First-Time Homebuyer Guide: 10 Essential Steps to Buying Your First Home

1. Know Your Budget Before You Start Looking

Before you fall in love with a house you can't afford, it's crucial to understand your financial situation. A good rule of thumb is that your monthly housing costs (mortgage, property taxes, insurance, and HOA fees) shouldn't exceed 28-30% of your gross monthly income.

What You'll Need for Upfront Costs:

• Down payment: Typically 3-20% of the purchase price. FHA loans allow as little as 3.5% down.
• Closing costs: Plan for 2-5% of the purchase price for lender fees, title insurance, and other closing expenses.
• Earnest money deposit: Usually 1-3% of the offer price, held in escrow until closing.
• Moving expenses: Budget $1,000-$5,000 depending on distance and how much you're moving.
• Emergency fund: Keep 3-6 months of expenses saved for unexpected repairs or job loss.

2. Check and Improve Your Credit Score

Your credit score directly impacts the interest rate you'll receive on your mortgage. Even a small difference in rate can mean tens of thousands of dollars over the life of your loan.

Credit Score Requirements by Loan Type:

• Conventional loans: Minimum 620, but 740+ gets the best rates
• FHA loans: Minimum 580 for 3.5% down (500-579 requires 10% down)
• VA loans: No official minimum, but most lenders want 620+
• USDA loans: Typically 640+

Quick Ways to Boost Your Score:

• Pay down credit card balances below 30% of your limit
• Don't open new credit accounts before applying for a mortgage
• Dispute any errors on your credit report
• Keep old accounts open to maintain credit history length
• Set up autopay to avoid missed payments

3. Get Pre-Approved for a Mortgage

A mortgage pre-approval letter shows sellers you're a serious, qualified buyer. It's different from pre-qualification — pre-approval involves a thorough review of your finances and a credit check.

Documents You'll Need:

• Last 2 years of W-2s and tax returns
• Recent pay stubs (last 30 days)
• Bank statements (last 2-3 months)
• ID and Social Security number
• Employment verification
• List of debts and assets

4. Define Your Must-Haves vs. Nice-to-Haves

Create two lists: non-negotiables (must-haves) and things you'd like but can live without (nice-to-haves). This clarity will save you time and help you make faster decisions.

Questions to Consider:

• What's your ideal commute time to work?
• Do you need a specific school district?
• How many bedrooms and bathrooms do you need now vs. in 5 years?
• Do you need a home office space?
• Is a garage essential or optional?
• Are you willing to renovate, or do you need move-in ready?
• How important is outdoor space?

5. Start Your House Hunt

With your pre-approval in hand and priorities defined, it's time to start looking. Use multiple resources to find properties and don't limit yourself to just one platform.

Where to Search:

• Online listings: Zillow, Redfin, Realtor.com, and local MLS sites
• FSBO sites: For Sale By Owner properties often offer room for negotiation
• Drive neighborhoods: Some homes are sold before they ever hit the market
• Word of mouth: Let friends, family, and coworkers know you're looking

6. Make a Competitive Offer

When you find the right home, you need to act quickly and strategically. Your offer includes more than just price — terms matter too.

Key Components of Your Offer:

• Purchase price: Based on comparable sales and market conditions
• Earnest money deposit: Shows you're serious (typically 1-3%)
• Contingencies: Conditions that must be met (financing, inspection, appraisal)
• Closing date: When you want to complete the purchase
• Inclusions/exclusions: What stays with the house

7. Schedule a Home Inspection

Never skip the home inspection. A qualified inspector will identify issues that could cost you thousands in repairs. Most inspection contingencies give you 7-10 days to complete the inspection and negotiate repairs.

What Inspectors Look For:

• Roof condition and estimated remaining life
• Foundation and structural integrity
• Electrical system and panel
• Plumbing, including water heater age
• HVAC system condition
• Signs of water damage or mold
• Pest infestations (termites, etc.)

For a detailed guide on what to look for, check out our Home Inspection Checklist.

8. Secure Your Financing

Once your offer is accepted, you'll move from pre-approval to full mortgage approval. Your lender will order an appraisal and do a final review of your finances.

What NOT to Do During This Period:

• Don't make large purchases (cars, furniture, appliances)
• Don't open new credit cards or loans
• Don't change jobs if you can avoid it
• Don't move money between accounts without documenting it
• Don't co-sign for anyone else's loan

9. Navigate the Closing Process

The closing process typically takes 30-45 days from accepted offer to keys in hand. Several things happen during this time.

Closing Timeline:

• Week 1-2: Inspection, appraisal ordered, title search begins
• Week 2-3: Negotiate repairs, receive appraisal, clear any title issues
• Week 3-4: Final loan approval, receive Closing Disclosure
• Closing day: Final walkthrough, sign documents, get keys

Learn more about what to expect in our Closing Process Guide.

10. Close and Move Into Your New Home

Congratulations! On closing day, you'll sign a stack of documents, pay your closing costs, and receive the keys to your new home.

Closing Day Checklist:

• Bring government-issued photo ID
• Bring a cashier's check or wire transfer confirmation for closing costs
• Review all documents carefully before signing
• Do a final walkthrough the morning of closing
• Get copies of all signed documents
• Collect all keys, garage remotes, and security codes

First Week in Your New Home:

• Change the locks
• Update your address with USPS, banks, and subscriptions
• Set up utilities in your name
• Locate the main water shutoff and electrical panel
• Test smoke and carbon monoxide detectors

Frequently Asked Questions