The Paperwork Test Most Buyers Skip

Before a single open house gets toured, the numbers that actually decide whether a mortgage gets approved are already set: credit score, debt-to-income ratio, and how much cash is sitting in savings. Falling in love with a listing before checking those three numbers is how house hunting turns into a slow disappointment.

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Credit and Debt-to-Income Come First

Lenders look at debt-to-income ratio (DTI) — monthly debt payments divided by gross monthly income — before they look at how charming a kitchen is. Most conventional loans want a DTI under 43%, and a lower number usually unlocks a better interest rate. Someone earning $6,000 a month with $1,800 in existing debt payments (car loan, student loan, credit cards) is already at 30% DTI before a mortgage payment is even added, which narrows what a lender will approve.

The Down Payment Is Only Part of the Cash Needed

A 20% down payment avoids private mortgage insurance, but it's rarely the only cash required at closing. Closing costs typically run 2%-5% of the purchase price, and lenders increasingly want to see reserves — extra cash left over after closing, equal to a few months of the new mortgage payment. On a $350,000 home, a 20% down payment is $70,000, but closing costs alone can add another $7,000-$17,500 on top, before a single reserve dollar is counted.

Buying Now vs. Renting and Waiting: Pros and Cons

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Pros of buying now:

  • Monthly payments build equity instead of covering someone else's mortgage
  • A fixed-rate mortgage locks in a housing cost that doesn't rise with inflation
  • Ownership opens the door to tax benefits and long-term wealth building tied to the property

Cons of buying now:

  • Closing costs and moving expenses are sunk costs paid again if the home sells within a few years
  • Maintenance, property taxes, and insurance land entirely on the owner, with no landlord to call
  • Cash tied up in a down payment isn't available for other goals until the home is sold or refinanced

Is the DTI and reserve math already run on paper, or is the plan still "get pre-approved and see what happens"?

Wise Tips

  • Get pre-approved (not just pre-qualified) before touring homes — it's based on verified documents, not a quick estimate, so it reflects a realistic budget.
  • Budget for closing costs and reserves separately from the down payment; treating them as one lump sum is how buyers get surprised at the closing table.
  • Run the DTI math with the new mortgage payment included before making an offer, not after — it changes what "affordable" actually means.

TL;DR

The numbers that decide mortgage approval — credit, DTI, down payment, closing costs, and reserves — matter more than any single listing. A 20% down payment is a starting point, not the full cash requirement, and running the DTI math with the new payment included before house hunting turns "I hope I qualify" into an actual budget.