Minimum Income Requirements
theresa rolen • January 3, 2025
Are There Minimum Income Requirements for Buying a Home?
Understanding Minimum Income Requirements for Buying Your First Home
Buying a house is a big step, and it can feel a little overwhelming, especially if it’s your first time. One of the most important things to think about is how much money you need to make to afford a house. This is called the "minimum income requirement." Let’s break it down in simple terms.
What is a Minimum Income Requirement?
When you buy a house, you usually get a loan from a bank to help pay for it. This loan is called a mortgage. The bank wants to make sure you can pay back the loan, so they check how much money you earn. The minimum income requirement is the smallest amount of money you need to earn each year to qualify for the mortgage.
How Do Banks Decide the Minimum Income Requirement?
Banks look at a few things:
- The Price of the House: Expensive houses need bigger loans, so the more expensive the house, the more income you’ll need.
- Your Down Payment: This is the money you pay upfront. If you can pay more upfront, you might not need to borrow as much money.
- Monthly Payments: Banks check if your monthly mortgage payment fits into your budget. They usually want your housing costs to be no more than 28% of your monthly income.
- Taxes and Insurance: Homeowners have to pay property taxes and home insurance. These costs are added to your monthly mortgage payment, so banks include them when calculating how much you can afford.
- Current Mortgage Rates: The interest rate on your loan affects your monthly payments. Higher rates mean higher payments, so banks consider this when determining your income needs.
- Homeowner’s Association Fees: Some homes, especially in neighborhoods with shared amenities, require HOA fees. These are added to your monthly housing costs and need to be factored into your budget.
- Other Debts: If you have other loans or credit card bills, the bank will make sure you can afford those too.
- Credit Score: This is like a report card for how you’ve handled money in the past. A better credit score can help you get a better loan.
How to Estimate Your Minimum Income Requirement
Here’s a simple example: (all numbers and amounts are estimated)
- Imagine you want to buy a house that costs $250,000.
- You have saved 3% for the down payment, which is $7,500. That means you need a loan for $242,500.
- Let’s say your monthly costs include:
- Mortgage payment: $1,250 (estimated based on a 7% mortgage rate)
- Property taxes: $250
- Home insurance: $200
- Mortgage insurance: $100
- HOA (home owners' association) fees: $100
- Adding these together, your total monthly payment is about $1,900.
- The bank wants your housing costs to be no more than 28% of your monthly income. To find out how much income you need, divide the estimated amount of $1,900 by 0.28. That’s about $6,786 per month, or about $81,430 per year.
Remember, this is just an example. Different houses, property taxes, insurance costs, and mortgage rates will change these numbers.
Tips for First-Time Home Buyers
- Save for a Down Payment: The more you can save, the easier it will be to qualify for a loan.
- Research Taxes and Insurance: Find out how much these will cost in the area where you want to live.
- Factor in HOA Fees: If the home has an HOA, make sure to include the fees in your budget.
- Pay Down Other Debts: Less debt means more money available for your mortgage.
- Check Your Credit Score: Make sure it’s in good shape before applying for a loan.
- Get Pre-Approved: Talk to a broker, like me, to see how much you can afford before you start house hunting.
More Cool Tips for First-Time Buyers
- Look for First-Time Buyer Programs: Many cities and states and lenders offer programs that help with down payments or offer special loans.
- Budget for Moving Costs: Don’t forget to set aside money for moving expenses, new furniture, or repairs.
- Think Long-Term: Consider how long you plan to stay in the house. A shorter stay might mean renting makes more sense.
- Inspect Before You Invest: Always get a professional home inspection to avoid costly surprises.
- Create a Home Wish List: Write down your must-haves and nice-to-haves before you start shopping to stay focused.
Buying a house is an exciting adventure! By understanding how much income you need, planning for taxes, insurance, and HOA fees, and keeping an eye on mortgage rates, you’ll be one step closer to finding the perfect home for you and your family.
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When a Pre-Approval Isn’t Actually Approval Why Realtors Can’t Afford to Blindly Trust Every Lender In today’s market, getting an offer accepted isn’t the hard part. Getting it to close is. Lately, I’ve been pulled into multiple “rescue missions”—offers accepted, homes taken off the market, timelines set… only for the deal to start unraveling once underwriting gets involved. Different buyers. Different lenders. Same root problem. A pre-approval that never should’ve been issued . A Real Scenario Realtors Are Seeing More Often A buyer submits what looks like a strong offer. The pre-approval checks the box. Everyone moves forward. But once the file is examined: Less than two years of work history Variable income only (hourly, commission, fluctuating pay) Prior history? Straight out of high school This doesn’t mean the buyer can’t qualify. It does mean the file requires precision , not assumptions. The Truth About Pre-Approvals (This Is the Part That Matters) A pre-approval is only as strong as : the income used to qualify it the guidelines actually followed and the lender who understands the difference between “maybe” and “mortgageable” Variable income + limited history isn’t impossible — but it requires structure, documentation, and time . What it does not tolerate is shortcuts, guesswork, or optimism disguised as confidence. Where Deals Start to Break Many weak pre-approvals rely on: Income that hasn’t been averaged long enough Pay that looks good on paper but doesn’t meet guideline requirements Front-end approvals that haven’t been reviewed by underwriting Everything looks fine—until underwriting gets involved. And underwriting always gets involved. What Buyer’s Agents Should Be Asking (Without Playing Underwriter) You don’t need to know every lending rule. You do need to ask smarter questions. 1. Is the buyer’s income salaried or variable? If it’s variable, averaging and seasoning rules apply. 2. How much of that income is actually being used to qualify? Not projected income. Not potential income. Qualified income. 3. Does the buyer meet the full two-year work history requirement? If not, how is the gap being documented and justified? 4. Has an underwriter reviewed this income yet—or is this a front-end pre-approval? This affects how much risk the seller is taking on. 5. What’s the backup plan if income is reduced or disallowed? Strong lenders already know the answer. If those answers aren’t clear, the offer isn’t strong—no matter the price. Why This Matters for Sellers When a seller accepts a shaky offer: The home comes off the market Showings stop Leverage disappears If the deal collapses late, sellers lose time, momentum, and often negotiating power. A strong offer isn’t just about price. It’s about: financing that survives underwriting a lender who answers the phone and a buyer who is truly qualified The Realtor Takeaway Trust is important. Verification is smarter. The best agents don’t just get contracts signed—they get them closed . Ask better questions. Vet the lender. And remember: hope is not a lending strategy. Book time to chat My Calendar Theresa Rolen, Loan Originator NMLS# 2249004 | Brokerage NMLS #1850081 Cell 913-705-0049 Email Theresa@SummitLendingUSA.com Theresa Rolen Cell (913) 705-0049 Trolen.myjourney@outlook.com
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