What is Home Buying Readiness Score?
A home-buying readiness score combines the dimensions mortgage underwriters and prudent buyers both look at: down payment, credit health, debt-to-income, job and income stability, post-closing reserves, and local affordability. The output is a 0 to 100 view of how prepared you are today and which gap to close first.
The Formula
Readiness = Weighted Sum (Down Payment + Credit + DTI + Job Stability + Reserves + Affordability)
Down payment, credit score, and DTI carry the heaviest weights because they are the underwriting decision drivers; reserves and affordability are the post-closing resilience drivers.
Worked Example
A first-time buyer with 6% saved for down payment, 690 credit score, 33% DTI, 4 years at the same employer, 4 months emergency fund, target home priced at 4.5x household income.
- Down Payment: 5 (between 3% and 10%)
- Credit Health: 7 (in the 680-740 band)
- Debt-to-Income: 8 (under 36%)
- Job and Income Stability: 9 (long tenure, fixed salary)
- Emergency Cushion: 7 (4 months)
- Local Affordability: 7 (within 3-5x band)
📌 Score around 72. The biggest opportunity is Down Payment; lifting to 10-20% removes PMI and improves the rate sheet. Otherwise readiness is solid; ask a lender for a pre-approval quote to confirm.
Why This Matters
Most rejected mortgages are predictable
CFPB data shows most mortgage application declines are driven by DTI above 43%, credit scores below 620, or insufficient documented income. Pre-screening the application via this readiness check surfaces those gaps before applying.
Post-closing reserves are underweighted
New homeowners frequently underestimate year-one repair and maintenance costs at roughly 1% of home value per year. A 3-6 month reserve covering the new payment plus essentials is the resilience layer that prevents debt accumulation in year one.
Pre-approval is not pre-qualification
A pre-qualification is an estimate based on self-reported data. A pre-approval involves verified income, credit pull, and underwriting review. Sellers and agents treat the two very differently; a pre-approval letter strengthens an offer and surfaces issues before they derail a closing.
Common Mistakes
❌ Counting down payment as readiness on its own
A 20% down payment plus a 45% DTI plus a 600 credit score still produces a poor mortgage outcome. The categories work together; one strong leg does not substitute for the others.
❌ Stretching to a 5-7x price-to-income home
Above 5x household income, the carrying cost (PITI plus maintenance) usually consumes too much of the monthly budget to leave room for other goals. The 3-5x band is the broadly sustainable range.
❌ Forgetting closing costs in the savings target
Closing costs typically run 2-5% of the purchase price on top of the down payment. A buyer targeting a $400,000 home with 10% down needs $40,000 for down payment plus $8,000-20,000 for closing, a gap that surprises first-time buyers who budget only the down payment.
Industry Benchmarks
| Category | Good | Average | Poor |
|---|---|---|---|
| Typical first-time buyer down payment | 20%+ | ~8% (NAR) | Below 3% |
| Best-pricing credit score tier | 740+ | 680-740 | Below 620 |
| DTI underwriting comfort band | Below 36% | 36-43% | Above 43% |
Source: CFPB Mortgage Origination Data and National Association of Realtors First-Time Buyer Profile
Benchmark data sourced from CFPB Mortgage Origination Data and National Association of Realtors First-Time Buyer Profile.