The first-time home buying process, step by step
1
Check your credit and pay down debt
Your credit score drives your interest rate. Pull your reports, dispute errors, and pay down revolving balances 3–6 months before you plan to apply.
2
Figure out your real budget
Use a mortgage calculator with your actual income, debts, and target down payment — not a bank's maximum approval, which is usually higher than what's comfortable.
3
Get pre-approved, not just pre-qualified
Pre-qualification is a quick estimate. Pre-approval involves verified income and credit and gives sellers real confidence in your offer.
4
Shop at least 3 lenders
Rate and fee differences between lenders on the same day can be significant. Compare Loan Estimates side by side, not just the headline rate.
5
Find a home and make an offer
Work with a buyer's agent, include reasonable contingencies (inspection, financing), and know your walk-away price before you fall in love with a listing.
6
Home inspection and appraisal
The inspection protects you from costly surprises; the appraisal protects the lender by confirming the home is worth the loan amount.
7
Underwriting
The lender verifies everything — income, assets, debts — before issuing final loan approval. Avoid new credit or big purchases during this window.
8
Closing
Review your Closing Disclosure at least 3 days before signing, bring your down payment and closing costs, and get your keys.
How much house can you actually afford?
A widely used guideline is the 28/36 rule: your total housing payment (principal, interest, taxes, insurance, HOA) should stay under 28% of your gross monthly income, and all debt payments combined — including the mortgage — under 36%. Lenders will sometimes approve you higher than this, but that doesn't mean it's comfortable.
See your exact numbers
Plug in your target home price, down payment, and rate to see your real monthly payment before you start touring homes.
Open the mortgage calculator →
Down payment options for first-time buyers
You almost certainly don't need 20% down. Here's how the common loan types compare:
| Loan type | Min. down payment | Mortgage insurance | Best for |
|---|
| Conventional 97 | 3% | PMI until 20% equity | Good credit, limited cash |
| FHA | 3.5% | MIP for life of loan (usually) | Lower credit scores |
| VA | 0% | None (funding fee instead) | Eligible veterans/service members |
| USDA | 0% | Guarantee fee | Eligible rural/suburban areas |
| Conventional (20% down) | 20% | None | Buyers who want no PMI/MIP |
Putting down less than 20% on a conventional loan means paying private mortgage insurance (PMI), typically 0.5–1.5% of the loan annually, until you reach 20% equity — it protects the lender, not you, but it's often still cheaper than waiting years to save a full 20%.
What closing costs actually cover
Budget 2–5% of your loan amount for closing costs on top of your down payment. These typically include the loan origination fee, appraisal, title search and insurance, recording fees, and prepaid property tax and homeowners insurance. Some of these are negotiable, and sellers can sometimes contribute toward buyer closing costs as part of the offer.
Common first-time buyer mistakes
✕Maxing out the pre-approval amount. Just because a lender approves you for a number doesn't mean it fits your budget once taxes, insurance, and maintenance are added.
✕Only checking one lender's rate. Comparing 3+ Loan Estimates on the same day is one of the highest-value 30 minutes in the entire process.
✕Making a big purchase or opening new credit before closing. This can change your debt-to-income ratio enough to delay or derail underwriting.
✕Skipping the home inspection. A few hundred dollars now can save tens of thousands in surprise repairs later.
✕Forgetting the full monthly cost. Property tax, insurance, HOA fees, and maintenance (budget ~1% of home value/year) add 30–50% on top of principal and interest.
Frequently asked questions
How much house can a first-time buyer afford?▼
A common guideline is the 28/36 rule: monthly housing costs under 28% of gross income, total debt under 36%. Actual affordability also depends on your down payment, credit score, and local property taxes.
What credit score do I need to buy my first home?▼
FHA loans allow scores as low as 580 with 3.5% down, or 500 with 10% down. Conventional loans typically want 620+. Higher scores generally unlock lower rates.
How much do I need for a down payment?▼
It depends on the loan type: 0% for eligible VA or USDA loans, 3–3.5% for conventional 97 or FHA loans, 20% to avoid PMI on a conventional loan.
What are closing costs and how much are they?▼
Fees to finalize your mortgage, typically 2–5% of the loan amount — lender fees, appraisal, title insurance, and prepaid property tax and insurance.