What Do You Need to Buy a House? Here’s Where to Start

What you need to buy a house is more than just saving for a down payment and securing a mortgage. Before you start browsing listings or house hunting, it’s a good idea to do the boring stuff first so you know that you’re truly ready to buy that house you might fall in love with. Here’s everything you need to have ready if you want to get serious about buying a home.

People you need when buying a house

Buying a house involves more than just you and the mortgage lender. You’ll work with other key professionals who will make the process as smooth as possible. Taking the time to set up a strong team will pay huge dividends down the line! It’s worth it to do some research, interview a few options, and get people on your side who you feel good about.

Buyer’s agent

A buyer's agent represents your interests throughout the transaction. They help you find properties, negotiate offers, coordinate inspections, and navigate the closing process. They can also connect you with the other professionals on this list through recommendations. Good real estate agents typically have strong ties to the community and can make navigating the home buying process a breeze.

Traditionally, the seller paid both the listing agent and buyer's agent commissions from the sale proceeds. But depending on your local rules, you might be expected to pay your buyer agent’s fee. Use a real estate commission calculator to estimate potential commission costs.

Mortgage lender or broker

A mortgage lender offers the loan directly, while a broker helps you compare multiple lenders to find the best deal. You can work with either a lender or a broker. It’s a good idea to get recommendations from your real estate agent or talk to multiple lenders and brokers to find the best rates, fees, and service. 

Home inspector and appraiser

A home inspector assesses the property’s condition, while an appraiser determines its market value. Both are key in confirming that the home is worth what you’re paying and free from major hidden issues.

Real estate attorney

Some states require you to hire a real estate attorney to be involved in all or some of the home buying process. Even if it’s optional in your area, having legal guidance can help you avoid costly mistakes. Here are the states that require a real estate attorney:

• Connecticut
• Delaware
• Georgia
• Massachusetts
• New York
• North Carolina
• South Carolina
• West Virginia

Finances you need to buy a house

Lenders look at your overall financial health to determine your eligibility for a mortgage. You’ll need cash for several purposes, including:

• Down payment: Depending on the type of mortgage, you’ll likely need at least 3% of the home’s purchase price saved (although some loans offer 0% down if you qualify). On a $400,000 home, that would mean at least $12,000 for it to be a 3% down payment. The amount you put down affects your monthly payment, whether you'll pay private mortgage insurance (PMI), and how competitive your offer looks to sellers. The more you can put down, the better your loan will be. We’ll cover more on down payment requirements below.
• Closing costs: You typically will need an additional 2%-6% of the purchase price to cover closing costs. Closing costs are fees associated with your loan and home purchase that are separate from the down payment (although both may be paid at closing). These include appraisal fees, title insurance, origination fees, taxes, and other expenses. 
• Cash reserves: Lenders also want to see that you'll still have money left after closing. There isn’t any strict requirement for how much money you need left after closing, but you usually need something. If you have a strong credit profile and solid employment history, you might be able to get by with less reserves. Having reserves shows you can handle the mortgage even if something goes wrong. 

Down payment requirements

The down payment you need to buy a house varies based on your loan program. Here’s what you need to put down for common mortgage loans:

• Conventional loans: If you can qualify for certain first-time homebuyer programs (like HomeReady or Home Possible) that have income, loan limit, and property restrictions, then you can only put 3% down on a conventional loan. But you'll pay private mortgage insurance (PMI) until you reach 20% equity. If you want to avoid PMI, you’ll need to put down at least 20%. If you don’t qualify for those first-time homebuyer programs, then you typically need 5-10% as a down payment on a conventional loan.
• FHA loans: Generally with an FHA loan, you’ll need to put down a minimum of 3.5% if your credit score is 580 and higher, and 10% if your score is between 500 and 579. That said, FHA down payment requirements can vary depending on your lender and financial situation, so don’t use those numbers as a hard-and-fast rule. With an FHA loan, you'll pay both upfront and monthly mortgage insurance premiums for the life of the loan unless you refinance into a conventional or other loan type.
• VA loans: These loans require 0% down for eligible service members, veterans, and surviving spouses. However, you'll likely pay a funding fee, which can be rolled into the loan. Although keep in mind that the funding fee can be waived if you qualify and you may be required to have a down payment in some one-off financial situations as well.
• USDA loans: These loans also offer 0% down for rural and some suburban properties in eligible areas, though income limits, location restrictions, and property type requirements apply. Talk to your lender about what would need to be true for you to qualify for a USDA loan.

Where you get your down payment matters. Lenders want proof that the funds have been in your account for at least two months. If you’re using gift money from family members and friends, you’ll need to provide a gift letter confirming that the money isn't a loan.

Stable source of income

Lenders want to see that you can afford your mortgage payments without defaulting. That’s why they want proof of a reliable income. 

If you’re a W2 employee, you need at least two years of steady employment history. Changing jobs more frequently than that won’t disqualify you immediately, but it will make you seem like a riskier person to lend to. You’ll need to provide an explanation for employment gaps. Lenders want to see recent pay stubs, W-2 forms from the past two years, and tax returns.

Self-employed buyers and those with unconventional income, like freelancers and gig workers, will face more scrutiny during the underwriting process. You'll need at least two years of tax returns showing consistent income. Some lenders may average your income over the past two years, so large income drops could affect your approval. You'll also need to provide profit and loss statements or bank statements.

Debt-to-income ratio

Debt-to-income (DTI) ratio is a key factor in mortgage approval. Most conventional loans look for a DTI below 43% as a general guideline, but some lenders prefer 36% or lower. Always talk to your lender to get an idea of what they’re looking for because the DTI ratio they’re looking for changes depending on the lender and your financial information.

This ratio includes your mortgage payment and all other loans you may have, including student loans, auto loans, credit card debt, and personal loans. If your DTI is high, paying down high-interest debt before applying for a mortgage can improve your chances of approval.

Credit score

Your credit score affects your interest rate, loan options, and even how much you can borrow. So, what credit score do you need to buy a house? As a wide general guideline, you need a credit score of at least 500 or higher to buy a house.

For conventional loans, you'll typically need a minimum credit score of 620. But if you want the best rates and terms, aim for a score of 740 or higher. 

FHA loans are more forgiving, sometimes accepting scores as low as 580 with a 3.5% down payment, or even 500-579 with 10% down. That said, FHA lending criteria varies between lenders and depending on your whole financial situation. There aren’t any hard-and-fast numbers that will guarantee you can qualify for an FHA loan. 

VA loans typically look for a score of at least 620, while USDA loans typically want to see at least 640. But those aren’t strict requirements—both VA and USDA loans are flexible with credit requirements depending on other factors in your financial situation.

The higher your credit score, the better the rates and terms you’ll get, which can save you thousands of dollars over the life of the loan. Check your credit months before you plan to buy a house. This gives you time to dispute errors, pay down balances, and avoid credit-damaging behaviors like opening new accounts or missing payments.

A preapproval letter

Before you start shopping for homes, you’ll want to know how much you can afford and show sellers that you're a serious buyer. That’s where prequalification and preapproval come in. It’s kind of confusing that you have to get both. First, you’ll get a prequalification letter from a lender that loosely gives you an idea of how much you could qualify to borrow and at what rates. You can get several prequalification letters from different lenders to compare. 

Once you’ve aligned on a lender, you can get a preapproval letter, which is more official than a prequalification letter. This will require submitting more financial paperwork on your end but the prequalification letter lets sellers know you’re a serious buyer who won’t fall through on the home purchase.

Prepare now to enjoy buying a house later

Buying a house requires a lot of preparation, but it’s totally worth it to fully enjoy all the fun that comes with buying a house as well. From building credit to saving cash for multiple purposes and assembling your professional team, every step is important and will pay off big time once you hit the closing table.