How Much Income Do I Need to Buy a House?
Homeownership isn’t just for the ultra-wealthy. While income is important when buying a house, determining exactly how much you need to earn can be tricky.
Most homebuyers use a mortgage to finance their purchase. Lenders look at your debt-to-income (DTI) ratio to decide how much they’ll lend. If you have more debt (like student loans, car payments, or credit cards), you’ll need a higher income to show you can comfortably pay your bills, including the mortgage.
Getting Pre-Approved or Pre-Qualified
If you're unsure how much you can borrow, talk to a lender about getting pre-approved or pre-qualified. They’ll ask for basic financial information to give you an estimate. Keep in mind this number can change during the full underwriting process, based on a deeper review of your finances.
How Do Lenders Determine Your Income?
- Salaried Employees: You’ll need to provide pay stubs or W-2s.
- Contract Workers: Provide 1099 forms to show earnings.
- Self-Employed: You’ll need several years of tax returns, as income can fluctuate.
Lenders also consider income from commissions, bonuses, overtime, military benefits, alimony, investments, social security, and retirement accounts.
What Else Do Lenders Look At?
Income and DTI aren’t the only factors lenders consider. They also look at:
- Credit score
- Home purchase price
- Down payment amount
Even if your income is lower than ideal, having low debt and a strong credit score can help you get approved. Be ready to provide documentation for all recurring expenses that could affect your ability to repay the loan.
There’s no set income required to buy a home, but it’s always a good idea to lower your debt before applying. Talk to a lender to understand your specific situation and the steps you can take toward homeownership.