Am I ready to buy a home? A checklist for would-be buyers
Owning a home is a goal for a lot of people, but how do you know when you’re really “ready?” Ready doesn’t necessarily mean that you need a perfect credit score or a pile of cash. Instead, you need a few things to line up: regular income, limited debt, some savings, and the right monthly payment.
Key takeaways
- Lenders mostly look at your income, credit, existing debt, and how much cash you bring to closing.
- You may need far less than 20% down. Some loans require 3.5%, 3%, or even nothing down.
- The monthly cost of owning includes taxes, insurance, and repairs, not just the mortgage.
- Buying a first home has gotten harder. In the National Association of Realtors' yearly survey covering mid-2024 to mid-2025, first-time buyers made up just 21% of home purchases (a record low). The average first-time buyer was 40 years old. That doesn't mean it's out of reach, but a little planning goes a long way.
1. Your income is steady
Lenders want to see reliable income, usually with about two years of history in the same line of work. It doesn't have to be the same job either. If you're self-employed or a gig worker, you’ll need to show two years of tax returns.
Ask yourself: Could you count on your current income for the next few years?
2. Your debt is under control
Lenders care a lot about your debt-to-income ratio (DTI). That's your total monthly debt payments, including your future mortgage, divided by your gross monthly income.
Most lenders like to see a DTI of 43% or less. Try to keep your housing payment around 28% of your gross income.
Example: If you earn $5,000 a month before taxes, 43% is $2,150. That has to cover your mortgage plus car payments, credit card minimums, and student loans.
3. Your credit is in decent shape
You don't need excellent credit. There are plenty of FHA loans available with a score of 580. What matters more right now is that you’re making on-time payments and working to lower your credit card balances.
Ask yourself: Have you checked your credit reports for free at AnnualCreditReport.com in the last year?
4. You have money for more than the down payment
Plan for three infusions of cash:
- Down payment: As little as 0% to 3.5% for many loans, depending on the program.
- Closing costs: Usually 2% to 5% of the price of the home.
- A buffer: Savings left after closing for emergencies and repairs.
Down payment assistance programs can help with the first two, but the third one is all you.
5. You know the true monthly cost
Your monthly housing payment usually includes four things: principal, interest, property taxes, and homeowners insurance. You may also pay mortgage insurance or HOA dues (put down 20% or more and you can skip mortgage insurance, which will save you money).
Then there's upkeep. Try to save1% to 2% of your home's value each year for repairs. On a $250,000 home, that's $2,500 to $5,000 a year.
Ask yourself: Could you pay that total comfortably and still save a little each month?
6. You plan to stay put for a while
Buying and selling a home is expensive. If you might move in the next few years, renting is usually cheaper. Buying really only makes sense if you plan to be in the area for five years or longer.
7. You've thought about what you're giving up
Owning means you don't have a landlord to call when the water heater breaks and less flexibility to move for a new job. For many people, the trade-off is worth it, but you’ll need to reconcile that with your own situation.
What if you're not ready yet?
That's okay. Most people need a year or two of prep. Pay down credit card balances, build savings, and keep your payments on time.
Am I ready to buy?
What this is
Why it matters
What it means for you
What to do next
Sources
Related FAQs
Common questions about this topic, answered simply.
Do I need 20% down?
No, plenty of buyers put down much less. A smaller down payment usually means paying mortgage insurance, though.
Can I buy a home with student loans?
Yes, lenders count your student loan payment in your DTI, but plenty of buyers have them.
Should I talk to a lender even if I'm not ready?
It can help. A lender or housing counselor can review your finances and tell you what to fix first. Talking to one doesn't commit you to anything.
Keep reading
How a HUD-approved housing counselor can help you buy
Buying your first home means learning a whole new language. You’ll discover the joy of escrow, points, DTI, and PMI, to name just a few topics. However, you don't have to figure it out alone. HUD-approved housing counselors offer free or low-cost guidance to help you.
Read Renting and housingClosing costs: the money you need beyond the down payment
Plenty of first-time buyers save hard for a down payment, then get surprised when they get to closing and realize they need more money. We’re talking about closing costs, additional fees/expenses that come with getting a mortgage and transferring a home into your name. They can add up to thousands of dollars, so it pays to plan.
Read Renting and housingDown payment assistance: free and forgivable money for first-time buyers
Saving for a down payment is the biggest challenge most would-be homeowners face. What many people don't know is that thousands of programs across the country can help cover it, sometimes with money you never have to pay back.
Read Renting and housingFHA, VA, and USDA loans: home loans for buyers with less saved
Think you need 20% down to buy a home? Three government-backed loan programs may change your mind. FHA, VA, and USDA loans are designed for buyers with less in savings, as well as those with lower credit scores or modest incomes.
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