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Home Buying: Basic Pre Approval Requirements
Jennifer Hernandez • February 17, 2024
Are you wondering the basic requirements of buying a home? One thing is for sure, and that is CHANGE. The real estate industry is no stranger to change, and this article will help you know the basics, so that you are able to make your home buying plans a reality, regardless of what industry regulations and changes are thrown our way.
Credit Will Always be Your Gateway to Homeownership
Think of your credit score as the key that unlocks the door to your future home. It's more than just a number; it's a snapshot of your financial story that lenders use to decide if you're ready for a mortgage. But here's the thing: no one expects perfection. In the real world, credit scores vary, and thankfully, there are different types of loans tailored to meet these variations.
Maintaining and improving your credit is the key, so that when it is your time to buy, you have the best options available to you at that time. MyFICO.com provides the most accurate score that consumers can see that is closest to what lenders pull.
Pre Approval is Key
This process is likely the most misunderstood . You will hear terms like pre-qualification and pre-approval. It’s very easy to confuse the two . A pre-qualification is basically an application plus a credit review. This does offer valuable insights, however , it lacks the most crucial part of the mortgage process, which is documentation.
With verification of income, assets and credit properly documented and reviewed, the lender is able to provide a letter of pre approval, which will be required to make an offer to a seller. The sellers will want the assurance that your entire background has been vetted thoroughly.
Our suggestion is to consider
pre approval 6-12 months from the time you plan to purchase. This will give you crucial insights to your maximum buying power, as well as any credit fixes you can attain to achieve a higher score for the future event of home buying! This will ensure you have many choices at hand in your financing instead of a select few.
Documentation to Provide
At the pre approval stage, you should be expecting to provide documents that confirm your income and savings. You can download a list of documents required HERE.
You should expect that these documents are required at the beginning of your process with a lender. If a lender does not require these items, it actually can be a sign of a red flag in the accuracy and efficiency they are willing to provide. Can you get advice and basic information without documentation? Sure you can, however this will set you up for possible surprises later on.
The basic rule to remember is 2-2-2. This means providing 2 recent paystubs, 2 years W 2 forms, and 2 months bank statements. If you are self-employed, meaning that you own more than 25% of a company, then you will need to provide tax returns for 2 years as well in most cases. Also be prepared to verify your legal identity and ability to work in the US. This is with a US passport, resident card, or work permit.
There are other forms and documents that might be required in your situation, for things like retirement income, social security, child support etc. You can find a complete list here of documents that could be required.
Basic Income Requirements
The magic number for lenders is 2. Industry guidelines all agree across all of the programs , that 2 years is a stable overview of income, to know about the employability of someone. The fact of having a 2 year history of being employed, shows that you have stability, and if found unemployed, will have an easier time finding new employment. Good news! The 2 year history does NOT have to be all with the same employer. However, if you have changed jobs more than 3 times in a 12 month period, this could be questioned and need to be explained to establish stability.
An exception to the 2 year work history rule for employees, is attending university or some other type of training for your trade or industry. You would merely need to prove with a transcript or diploma that you were in school, and the requirement to have 2 years history of work is usually waived.
It is important to know that for employees, the gross income is used , not the take home income, when being reviewed by an underwriter. If relying on any additional income than your basic wage to qualify, like overtime, commission or bonus, the 2 years history of this income will come into play again. For this reason you should check with a lender immediately so proper calculation of income is attained.
If you are self employed, a 2 year period is also deemed enough time by underwriters to show how you manage expenses and have the ability to generate income. Your 2 year tax returns will show this, and the underwriters will look at the net income, after expenses have been deducted.
It’s worth mentioning secondary income. There are many people that rely on a second job to make ends meet. Especially in this case, a 2 year history of secondary employment is required. In addition, to prove that you have been able to carry 2 jobs for two years or more.
More the reason to check with a lender as soon as possible to make sure you know what income can count toward mortgage approval.
How Much House Can You Afford
Lenders will calculate your housing payment to be a cumulation of principal, interest, and a proration for property tax, home insurance and required HOA dues. This total payment in most guidelines should be no more than 40-43% of your total gross income that was calculated using the methods in the prior section. The reason we say ‘in general’ is because there are exceptions when a larger down payment is being made, like 20% or higher. In these cases, debt ratios could be considered up to almost 50% of your monthly gross income.
The maximum debt to income percentage, also known as DTI or Debt to Income, is 50% for Conventional Mortgages, and 55% for VA and FHA Mortgages. These mortgage types are some of the most common, and
represent a large percentage of loans (almost 80%) , especially for
first time buyers.
If you are looking for a general rule of thumb, you could take your annual household income from acceptable sources, and multiply by 3-4 times. That would give you an approximate home price. For example, if your income is $80,000 , multiplying it by 3 or 4 times, means a home price of $240,000 to $320,000. However, be careful with this formula, as it does not take into account how you got to the $80,000 in income, and whether the lender will calculate your income the same, especially if from overtime, commissions, or even a second job. Also, your debts overall must be considered from things like car payments , loans and credit cards. If your debt is more than 8-10% of your income, then the formula for the above calculation is not correct.
Down payment - the missing link
One of the biggest myths about home buying is that you have to put down 20% on a purchase. This is not the case. There are 3-5% down options available, depending if you are a first time buyer, or the loan program you are seeking, such as FHA , Conventional, or VA. These are some of the most common loan types in the industry.
Down Payment Assistance is surely available in each state, which can alleviate the need for funds required at closing. However, many of the down payment assistance programs have income ceilings, minimum credit score requirements , and maximum purchase prices or even areas of town a person can buy.
At the pre approval, the lender will determine the loan program you are qualified for, and what amount is required to close with not only down payment, but
closing costs. This final amount must be verified in your banking or investment accounts, or verified as a
gift from a close relation. All monies used for closing must be verified from an acceptable source. This is defined as money you have had on deposit for 60 days, or, deposits from your own earnings, or assets that you have sold that can be documented.
Cash money, aka mattress money, is not acceptable, because it cannot be sourced.
Bitcoin is mentioned a lot now, and becoming a looming question for funds. Bitcoin is allowed, however, the statements to prove bitcoin and its source in a 60 day period comes into question. Talk to a lender asap if this applies to you, as the rules for different programs vary greatly in this area.
In summary, be prepared to provide 2 months statements in checking, savings, investments, and retirement accounts. These must be full statements, all pages. Snapshots online are generally not accepted.
The Overall Picture
Remember, when lenders peek into your overall financial history, they're not just looking for numbers. They're trying to assess how well you handle financial responsibilities and changes. If you start the process prepared and ready to provide this information discussed above, you will have a smooth and accurate assessment to make your home buying journey a reality!
We would love to help you get started! You can
reach us here, and my team and I look forward to starting your home buying journey.
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Buying a home is one of the biggest financial and emotional decisions you'll ever make. But how do you really know if you're ready? In this article, we’re breaking down five clear signs that you might be ready to buy a house—and one red flag that means you may want to wait. Whether you’re a first-time buyer or just testing the waters, this guide will help you move forward with clarity and confidence. Sign #1: You’re Financially Stable The first green light? Consistent income and job stability. If you’ve had a steady paycheck for at least two years (especially in the same industry), that’s a strong start. But it goes deeper than income: You should also have: An emergency fund covering at least 3–6 months of expenses Savings for a down payment (typically 3%–20% of the home price) Money for closing costs and moving expenses Pro Tip: Many buyers underestimate how much they’ll need after the down payment. Check out this mortgage planning article to avoid that mistake. Texas-Specific Tip: Texas has no state income tax—but property taxes are higher than the national average. Be sure to budget accordingly. You can estimate local taxes via the Texas Comptroller’s Property Tax site. https://comptroller.texas.gov/taxes/property-tax/rates/index.php Sign #2: You’ve Got Manageable Debt & Decent Credit Your debt-to-income ratio (DTI) and credit score directly impact your ability to qualify for a mortgage—and the rate you’ll get. A credit score above 620 is usually the minimum for most loan types The higher your score, the lower your interest rate—potentially saving you thousands over time If you're carrying high-interest debt, it might be wise to pause and reduce it before buying Your debt-to-income ratio is under 55%. Want to learn more? Watch How Your Credit Score Affects Your Mortgage . Sign #3: You’re Ready to Stay Put Buying a home makes more sense if you plan to stay in one place for at least 3–5 years. Why? Because selling a home comes with closing costs, commissions, and possibly capital gains taxes. If you move too soon, you may not have built enough equity to make it financially worthwhile. Ask yourself: Are you planning to stay in the same city or job? Do you feel ready to settle down a bit? Sign #4: You’re Ready for the Responsibilities of Ownership Homeownership isn’t just about finances—it’s a lifestyle shift. Are you ready to: Maintain a yard Handle repairs Budget for appliances or home upgrades These are everyday realities renters don’t usually deal with. If you’re ready to take that on, it’s a strong sign you’re ready to buy. Need a reality check? Watch The Real Cost of Homeownership for a behind-the-scenes look. Sign #5: You’ve Budgeted for the Full Cost of Homeownership It’s easy to focus just on your monthly mortgage payment—but that’s only part of the picture. You also need to budget for: Property taxes Homeowners insurance Maintenance and repairs HOA fees (if applicable) If you’ve run the numbers and still feel comfortable, you’re probably in good shape. Red Flag: You’re Buying Out of FOMO If your motivation to buy a house is: Everyone else is doing it You’re afraid of being priced out You feel pressured by social media or family Take a step back. Fear of Missing Out (FOMO) is not a solid reason to buy a home. Your decision should be based on your goals, your finances, and your lifestyle—not the market hype. Not Sure If You’re Ready? We’ve Got You Covered Download our free Homebuyer Readiness Checklist to see where you stand Check out our Blueprint to Homeownership course for a step-by-step guide through the buying process Bottom Line Buying a house isn’t something to rush—but with the right preparation, it can be one of the most rewarding decisions you ever make. If you feel financially stable, ready for long-term commitment, and confident in your lifestyle plans—you may be ready to take the next step. Have questions? Reach out here Book a 15 Mins Call and we’ll walk you through it. Want more clear, honest mortgage advice? Subscribe to Loan With Jen on YouTube
Think you can’t afford to buy a home? You might be surprised. The income you actually need may be lower than you think. In fact, most people are asking the wrong question entirely. In this post, we’ll break down: How lenders really decide what you qualify for A simple formula to estimate your price range Why your debt matters more than your income Plus—how first-time buyers get approved with less than you’d expect It’s Not Just About Income—It’s About Debt-to-Income Ratio (DTI) Most people think income alone determines your buying power. But lenders focus more on your Debt-to-Income Ratio (DTI) . Here’s how DTI works: Your total monthly debt ÷ your gross monthly income = your DTI Most lenders want this ratio to be 45% or lower , though some loan programs will allow more. This calculation includes: Your new mortgage payment Property taxes Insurance HOA fees (if applicable) Any car loans, student loans, or credit card minimum payments Example: Let’s say you make $75,000 per year—that’s $6,250/month gross income. 45% of that = $2,812 Now subtract your monthly debts: Car loan = $500 Credit card payments = $300 Total = $800 That leaves you with about $2,000/month for a mortgage payment. What Kind of House Does $2,000/Month Get You? With interest rates around 6.5% , that could get you a home priced at $260,000–$280,000 , depending on your: Down payment Property taxes Location HOA dues Of course, this is just an estimate. You can plug your numbers into a mortgage calculator to get a more accurate idea based on your location and situation. How Loan Types Impact Income Requirements Your loan program plays a big role in how much home you can afford. Here’s a quick breakdown: FHA Loans : Allow DTIs up to 50%, and only require 3.5% down VA Loans : For veterans—no down payment required and very flexible income requirements Conventional Loans : Stricter guidelines; usually require 43–45% DTI and 3–5% down USDA Loans : No down payment, but must be in eligible rural areas and meet income caps And remember— a larger down payment means a smaller monthly mortgage , which helps you qualify for more. Credit Scores and Reserves Matter Too Even if you qualify on paper, your credit score and cash reserves play a key role: Higher credit score = lower interest rate = lower monthly payment Reserves are how much money you have in the bank after closing. Many lenders require at least 1–2 months of mortgage payments in reserves. Even if your income is borderline, having reserves can tip the scales in your favor. Real Buyer Stories: It’s More Possible Than You Think Story 1 : A couple earning $90K/year thought they needed to wait because of student loans. But with FHA, 3.5% down, and minimal other debt, they got approved for $325K—and closed on a home last month. Story 2 : A single teacher earning $52K/year bought a $210K condo using just 3% down and a first-time buyer grant. She didn’t think she qualified—until she did. Don’t Forget Side Income or Co-Buying You might qualify for more than you think if: You co-buy with a spouse, parent, or sibling You have side income (Uber, freelance, small business) that’s been on your taxes for at least 2 years That extra income can help you get approved. The Formula: Estimate What You Can Afford Here’s a quick formula to ballpark your buying power: Take your gross monthly income Multiply by 0.45 (max DTI) Subtract your monthly debts The remainder is your max mortgage payment (including taxes & insurance) Use a mortgage calculator to plug in that number and see what home price you might qualify for. Online mortgage calculators don’t take tax or insurance into consideration most times, but this will give you a ballpark figure. Before you get your heart set on a house though, reach out to a lender to find out your true buying power. It costs you nothing to get this information! Bottom Line: You Probably Don’t Need Six Figures to Buy a Home Most buyers are surprised by what they can afford. The key is understanding how lenders look at your full financial picture—not just your income. You don’t have to guess. And you don’t have to go it alone. Next Steps Take our FREE Blueprint to Homeownership course for a step-by-step guide Reach out to our team for a free strategy call —we’ll help you crunch the numbers and create a plan If you found this helpful: Subscribe to the Loan With Jen YouTube channel for weekly tips
You’re not starting over—you’re starting fresh. And yes, you can buy a home after a divorce. If you’re navigating a divorce or separation, I want to start with this: Big hug. Big kiss. This season of your life might feel uncertain or overwhelming, but you’re not broken. You’re rebuilding—and I’m here to help. Let’s walk through the 5 most common mistakes people make when trying to buy a house after divorce —and how to avoid them. 1. Your Credit Tells the Real Story—Not Just the Divorce Decree Here’s what most people miss: Even if a divorce decree says your ex is responsible for a shared mortgage or credit card, your name on the account means it’s your responsibility in the lender’s eyes. That means: Late payments by your ex will still hit your credit. A mortgage that your ex was supposed to refinance but didn’t? Still counts against your debt load. What to do: Pull your full credit report from all 3 bureaus : Experian, Equifax, and TransUnion Review all joint accounts : Are they closed? Paid off? Still open? Check if your ex has refinanced you off the mortgage —don’t assume, verify! Collect documentation if the mortgage responsibility was transferred Pro Tip: As a lender, I can do a soft credit pull for you—no ding to your score—to identify red flags before you apply! 2. Income After Divorce—What Counts (and What Doesn’t) Post-divorce income can be complex. Whether you're earning on your own or receiving support payments, lenders need proof of stability and consistency . What lenders typically require: W-2 income or 2 years of self-employment returns At least 3–6 months of child support or alimony payments (with documentation) A copy of your final divorce decree or court-ordered support agreement Watch out for: Informal payments (Venmo, cash) with no paper trail Newly ordered support that hasn’t been received yet Significant drops in income—these must be accounted for Pro Tip: If your income has decreased after divorce, we can explore co-borrowers, grants, or flexible loan programs to help you qualify. 3. The Old Mortgage Can Haunt You (Even If You Don’t Live There) Even if your ex is living in the home and paying the mortgage, if your name is still on the loan, it counts against your debt-to-income ratio. This can affect how much you qualify for—even if you’re renting now or planning to buy something smaller. How to handle it: Ask your ex to refinance the home and provide a release of liability from the lender. Ask the lender - before you are off the loan and still authorization to speak to the lender - to provide you with instructions on how to receive a release of liability. If refinancing isn’t happening, collect 12 months of canceled checks or bank statements showing your ex is paying from their own account If those options aren’t possible, you may need to wait until the home is sold or work with a lender who understands how to navigate this scenario 4. Don’t Skip the Emotional Prep—Buying a Home Is a Big Deal Divorce doesn’t just impact your finances—it affects your emotions, too. Even if you're financially ready to buy, make sure you’re mentally and emotionally ready to take on homeownership again. This is especially true if you're moving from a home that holds memories or are co-parenting with children. Ask yourself: Am I rushing to buy just to feel “settled”? Is this home choice based on my new lifestyle , not my old one? Do I have the support system and clarity to take on this responsibility? Mindset Tip: Your next home should support your fresh start , not keep you tied to the past. You’re building your life now—on your terms. 5. Timing Is Everything—Don’t Rush the Process After a divorce, it’s tempting to try and “fix” everything fast. But buying a home is a major financial move, and sometimes waiting just a few months can make a big difference. Reasons you may want to pause briefly: Waiting for credit to improve Gathering more documentation or saving for a down payment Giving support payments time to become “seasoned” (most lenders want 3–6 months of consistent payments) That said, you don’t have to put your life on hold forever. The key is working with someone who knows the post-divorce lending landscape and can help you make informed choices. You’re Not Alone—And You Can Do This Whether you're newly separated or a year into your new chapter, you deserve a place to call your own. And you don’t have to navigate this alone. Ready to get started? Here are your next steps Get a free credit and income readiness review —just message me Take my Blueprint to Homeownership course if you want a full step-by-step roadmap. You’ve got options. You’ve got support. And most importantly—you’ve got this. I’m here to help you rebuild with confidence. Let’s find your fresh start.
Did you know that buying a home doesn’t just build equity… it actually lowers your tax bill every single year ? Whether you're a first-time homebuyer or looking to grow your investment portfolio, real estate offers powerful tax advantages that most people don’t even realize exist. I even have a legal strategy that helps real estate investors defer taxes on hundreds of thousands of dollars in profit. Why Does Real Estate Have So Many Tax Perks? Simple: The government wants you to buy real estate. Homeownership and property investment fuel the economy, so the IRS offers major tax incentives just for owning property. But many people miss out on these benefits—either because they are unaware or didn’t plan ahead with a qualified professional. Tax Benefits for Homeowners (Primary Residence) If you’re buying a home to live in , here are the top 3 tax perks you need to know: 1. Mortgage Interest Deduction You can deduct the interest portion of your mortgage —which is a huge portion of your payment in the early years. For most people, the deduction applies to loan amounts up to $750,000 (if married filing jointly). Fo example, if your loan is $400,000 at 6% interest, you’re paying ~$24,000 in interest your first year—most of which may be deductible. 2. Property Tax Deduction You can deduct state and local property taxes , up to $10,000 per year (or $5,000 if married filing separately). While not as generous as it once was, it’s still a meaningful deduction, especially in higher-tax areas like Texas . For Texas-specific property tax resources, check out the Texas Comptroller’s Property Tax Help page. https://comptroller.texas.gov/taxes/property-tax/ 3. Capital Gains Exclusion When you sell your primary home, you may be able to exclude up to $250,000 of the profit (or $500,000 if you are married) from capital gains tax. The catch: You must have lived in the home for at least 2 of the last 5 years. That means if your home appreciated $400,000 and you're married—you could pay zero tax on that gain! Watch: How to Avoid Capital Gains Tax on Your Home Sale Tax Benefits for Real Estate Investors This is where the real tax magic happens. As an investor, you’re not just earning income—you’re tapping into one of the most tax-advantaged asset classes in the country. Here are five big tax breaks available to real estate investors: 1. Depreciation Even if your rental property is appreciating in value, the IRS lets you “pretend” it's losing value for tax purposes—this is called depreciation . A $275,000 rental property (excluding land) can generate $10,000/year in depreciation —offsetting your rental income on paper and lowering your taxable income.
If you're planning to buy a home in the U.S. and you're currently on a work visa or other visa status , this news directly impacts you. As of March 26 , the FHA (Federal Housing Administration) announced it will no longer accept applications from visa holders , regardless of the type of visa. This change may come as a shock, especially if you’re in the middle of the homebuying process or have already been pre-approved. Let’s break down what this means—and what options are still available to you.