Home buying readiness
Preparing for homeownership
More than just a credit score
12 min workbook
Why this matters
Readiness for homeownership is made of several pieces, and a credit score is only one of them.
Understanding all five areas before you shop keeps you from becoming emotionally committed to a home before you understand the financing.
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Five readiness areas
- Credit
- What your credit reports and scores show to a lender.
- Income
- How your income is earned and how it can be documented.
- Debt
- The monthly payment obligations you already carry.
- Funds
- Cash available for a down payment, closing costs and reserves after closing.
- Monthly comfort
- The payment range that fits your life, which may be lower than what a lender would allow.
What you've heard vs. what you should know
What you've heard
“I need 20% down.”
What you should know
Not necessarily. Some eligible conventional programs offer down payments as low as 3%, while FHA materials describe a 3.5% minimum down payment for borrowers with credit scores of at least 580. Eligibility and loan terms vary, and none of this is a promise of qualification.
What you've heard
“Down-payment assistance is free money.”
What you should know
Assistance programs vary widely. They may include grants, forgivable subordinate financing, deferred-payment financing, or repayable second mortgages.
What you've heard
“First-time buyer always means I've never owned a home.”
What you should know
Definitions vary by program. Don't self-disqualify without checking the actual program requirements.
Questions to ask about any assistance program
- Is it a grant or a loan?
- Is there a lien?
- When is repayment due?
- What happens if I sell?
- What happens if I refinance?
- What income, credit and occupancy requirements apply?
Prequalification vs. preapproval
- Prequalification
- An early estimate based on information you provide.
- Preapproval
- Generally a more formal review of credit and financial documentation.
Neither is a final loan approval or a guarantee.
Before you seriously shop
Understand your financing and your comfortable monthly-payment range before becoming emotionally committed to a particular property.
Five questions to ask a mortgage professional
- Has my actual credit been reviewed?
- Has my income been documented?
- Have my available funds and assets been reviewed?
- What purchase and payment range should I realistically consider?
- What conditions or documentation remain?
Homeownership self-check
My working numbers
Estimates only. Nothing here is a qualification decision.
Start here
Work through the self-check above and note which of the five readiness areas you understand least.
That area, not the home search, is your first piece of work.
30-day WORKWELL challenge
0 of 7Complete your Homebuyer Readiness File.
Reflection
Your next step
When your readiness file is assembled, a conversation with a mortgage professional becomes far more useful — you'll be asking questions instead of guessing.
WORKWELL can help you get your file in order first. That help is free and optional.