First-Time Home Buyer Tips

Before You Start

Getting your finances in order before house hunting saves time, stress, and money. Here's what to do first:

• Check your credit score: Higher scores get better rates. A 760+ score gets the best rates, but you can get approved with 620+. Check your score for free at annualcreditreport.com and dispute any errors (CFPB: Getting your credit report).
• Review your credit report: Look for incorrect late payments, accounts that aren't yours, or outdated negative marks. Fixing errors can boost your score 20-50 points.
• Pay down debt: Your debt-to-income ratio (DTI) affects how much you can borrow. Most lenders want DTI under 43% (CFPB: What is DTI?). Paying off credit cards and car loans improves your ratio.
• Save for down payment: 20% avoids PMI, but many programs allow 3-10% down. On a $350,000 home, 20% down is $70,000 — but FHA requires only $12,250 (3.5%).
• Build emergency fund: Keep 3-6 months of expenses separate from your down payment. Lenders also like to see reserves in your account.

Use our affordability calculator to estimate how much home you can comfortably afford based on your income and debts.

Getting Pre-Approved

Pre-approval shows sellers you're serious and tells you exactly how much you can borrow. It's different from pre-qualification (which is just an estimate). Pre-approval involves a full financial review:

• Get pre-approved before house hunting: Know your budget and avoid falling in love with homes you can't afford
• Compare offers from multiple lenders: At least 3 lenders — rates and fees vary significantly. Even a 0.25% rate difference saves thousands over the loan's life
• Understand your approval amount vs. what you can afford: Just because you're approved for $400,000 doesn't mean you should spend that much. Factor in taxes, insurance, maintenance, and your lifestyle
• Ask about first-time buyer programs: Many states and lenders offer special programs with lower rates, down payment assistance, or closing cost credits

Choosing the Right Mortgage

Different loan types suit different situations. Here's a quick comparison:

• Conventional: 3%+ down, PMI if under 20%. Best for borrowers with good credit (680+) and savings for a larger down payment. PMI drops off once you reach 20% equity.
• FHA: 3.5% down, lower credit requirements (580+). Good for first-time buyers with limited savings or lower credit. But MIP lasts the life of the loan with less than 10% down.
• VA: 0% down for eligible veterans and active duty. No mortgage insurance. Best option if you qualify — see our VA eligibility checker.
• USDA: 0% down for rural and suburban areas with income limits. Lower mortgage insurance than FHA. Check if your area qualifies at rd.usda.gov.

For a detailed comparison, read our guides on FHA vs Conventional and VA vs FHA.

Working with Real Estate Professionals

The right team makes the process smoother:

• Real estate agent: Represents your interests in the purchase. Look for agents who specialize in first-time buyers and know your target neighborhoods well
• Loan officer: Helps with mortgage process, explains loan options, and guides you through approval. Don't be afraid to shop around — different lenders offer different rates and service levels
• Home inspector: Identifies potential problems before you buy. Always get an inspection, even on new construction. Budget $300-500 for this
• Real estate attorney: Required in some states, optional in others. Reviews contracts and protects your legal interests

Making an Offer

• Research comparable homes: Look at recent sales of similar homes in the area to determine a fair price. Your agent can provide a comparative market analysis (CMA)
• Don't always go with the lowest price: A slightly higher offer with better terms (flexible closing date, fewer contingencies) may be more attractive to sellers
• Include earnest money deposit: Typically 1-3% of the purchase price. This shows you're serious and is applied to your down payment at closing
• Be prepared to negotiate: Sellers often counter-offer. Be ready to negotiate on price, closing date, repairs, or included appliances

Closing Day

Closing is the final step where you sign paperwork and get the keys. Here's what to expect:

• Bring required documents: Government-issued ID, proof of homeowner's insurance, certified funds for closing costs and down payment
• Review all paperwork carefully: You'll sign dozens of documents. Take your time and ask questions about anything you don't understand
• Do a final walkthrough: Inspect the home one more time before closing to make sure the seller completed any agreed-upon repairs and nothing has changed
• Get copies of everything: Keep copies of all signed documents, the closing disclosure, and your deed for your records

Typical closing takes 30-60 minutes. Once everything is signed and funded, you get the keys to your new home.

After You Buy

Homeownership comes with ongoing responsibilities:

• Set up automatic payments: Never miss a mortgage payment — set up autopay from your checking account
• Build a maintenance fund: Budget 1-2% of your home's value annually for maintenance and repairs
• Understand your property taxes: Taxes can increase over time. Check with your local assessor for current rates
• Review your insurance annually: Shop around each year for the best homeowners insurance rates
• Track your equity: As you pay down your mortgage and home values change, your equity grows. Use our home equity calculator to track it.