What Do You Need to Buy a House?
5 Min Read | Last updated: September 15, 2025
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See what you need to buy a house with a conventional mortgage, including typical down payment requirements, credit score requirements, and proof of income.
At-A-Glance
- Buying a new home may require a lot of cash upfront for the down payment on a conventional mortgage.
- A wave of startup companies aim to provide you alternatives to lower your cash requirements.
When buying a new home the “conventional” way, you apply for a 30-year fixed-rate mortgage and make a big down payment – but you must be able to afford it. Because that conventional approach presents high hurdles for many people, other alternatives might help you buy the house you want without needing all that cash right away.
Startup companies are using technology and innovative business models that put a new spin on concepts like rent-to-own and all-cash offers. Some companies are catering to younger millennials, whose homeownership rate is relatively low – 36.3% in the fourth quarter of 2024 for Americans under 35 years old, according to the U.S. Census Bureau.1 And they’re focusing on helping you avoid that big down payment, which is a significant financial obstacle to homeownership.2
This article lays out what you need to buy a house “the old-fashioned way” versus the new alternatives emerging in many U.S. cities.
What Do You Need to Buy a House the Conventional Way?
If you want to avoid having to pay private mortgage insurance, you need a down payment of 20% of the property’s price.3 According to a House Price Index (HPI) Quarterly Report released by the Federal Housing Finance Agency (FHFA) in May 2024, the average single-family home in America goes for roughly $423,400 in March 2024.4 That means you’d have to come up with at least $84,680 – plus closing costs that usually amount to between 2% and 5% of the selling price.5 Then you’d have to make monthly mortgage payments on the rest, at an interest rate of around 7% at this writing.6
Banks’ requirements don’t stop there. To get a conventional loan, you’ll usually need a qualifying credit score, a solid credit history, proof of reliable income, a debt-to-income ratio of around 43% or lower, and more.7
If you can’t come up with a 20% down payment, you may need to buy private mortgage insurance (PMI) to cover its risk. In that case, you’d have to pay a mortgage insurance bill every month on top of your mortgage payment. For more, read “How Much of a Down Payment Do You Need to Buy a House?”
There’s another catch, though: Whoever is selling you a house may prefer that you have an even bigger down payment than the banks require – and an all-cash offer can be especially appealing to a seller when multiple potential buyers are bidding on a property. The theory is that the more money you offer to put down, the less chance there is of the bank denying your mortgage application. No homeowner wants to have to put their house back on the market after a buyer’s mortgage has fallen through.
These are just some of the typical hurdles you need to overcome to buy a house the conventional way – hurdles that drove entrepreneurs to launch companies offering unconventional alternatives.
Down Payment Alternatives Offer New Spins on ‘Rent-to-Own’
Enter rent-to-own contracts that intend to significantly reduce cash requirements to buy a house. Startups in certain U.S. cities offer homebuyers the option to bypass down payments and monthly mortgage payments by paying something that looks a lot like rent. The difference is that a portion of the rent goes toward buying the property you are living in.
Some experts view these new arrangements as riskier than conventional mortgages. They advise working with an attorney before committing.8 And, while you may not need as much cash upfront for these alternatives, the bar may still be pretty high for your credit score and other aspects of your financial profile.
The Takeaway
What do you need to buy a house? Usually, a lot of money upfront in the form of a down payment on a mortgage. But because down payments have long been considered one of the biggest financial hurdles to homeownership, some startups are offering alternative approaches that can lower the requirements you must meet to buy a house.
1 “Quarterly Residential Vacancies and Homeownership, Fourth Quarter 2024,” U.S. Census Bureau
2 “2024 Home Buyers and Sellers Generational Trends Report,” National Association of Realtors
3 “What is private mortgage insurance?,” Consumer Financial Protection Bureau
4 “FHFA - House Price Index (HPI) Quarterly Report,” Federal Housing Finance Agency
5 “What Are Closing Costs and How Much Will I Pay?,” Freddie Mac
6 “Mortgage Rates,” Freddie Mac
7 “What Credit Score Do I Need to Buy a House?,” Experian
8 “Mortgage financing options in a higher interest rate environment,” Consumer Financial Protection Bureau
Karen Lynch is a journalist who has covered global business, technology, finance, and related public policy issues for more than 30 years.
All Credit Intel content is written by freelance authors and commissioned and paid for by American Express.
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