How to Buy a House for the First Time

Buying your first home is a major milestone, often filled with excitement, anticipation and a fair share of stress. Before taking the leap into homeownership, ensure you're financially and mentally ready by assessing whether homeownership fits your long-term goals and if you're prepared for the responsibilities that come with it.

From determining your readiness to navigating the buying process — finding the ideal property, securing financing and closing the deal — understanding each step can help you make a confident, informed homebuying decision.

Ensure you’re financially ready and assess whether homeownership aligns with your long-term goals. Plan for the upfront and ongoing costs.

Homeownership is a big commitment that takes some time to prepare for. Ensure you have a strong credit score and enough savings to cover the down payment, closing costs and move-in expenses.

Before searching for your first home, ensure you know how much you can afford. A good guideline is the 28/38 rule, which is:

• Your mortgage payment should not exceed 28% of your gross monthly income.
• Your total debt payments (including your mortgage) should stay under 36% of your monthly earnings.

Although this rule isn't set in stone, it's a good starting point to help you set a budget that's manageable in the long term. You can also use tools like home affordability calculators that can give you an estimate based on factors like your income, debt, down payment and credit score.

Compare mortgage rates, terms and programs to find the best deal. Get pre-approved to strengthen your buying position.

When buying a home, choosing the right mortgage helps secure the best terms for your budget. Several types of mortgages are available, each with its own down payment and eligibility requirements. Here are the main options to consider:

You also have options when it comes to the length and interest rate variability of the mortgage:

Compare mortgage lenders to secure the best terms. Request loan estimates from at least three lenders to evaluate interest rates, fees and term options. Some lenders offer discount points — upfront fees that reduce your interest rate. Use an online mortgage calculator to see how different terms and rates impact your total payment.

Many states, cities and counties offer programs to help first-time home buyers. These programs often combine low-interest loans with down payment and closing cost assistance, making home ownership more affordable. If you meet certain income requirements, you may be eligible for grants or forgivable loans that don't need to be repaid.

A mortgage pre-approval is a lender's offer to loan you a specific amount under set terms based on your financial information. It shows sellers and real estate agents that you're a serious buyer, giving you an advantage in competitive markets.

When you're ready to shop for a home, apply for pre-approval. Lenders will review your credit, W-2s, pay stubs and bank statements to determine how much you qualify for. You can apply with multiple lenders — banks, credit unions or online lenders — to compare rates. To protect your credit score, submit all applications within a 30- to 45-day window so inquiries count as one hard pull.

Work with a real estate agent to find homes that meet your needs. Visit properties in person and stay focused on your budget.

A good real estate agent can simplify your homebuying process by finding suitable properties, negotiating offers and guiding you through closing. Start by asking for referrals from recent homebuyers, then interview a few agents to compare their experience with first-time buyers and strategies for finding homes, including off-market properties. In competitive markets, this can be especially valuable. Choose an agent you trust and feel comfortable working with, as they’ll be your advocate throughout the process.

Once you find the right agent, you may need to sign a buyer's agency agreement stating that you'll work exclusively with them. Most agents earn their commission from the home sale, so you have no upfront cost.

With your real estate agent, you can explore homes that match your wishlist. While online listings are helpful, visiting homes in person reveals details like the layout, outdoor space and neighborhood feel that you might miss online.

For first-time buyers, the following places are especially helpful when searching for homes:

Submit an offer and negotiate with the seller based on the inspection and appraisal. Prepare your earnest money deposit.

In a competitive market, you must act quickly when making an offer. Start by asking your real estate agent for a comparative market analysis to understand what similar homes have sold for. This will help you avoid overbidding or underbidding.

Once your offer is submitted, be ready for a counteroffer. Negotiations are common, and your agent can guide you on adjusting your bid or adding contingencies, like a home inspection.

After your offer is accepted and you've signed a purchase agreement, it's time to secure your mortgage. You can choose to stick with the lender who pre-approved you for a faster process, but you're not obligated to do so. If you switch lenders, you'll need to provide key documents to complete your loan application:

• Legal ID and Social Security Number
• Pay stubs (30 to 60 days)
• W-2 tax forms (past two years)
• Proof of additional income (e.g., gift money, alimony)
• Investment account statements (e.g., IRA, 401(k))
• Federal and state tax returns (last two years)
• Debt details (student loans, car loans)
• Recent bank statements (showing sufficient funds)

As part of the mortgage process, be prepared for additional costs beyond your down payment. Your lender will charge fees associated with processing your mortgage application. These include the application fee, credit report fee, appraisal, title insurance and other costs like escrows and surveys. The lender will itemize these costs in a Good Faith Estimate (GFE) or Loan Estimate, which you'll receive shortly after submitting your loan application. Review this estimate carefully to understand the total costs of your loan.

After submitting your mortgage application, avoid making large purchases, such as buying a car. Any changes in your financial situation could delay or derail your loan approval, as lenders may need to reanalyze your ability to afford the home.

Review your closing documents, compare them with earlier estimates and ensure all terms are accurate before signing.

Before closing, your lender will require homeowners insurance, which financially protects your home and belongings against damages or theft. It also includes liability coverage if someone is injured on your property. Ensure your policy covers the cost of rebuilding your home if it’s destroyed.

Shop for the best home insurance rates and policies to get adequate coverage. If your home is in a flood zone, you may need flood insurance. Consider an umbrella policy for additional coverage of other assets, like your car.

A home inspection is a thorough evaluation of a property’s condition, conducted by a professional inspector before finalizing the sale. They’ll examine key areas like the foundation, electrical systems, plumbing, roofing and appliances to identify potential issues.

The inspection typically happens after your offer is accepted but before the appraisal and closing. You’ll receive a detailed report outlining any defects or safety concerns once it's complete.

A home appraisal happens after the inspection and is required by your lender to assess the property's market value. The appraiser provides an unbiased estimate based on the home’s size, condition and recent sales of comparable properties. This ensures the home’s value aligns with your mortgage loan.

While the inspection checks the home’s condition, the appraisal confirms its value. If the appraisal is lower than expected, you may need to renegotiate with the seller or increase your down payment as a mortgage lender won't lend you more than the house is worth.

Negotiating can help you save money during the homebuying process. You may ask the seller to cover repair costs or reduce the price to account for needed repairs. In some cases, you can also request the seller to pay part of the closing costs, though lenders may limit how much they can contribute.

Your negotiating power depends on the market. In a buyer's market, you may have more leverage to negotiate a lower price or better terms. In a seller's market, where demand is high, negotiations may be more difficult.

Your agent can use the inspection and appraisal reports to negotiate on your behalf, potentially lowering the price based on the home’s condition.

You're almost a homeowner! The final step is closing on your home purchase. A few days before closing, your lender will send a disclosure outlining key details, including monthly payments, loan terms and closing costs.

At the closing appointment, you'll meet with your agent, the seller's agent and other parties to sign the paperwork, pay closing costs and receive the keys to your new home.

You'll also sign either a HUD-1 settlement statement or a closing disclosure document, both of which itemize the financial details of your loan. Be sure to compare these to the Good Faith Estimate or Loan Estimate you received earlier. If there are discrepancies, ask your lender to clarify and resolve any issues before finalizing.

Set up utilities, change your address and schedule movers. Plan for safety checks and any needed repairs before settling in.

Here are answers to some of the most common concerns first-time homebuyers encounter.