What is a good debt-to-income ratio for buying a house?

Most lenders want your total DTI (all monthly debt payments divided by gross monthly income) under 43%. For the best rates and approval odds, aim for under 36%. FHA loans allow up to 50% DTI in some cases. To calculate: add your future mortgage payment + car loans + student loans + minimum credit card payments, then divide by your gross monthly income.

Should I pay off all debt before buying a house?

Not necessarily. Focus on paying down high-interest debt and reducing your DTI ratio below 36%. Keeping a small balance on a credit card (paid monthly) actually helps your credit mix. Prioritize paying off collections, charge-offs, and high-interest debt. Don't close old credit cards — the credit history length helps your score.

How much emergency fund should I have before buying a house?

Have at least 3-6 months of your new total housing cost (mortgage + taxes + insurance + utilities + maintenance). This is separate from your down payment and closing costs. Homeownership comes with unexpected costs — roof repairs, appliance failures, plumbing issues — and you need a buffer to avoid going into debt for them.

Financial Checklist Before Buying a House (Printable Guide)

Use this financial checklist before buying a house to make sure you’re truly ready — not just emotionally ready, but financially prepared for every cost that comes with homeownership. Check off each item before you start house hunting.

Credit Readiness Checklist

✅	Task	Target
☐	Pull free credit reports from AnnualCreditReport.com	All 3 bureaus
☐	Dispute any errors or outdated information	Allow 30-45 days
☐	Check credit score (FICO, not VantageScore)	740+ for best rates
☐	Pay credit card balances below 30% utilization	Under 10% is ideal
☐	Stop opening new credit accounts	6+ months before applying
☐	Don’t close old credit accounts	Keeps history length
☐	Pay all bills on time — no exceptions	6-12 months of perfect payments
☐	Pay off collections or charge-offs	Or negotiate pay-for-delete

Savings Readiness Checklist

✅	Task	Target Amount ($350K home)
☐	Down payment saved	$12,250-$70,000 (3.5-20%)
☐	Closing costs saved	$7,000-$17,500 (2-5%)
☐	Home inspection budget	$300-$500
☐	Moving costs set aside	$1,000-$5,000
☐	Immediate repair/furnishing fund	$2,000-$10,000
☐	Emergency fund (separate from above)	3-6 months of housing costs
☐	Down payment source documented	Lender requires 60-day paper trail

Debt Readiness Checklist

✅	Task	Target
☐	Calculate current DTI ratio	Under 36% ideal, under 43% max
☐	Calculate DTI with estimated new mortgage payment	Still under 43%
☐	Pay off high-interest consumer debt	Credit cards, personal loans
☐	No new large purchases (car, furniture)	Avoid until after closing
☐	No new financing or credit applications	Avoid until after closing
☐	Student loan payments factored in	Include in DTI calculation

Budget Readiness Checklist

✅	Task	Details
☐	Calculate max affordable home price	Use 28% of gross income for housing
☐	Factor in property taxes for target area	Varies widely — research your county
☐	Research homeowners insurance costs	Get quotes before committing
☐	Account for PMI if under 20% down	$100-$300/month on average
☐	Budget for maintenance (1% of home value/yr)	Non-negotiable ongoing cost
☐	Account for HOA fees if applicable	Can add $100-$500+/month
☐	Ensure new total housing cost ≤ 30% of take-home pay	The real affordability test

Pre-Approval Checklist

✅	Document	Status
☐	Last 2 years of tax returns	Ready
☐	Last 2 years of W-2s or 1099s	Ready
☐	Last 30 days of pay stubs	Ready
☐	Last 2-3 months of bank statements	Ready
☐	Last 2-3 months of investment account statements	Ready
☐	Photo ID	Ready
☐	Gift letter (if using gift money for down payment)	Ready
☐	Explanation letters for any credit issues	Ready

Affordability Quick Test

Rule	Calculation	Your Number
28% rule (housing cost ≤ 28% of gross income)	Gross monthly income × 0.28 = max housing cost	_____
36% rule (all debt ≤ 36% of gross income)	Gross monthly income × 0.36 = max total debt payments	_____
Subtract existing debt payments	Max total debt - current debt = available for mortgage	_____
3x gross income (conservative home price)	Annual gross income × 3 = conservative max price	_____
Emergency fund after purchase	Would you still have 3+ months saved?	Yes / No

Red Flags: You’re Not Ready Yet

Warning Sign	What to Do
Credit score under 680	Spend 6-12 months improving it
DTI will exceed 43% with mortgage	Pay down debt first
Down payment is entirely borrowed	Save more — borrowed down payments are risky
No emergency fund after down payment	You’ll be one repair away from trouble
Job less than 2 years (lender concern)	Wait for employment stability
Planning major life change (career switch, move)	Settle first, buy second

The Bottom Line

Go through every section of this checklist before touring homes. Missing even one item can cost you thousands in higher rates, surprise expenses, or a denial at closing. The best time to discover you’re not ready is before you fall in love with a house — not during the loan process.