The 4 Numbers That Determine If You Can Buy a Home

Most First-Time Buyers Never Calculate These: Essential Numbers for Homeownership

Most people start house hunting the wrong way. They browse listings, attend open houses, and chat with realtors. But here’s the kicker: they don’t actually know the numbers a lender will use to approve them. And those numbers? They determine everything:

• Whether you qualify

• How much house you can afford

• What your monthly payment will be

  
  

Before you dive into the world of home buying, 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 kick things off with your gross monthly income — that’s the amount you earn before taxes and deductions. Why? Because your income sets the stage for the maximum mortgage payment you can comfortably handle.

Most lenders will peek at your last two years of income history to ensure 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 hang on! Income alone doesn’t determine what you can afford. The next number is just as crucial.

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

Your debt-to-income ratio is like a financial report card. It shows lenders how much of your income is already tied up in 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

  
  

Let’s break it down with an example. If your monthly income is $5,000:

• Your housing costs should hover 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 like 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 think they need perfect credit to buy a home. Spoiler alert: that’s a myth! Many loan programs start around 620 credit scores, and some programs may allow even lower, depending on the loan type.

But here’s the golden nugget: improving your credit score — even just a smidge — can save you thousands of dollars over the life of your loan.

4. Your Savings

Buying a home isn’t just about the down payment. Nope! Most buyers also need cash 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 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 know all four. They might 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 can feel like a wild goose chase. Many folks 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 handy 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. Nope! 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.

So, what are you waiting for? Get started on your journey to homeownership today: www.bbtdc.org/keys-to-cashflow-suite