- Proof of where your down payment came from.
If your parents are giving you money for a down payment, it’s a "gift," not a "loan." The bank will require a signed gift letter stating that you don't have to pay them back. If you deposit $5,000 in cash into your account two weeks before applying, the underwriter will flag it. They call this "unseasoned funds." They need to source every penny. If they can’t see where it came from, they can’t use it.
Assets and the "Rainy Day" Factor
It isn't just about the down payment. Lenders look at your "reserves." This is the amount of money you have left in the bank after you pay the down payment and closing costs.
Closing costs are the silent killer. They usually run between 2% and 5% of the home's price. If you’re buying a $400,000 house, you might need $12,000 just for the privilege of signing the papers. If you have $0 in your savings account the day after you close, you are a high-risk borrower. Some loan programs require you to have 3–6 months of mortgage payments sitting in a liquid account just as a safety net.
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The Property Itself
The house has to qualify, too. This isn't just about you.
If you’re using an FHA or VA loan, the appraiser is going to be picky. Peeling paint? No go. Missing handrails? Fix it. If the house is falling apart, the bank won't lend on it because the house is their collateral. If you stop paying, they want to be sure they can sell it and get their money back.
Condos are even weirder. The bank will look at the Homeowners Association (HOA) financials. If the HOA is involved in a lawsuit or doesn't have enough money in their reserve fund, the bank might "blacklist" the entire building. You could have a 800 credit score and $1 million in the bank, and they’ll still say no because the condo building is a mess.
Real Talk on Mortgage Insurance
Unless you’re putting 20% down, you’re probably paying Private Mortgage Insurance (PMI). On an FHA loan, it’s called Mortgage Insurance Premium (MIP). This is an extra fee you pay every month that protects the lender—not you—in case you default.
It’s expensive. On a $300,000 loan, PMI could easily be another $150 to $200 a month. Factor that into your budget early. Don't wait for the closing disclosure to realize you can’t afford the monthly bill.
Moving Forward: Your Action Plan
Don't just start browsing Zillow. That’s how people get heartbroken.
First, pull your actual credit report from AnnualCreditReport.com. Look for errors. They happen more often than you'd think.
Second, stop opening new lines of credit. Do not buy a car. Do not buy furniture on a "no interest for 12 months" plan. Do not even let a jeweler pull your credit for an engagement ring. Keep your credit profile frozen in time until you have the keys in your hand.
Third, get a "Pre-Approval," not just a "Pre-Qualification." A pre-qualification is a guess based on what you told them. A pre-approval is when an underwriter actually looks at your tax returns and tells you exactly what they will lend you. In a competitive market, a pre-qualification isn't worth the paper it's printed on.
Fourth, calculate your "true" monthly payment. This includes principal, interest, taxes, homeowners insurance, and HOA fees. Use a real calculator, not a simplified one.
Fifth, save more than you think you need. There are always "hidden" costs—inspections, appraisals, credit report fees, and the inevitable $2,000 you'll spend at Home Depot the first week you move in.
Navigating the requirements for a home loan is about being boringly predictable. The more boring your finances look, the more the bank will love you. Keep your job, pay your bills, and keep your paperwork organized. It’s a grind, but it’s the only way through the front door.