First-Time Home Buyer Guide
Buying your first home is exciting and a little terrifying. Break it into steps, know the numbers ahead of time, and the process becomes far less intimidating.
Step 1: Figure out what you can actually afford
Before you fall in love with a listing, know your number. A common guideline keeps total housing costs (mortgage, property taxes, insurance) within about 28% of your gross monthly income, and total debt payments under about 36% — the "28/36 rule" lenders often use. Remember to budget beyond the payment: property taxes, homeowners insurance, maintenance, and possibly HOA fees. Owning costs more than renting in ways that surprise first-timers.
Step 2: Save for the down payment and closing costs
You don't always need 20% down — many loan programs allow far less, and there are first-time buyer programs to explore. But a larger down payment means a smaller loan, lower payments, and avoiding private mortgage insurance (PMI). Don't forget closing costs, typically 2%–5% of the price, plus moving and immediate repairs. Keep this money safe and liquid in a high-yield savings account — not invested in stocks. See our guide to saving for a down payment.
Step 3: Strengthen your credit
Your credit score heavily influences your mortgage rate, and even a small rate difference adds up to tens of thousands over a 30-year loan. In the year before buying, pay everything on time, lower your credit utilization, and avoid opening new accounts or big new debts that change your debt-to-income ratio.
Step 4: Get pre-approved
A mortgage pre-approval is a lender's written estimate of how much they'll lend you, based on a real review of your finances. It tells you your true budget and shows sellers you're serious. Shop a few lenders — banks, credit unions, and mortgage brokers — and compare their Loan Estimates side by side. Rates and fees vary, and multiple mortgage inquiries in a short window generally count as one for your score.
Step 5: Shop, make an offer, and close
With a budget and pre-approval, work with a buyer's agent to tour homes and make an offer. Once accepted, you'll get a home inspection (don't skip it), the lender orders an appraisal, underwriting verifies everything, and finally you sign at closing and get the keys. Review the Closing Disclosure carefully against your Loan Estimate before signing.
Mistakes to avoid
- Buying at the top of your budget. Leave room for surprises and life changes.
- Skipping the inspection. It can reveal expensive problems before you're committed.
- Forgetting ongoing costs. Maintenance alone can run 1%+ of the home's value per year.
- Opening new credit mid-process. A new car loan can sink your approval.
- Draining your emergency fund for the down payment. Keep a cushion for the unexpected.
General educational information, not financial or real estate advice. Loan programs and rules vary — confirm details with licensed professionals. See our disclaimer.