Am I ready to buy a home?

A guide for making one of the most important purchases of your life

Understand your finances

Look closely at all your income sources to determine your total annual income. Then study your expenses and calculate how much you are truly spending each year.

Budget your monthly payments

Take your monthly income, before taxes, and multiply that by 28%. That’s how much you can afford each month.

Mortgage

Everything else

Know your credit score

The higher your credit score, the lower your mortgage rate will be and the more house you can afford.

800-850

Excellent

740-799

Great

670-739

Good

580-669

Fair

300-579

Poor

Lower rate

Higher rate

Keep your debt manageable

Lenders will look at your debt-to-income ratio (DTI) to figure out the percentage of your income used to pay off debt.

Monthly

Debt

Income

should be less than

Determine how much to put down

Minimum

2

%

Average for

first time buyers

6

%

Avoids PMI

20

%

Learn more about PMI

Your lender may add private mortgage insurance (PMI) to your monthly payments to protect them should you default. Once you’ve reached 20% equity in your home, PMI payments typically end.

Home value

20%

No more PMI

Prepare for other costs

Often overlooked, additional homeownership costs add up quickly. Be sure to include these in your budget.

Closing costs

3-5% of loan value

Home repair

4% of home value annually

Insurance

0.25% of home value annually

Property tax

Varies by location

Learn more about the homebuying process

5 ways to improve your credit score

Read more, 3 mins

What to consider when buying your first home

16 resources

Learn more about financing your home

What is private mortgage insurance (PMI)?

Read more, 2 mins

Fixed vs. adjustable rate mortgages

Watch video, 3 mins

Want to find more tips for buying a home?

5 stages of the homebuying process

Read more, 3 mins

6 first-time homebuyer mistakes to avoid

Read more, 3 mins