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Written by
Suzanne De Vita
Suzanne De Vita is a senior editor on Bankrate’s Home Lending team, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters.
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Laurie Richards
Reviewed by
Kenneth Chavis IV
Kenneth Chavis IV is a senior wealth counselor at Versant Capital Management who provides investment management, complex wealth strategy, financial planning and tax advice to business owners, executives, medical doctors, and more.
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From conventional to government loans, there are many types of mortgages to suit borrowers with varying credit scores and financial means. While there isn’t a standard baseline income to qualify for a mortgage, in general, you’ll need enough income to repay the loan. Here’s how qualifying for a mortgage works and how your income can impact the decision.
There is no single, universal income requirement to qualify for a mortgage. It all depends on the amount you need to borrow, current interest rates and the type of loan you’re applying for.
Rather than requiring a specific amount of income, mortgage lenders review your credit and financial information to learn two key points:
Lenders evaluate your debt-to-income (DTI) ratio to determine the answers to these questions.
Your DTI ratio, also known as the “back-end” ratio, is a measure of gross monthly income against monthly debt payments. To calculate your DTI ratio, divide your monthly debt payments by your gross monthly income.
While there’s no minimum income requirement for a mortgage, there are parameters around the DTI ratio. These vary by loan type:
You can use many different income sources to qualify for a mortgage, including:
Whichever type of income you have, you’ll need to give your lender documentation to support your claims. Here’s a list of common documents needed for a mortgage.
Most financial advisors generally recommend following the 28/36 percent rule. This means your monthly mortgage payment and total monthly debts shouldn’t exceed 28 and 36 percent of your total gross income, respectively. For example, if your gross income is $6,000 per month, your mortgage payment should be no more than $1,680 (28 percent of $6,000), and your total debt payments (including the mortgage) should max out at $2,160 (36 percent of $6,000).
Check out Bankrate’s calculator to see how much house you can afford.
I switched jobs two months before applying for a mortgage. One lender required that I submit multiple extra pay stubs. — Andrew Dehan, Writer, Bankrate
Beyond your income and DTI ratio, lenders also review your:
“Speaking from personal experience, I switched jobs two months before applying for a mortgage,” says Andrew Dehan, writer at Bankrate. “One lender required that I submit multiple extra pay stubs. It also pushed my partner to leave me off the mortgage because she had the higher credit score and had been at her job longer. We shopped around and found a lower rate at a bank that didn’t give us nearly as much trouble.”
A low income doesn’t have to keep you from buying a house. There are a few ways to buy a house with low income:
Save for getting a better-paying job or taking on a side hustle, it’s not always possible to increase your income. You can still up your chances of getting approved for a mortgage by lowering your debt-to-income (DTI) ratio, such as by reducing credit card debt. You can then work toward saving more for a larger down payment, either by setting aside funds, getting a gift from family or friends, finding a down payment assistance program or a combination. A bigger down payment means you’ll take out a lower mortgage amount, making it easier to qualify with your current income.
While there’s no minimum income requirement for mortgage loans, income ceilings apply for some loan types. These include Fannie Mae HomeReady loans, Freddie Mac Home Possible loans and government-backed USDA loans.
Arrow Right Senior editor, Home Lending
Suzanne De Vita is a senior editor on Bankrate’s Home Lending team, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters.
