A buyer can purchase a house directly from the seller with nothing more than the agreed-upon purchase price. However, good credit, a down payment, stable employment, identification and financial records are required if the buyer wants to purchase the house using a mortgage from a financial institution, according to Kiplinger.
Most financial institutions have a similar process for qualifying homebuyers for mortgage loans; however, as independent business entities, they have the freedom to change procedures and make exceptions to their stated credit criteria at will, as long as the process complies with federal and state laws. Generally, financial institutions require buyers to comply with the "Three C's": creditworthiness, capacity and collateral, as noted by Kiplinger.
A buyer must have a credit score that falls within the range of acceptable risk as determined by the lender, explains Colorado State University Extension. Some lenders require buyers to have a high credit score to qualify for a mortgage, while some government-backed mortgage programs may accept buyers with lower scores.
The lender ordinarily requires the buyer to show proof of employment and records of financial savings to demonstrate the capacity to pay back the loan over time. Most lenders require a stable employment history that goes back at least two years, and the buyer must typically produce pay stubs and tax returns to substantiate income, notes Kiplinger. Bank statements and other financial records are often required to show the buyer's financial health.
Satisfying the collateral requirement typically calls for a down payment of at least 20 percent of the purchase price, according to 360 Degrees of Financial Literacy. However, some government-backed programs accept as little as 2 percent for the down payment.