The 4 Numbers That Determine If You Can Buy a Home

(Most First-Time Buyers Never Calculate These)

Most people start house hunting the wrong way.

They browse listings.

They attend open houses.

They talk to realtors.

But they don’t actually know the numbers a lender will use to approve them.

And those numbers determine everything:

• Whether you qualify

• How much house you can afford

• What your monthly payment will be

Before you start looking at homes, there are four financial numbers every future homeowner should know.

Calculating monthly income for mortgage readiness

Calculating your monthly income helps set a realistic homebuying budget.

1. Your Monthly Income

Lenders begin with your gross monthly income — the amount you earn before taxes and deductions.

Why?

Because your income determines the maximum mortgage payment you can reasonably afford.

Most lenders review your last two years of income history to confirm that your earnings are stable and consistent.

This can include:

• Salary or hourly income

• Self-employment income

• Consistent side income

• Certain bonus or commission structures

But income alone doesn’t determine what you can afford.

The next number matters just as much.

2. Your Debt-to-Income Ratio (DTI)

Your debt-to-income ratio shows lenders how much of your income is already committed to debt.

This includes:

• Credit cards

• Car loans

• Student loans

• Personal loans

• Minimum debt payments

Many lenders follow the 28/36 guideline.

This means:

• No more than 28% of your income should go toward housing

• No more than 36% of your income should go toward total debt

Example:

If your monthly income is $5,000

• Your housing costs should stay around $1,400 or less

• Your total debts should stay around $1,800 or less

Understanding this number alone can completely change how you approach homebuying.

Reviewing credit score before mortgage application

Knowing your credit score helps you understand your mortgage options.

3. Your Credit Score

Your credit score is essentially your financial reputation.

It tells lenders how reliably you’ve handled credit in the past.

Your credit score influences:

• Whether you qualify for a mortgage

• Your interest rate

• Your monthly mortgage payment

Many buyers believe they need perfect credit to buy a home.

That’s a myth.

Many loan programs begin around 620 credit scores, and some programs may allow even lower depending on the loan type.

But improving your credit score — even slightly — can save thousands of dollars over the life of your loan.

4. Your Savings

Buying a home requires more than just a down payment.

Most buyers also need money for:

• Closing costs

• Inspections

• Moving expenses

• Initial repairs

• Emergency reserves

Down payments can range from 3% to 20% depending on the loan program.

Closing costs typically add another 2%–5% of the purchase price.

Many lenders also prefer buyers to have several months of mortgage payments saved after closing.

This is one of the most overlooked parts of preparing to buy a home.

Using a budget planner to track mortgage readiness

The Mistake Most Future Homeowners Make

Most people know one or two of these numbers.

But very few people know all four.

They may know their income.They might know their credit score.

But they usually haven’t calculated:

• Their real homebuying budget

• Their true debt-to-income ratio

• Their affordability range

• Their down payment strategy

Without these numbers, the homebuying process becomes confusing and stressful.

And many people delay buying simply because they don’t have a clear financial plan.

A Simple Way to Organize Your Numbers

That’s exactly why we created the Mortgage & Budget Planner.

This workbook helps you organize the numbers lenders look at so you can clearly understand your path to homeownership.

Inside the planner you’ll calculate:

• Your true homebuying budget

• Your debt-to-income ratio

• Your mortgage affordability range

• Your down payment strategy

• Your monthly financial plan

Instead of guessing where you stand, you’ll be able to see the full picture.

Start Planning Your Path to Homeownership

If buying a home is one of your goals, the first step isn’t looking at listings.

The first step is understanding your numbers.

The Mortgage & Budget Planner was designed to help future homeowners organize their finances and prepare for the mortgage process with clarity.

Get Started:www.bbtdc.org/keys-to-cashflow-suite