Buying your first home can feel like everyone suddenly expects you to understand credit scores, pre-approvals, mortgage rates, inspections, closing costs, escrow accounts, and about 47 other things nobody taught you.
You don’t need to become a mortgage expert.
You just need to understand the process well enough to make good decisions.
This guide walks through the homebuying process from “Maybe we should buy a house” to “We have the keys.”
The short answer
For most first-time buyers, the process looks like this:
Figure out what monthly payment actually fits your life.
Talk with a lender and get pre-approved.
Understand your loan and down-payment options.
Find a real estate agent and start shopping.
Make an offer.
Complete the inspection, appraisal and mortgage approval process.
Review your final numbers.
Close on the home and get the keys.
A pre-approval before you seriously shop is important because it helps establish your price range and shows a seller that you've already started the financing process.
The big takeaway: Don't start by asking, “What's the most expensive house I can qualify for?”
Start with:
“What monthly payment leaves us comfortable after we buy the house?”
1. Start with the payment, not the purchase price
This is one of the biggest things we tell first-time buyers.
A $350,000 house doesn't automatically have a certain payment.
Your payment can change based on:
down payment
interest rate
loan program
property taxes
homeowners insurance
mortgage insurance
HOA or condo fees
That's why two homes with the same price can have surprisingly different monthly payments.
Before shopping, decide what housing payment feels comfortable alongside everything else you want to do with your money.
That includes things like:
retirement savings
vacations
car payments
childcare
student loans
hobbies
emergency savings
actually enjoying your life
The CFPB similarly recommends establishing your home-price budget, reviewing your spending and understanding your finances before shopping.
What we tell our clients
Being approved for a payment and being comfortable with a payment are two different things.
We'd rather help you find the second one.
2. You probably don't need 20% down
This might be the most persistent first-time-buyer myth.
You do not automatically need a 20% down payment to buy a home.
Certain conventional financing options can allow qualified buyers to purchase with as little as 3% down, while FHA financing can permit a down payment as low as 3.5% for eligible borrowers and properties.
There may also be state and local down-payment-assistance programs available depending on your income, location, loan type and other eligibility requirements. HUD notes that state and local programs may help eligible buyers with down-payment needs.
But here's the more important question:
Should you put down as much as possible?
Not necessarily.
Putting more money down may lower your payment and borrowing costs, but draining your savings account to hit a particular down-payment percentage can leave you house-rich and cash-poor.
You'll likely still need money for things like:
closing costs
moving
repairs
furniture
appliances
emergency savings
Fannie Mae specifically recommends considering those additional expenses instead of looking at the down payment in isolation.
What we tell our clients
Don't chase a down-payment percentage just because you've heard it's the “right” number.
Let's compare the options.
Sometimes keeping an extra $15,000 in the bank is more valuable than putting another $15,000 into the house.
3. Get pre-approved before you fall in love with a house
A pre-approval is essentially your mortgage game plan.
Your lender reviews your financial picture and determines what financing options may be available to you.
That typically involves reviewing things such as:
income
employment
assets
credit
monthly debts
expected down payment
Getting pre-approved also allows you to start comparing possible loan programs and price ranges before you're under pressure from an accepted purchase contract. The CFPB recommends exploring financing before finding a home because buyers may have only a short window to finalize financing after an offer is accepted.
Documents you may want handy
Depending on your situation, your lender may request items such as:
recent paystubs
W-2s
tax returns when applicable
bank statements
identification
documentation for other income
information about debts or obligations
Self-employed borrowers, commissioned employees, business owners, investors and buyers with less traditional income may need additional documentation.
That's normal.
It doesn't automatically mean something is wrong.
4. Understand the major loan options
There isn't one universally “best” mortgage.
There is a mortgage that fits your particular situation better than the alternatives.
Some of the major categories you'll hear about are:
Conventional loans
Conventional financing is extremely common and can work well for buyers with a wide range of down payments and financial profiles.
Some qualified first-time buyers can access conventional financing with as little as 3% down.
FHA loans
FHA financing can be useful for buyers who need more flexibility around credit, debt-to-income ratios or down payment.
Eligible borrowers may be able to put down as little as 3.5%.
VA loans
Eligible veterans, active-duty service members and certain surviving spouses may have access to VA financing.
Down-payment-assistance programs
Depending on your location and qualifications, assistance programs may help with some portion of the down payment or closing costs.
The important part isn't memorizing every mortgage program.
That's our job.
Your job is understanding the tradeoffs between the options that actually apply to you.
5. Know the difference between down payment and cash to close
These are not the same thing.
Your down payment is the portion of the purchase price you are contributing toward the home.
Your cash to close can include additional items such as:
down payment
lender/title/settlement costs
prepaid interest
initial homeowners insurance
property-tax and insurance escrow deposits
Credits and deposits can reduce what you ultimately bring to closing.
Those might include:
earnest money you've already paid
seller credits
lender credits
applicable assistance programs
This is why someone buying with 5% down shouldn't automatically assume:
“I need exactly 5% of the purchase price in my bank account.”
There are other pieces to calculate.
6. Find the right real estate agent
Once your financing plan is established, you'll want a strong real estate agent helping you find and negotiate the home.
A good agent isn't just opening doors.
They can help you think through:
neighborhoods
comparable sales
offer strategy
inspection issues
seller concessions
timelines
negotiations
Your lender and real estate agent should also communicate well with each other.
A home purchase involves a lot of moving pieces. You don't want to become the messenger between two professionals who never speak.
7. Make an offer
Once you find the right house, your agent helps structure the offer.
An offer can include more than just price.
Depending on the transaction, it may address things like:
closing date
earnest money
inspection terms
financing terms
appraisal provisions
seller-paid costs
possession timing
The strongest offer isn't automatically the highest offer.
Price matters, but so do certainty, timing and the overall structure of the transaction.
8. Once you're under contract, the mortgage process gets real
After the seller accepts your offer, several things begin happening at once.
Your lender will work through the final mortgage approval process, while you and your agent handle the property-related parts of the transaction.
That often includes:
Inspection
A home inspector evaluates the condition of the property and identifies potential concerns.
Appraisal
For many mortgages, an appraisal is ordered to provide an independent opinion of the property's value and, depending on the loan program, evaluate certain property requirements.
Underwriting
An underwriter reviews the loan file and confirms that the borrower, loan and property satisfy the applicable requirements.
You may receive requests for updated documents or explanations during underwriting.
Don't panic.
That is a normal part of many mortgage transactions.
The CFPB notes that buyers should remain alert for lender document requests during the closing phase.
9. Don't make big financial changes before closing
This deserves its own section because buyers accidentally create problems here.
Once you've been pre-approved—and especially once you're under contract—talk to your lender before doing something major financially.
Examples include:
financing a vehicle
opening a new credit card
buying furniture on credit
moving large amounts of money between accounts
changing jobs
becoming self-employed
co-signing for someone else's debt
Some of these changes can affect the financial information used to approve your mortgage.
The safest rule is simple:
Before making a significant financial move, call your mortgage person.
10. Review the numbers before closing
Before closing, you'll receive final disclosures detailing the terms and costs of the mortgage.
Don't treat these documents like the terms-and-conditions screen on an app.
Review them.
Look at things like:
loan amount
interest rate
monthly payment
closing costs
credits
cash required at closing
The CFPB provides tools specifically designed to help borrowers review Loan Estimates and Closing Disclosures and recommends checking the details carefully.
If something doesn't look right, ask.
There are no bonus points for pretending you understand something you don't.
11. Closing day
Closing is where the transaction becomes official.
You'll review and sign the required documents and complete the financial portion of the purchase.
And then comes the much more exciting part:
You get the house.
The CFPB describes document signing as the final step of the mortgage closing process and emphasizes reviewing those documents carefully before signing.
What we tell first-time buyers
After working with homebuyers for years, these are some of the things we wish every first-time buyer knew:
You don't need to know everything before calling us.
That's what we're here for.
Don't wait until your finances are “perfect.”
Sometimes buyers spend a year trying to fix something that didn't actually need fixing.
Let us look first.
Don't shop based only on the maximum approval.
Build the mortgage around your life—not your life around the mortgage.
Keep some money after closing.
Owning a home is a lot more enjoyable when the refrigerator breaking doesn't create a financial emergency.
Ask every question.
There are no dumb mortgage questions.
Most people buy only a handful of homes in their lifetime. We deal with mortgages every day.
You aren't supposed to know what we know.
First-time home buyer FAQs
How much money do I need to buy my first home?
It depends on your loan program, down payment, closing costs, property and available credits or assistance. Some conventional options can start at 3% down, while eligible FHA borrowers may qualify with 3.5% down. Your actual cash-to-close requirement will be specific to your transaction.
Do I need perfect credit?
No. Mortgage programs have different credit requirements and pricing structures. Instead of assuming your score disqualifies you, have a lender evaluate the full scenario.
Should I pay off all my debt before applying?
Not automatically. Paying off debt can sometimes help, but using all of your available cash to eliminate a low-payment debt may not be the best strategy. Have the numbers modeled before moving money around.
Should I get pre-approved before calling a real estate agent?
We generally recommend establishing the financing plan early. You'll understand your payment range, available programs and cash requirements before serious home shopping begins. The CFPB likewise recommends exploring loan options and obtaining a preapproval before finding the home.
Does getting pre-approved mean I'm committed to that lender?
No. A preapproval does not by itself commit you to a lender.
Is 20% down always better?
No. More down can lower the loan amount and potentially reduce borrowing costs, but the right decision also depends on how much cash you want to retain, your payment target and your other financial goals.
Bottom line
Buying your first home doesn't need to feel overwhelming.
The process becomes much easier when you break it into a few decisions:
What payment feels comfortable?
What financing option fits your situation?
How much cash should you use?
And what kind of home makes sense for your life?
You don't have to figure all of that out before talking to a lender.
That's the conversation.
Thinking about buying your first home?
Talk with Nick & Kreg and we'll help you figure out what the numbers actually look like before you start shopping.
This information is for educational purposes only and is not a commitment to lend. Loan programs, rates, terms, qualification requirements and guidelines are subject to change. Additional restrictions may apply.