Buying a home feels complicated because the industry makes it feel complicated. But at the core, every lender on the planet is looking at the same three things: your income, your credit, and your assets. That's it. We call them the Three Pillars — and once you understand them, the entire mortgage process starts making sense.
Pillar 1: Income
Income answers one question: can you afford the monthly payment? Lenders look at your gross monthly income (before taxes) and compare it to your total monthly debts. That ratio is called your DTI — debt-to-income ratio.
Most loan programs want your total DTI (all debts plus your future mortgage payment) below 45-50%. So if you earn $6,000 per month gross, your total debts including your new mortgage shouldn't exceed about $2,700 to $3,000.
- W-2 employees: lenders use your last two years of pay stubs, W-2s, and tax returns.
- Self-employed: lenders average your last two years of net income from tax returns.
- Side income, bonuses, and overtime count — but usually only with a two-year history.
- Child support and alimony count as income if you have 3+ years remaining.
Pillar 2: Credit
Credit answers a different question: do you pay your bills? Your credit score is a three-digit summary of your payment history, debt levels, and credit age. Lenders pull all three bureaus (Equifax, Experian, TransUnion) and use the middle score.
The minimum depends on your loan type — 580 for FHA, 620 for conventional, flexible for VA. But beyond the minimum, your score determines your interest rate. A 740 gets significantly better pricing than a 660, even though both qualify.
Pro tip: lenders look at your credit profile, not just the number. A 640 with no late payments and low balances tells a different story than a 640 with collections and maxed-out cards.
Pillar 3: Assets
Assets answer the third question: do you have money for the down payment, closing costs, and reserves? Lenders want to see where the money is coming from and that it's been in your account (typically two months of bank statements).
- Down payment: 0% to 20% depending on loan type. Many programs require as little as 3% or 3.5%.
- Closing costs: typically 2-5% of the purchase price. Some can be rolled into the loan or covered by seller credits.
- Reserves: some programs require 2-6 months of mortgage payments in savings after closing.
- Gift funds: many loan types allow family members to gift part or all of your down payment.
Where most people get stuck
Here's what's interesting: most people who think they can't buy a home are strong in two of the three pillars and weak in one. Maybe your income and assets are solid, but your credit needs work. Or your credit is great and your income is stable, but you haven't saved enough for a down payment yet.
That's exactly what AMLO's Three Pillars Assessment is built for. It scores each pillar independently so you can see exactly where you stand — and more importantly, exactly what to focus on next.
The bottom line
You don't need to be perfect in all three areas. You just need to know where you are. A good loan officer will look at your full picture and find the best path forward — whether that's applying now, improving one pillar, or exploring programs like down payment assistance that bridge the gap.
Ready to see where you stand? Take AMLO's free readiness assessment. It scores all three pillars in under 2 minutes — no credit check, no sign-up, no spam.
