Buying Your First Home

Step 1: Get Your Finances Ready

Before you look at a single listing, your finances need to be in order. Lenders will scrutinize three things: your credit score, your debt-to-income ratio (DTI), and your down payment.

1. 1
   Check your credit score

   A score of 740+ gets you the best rates. Below 620, most conventional loans are unavailable. Pull your free report at annualcreditreport.com and dispute any errors.

2. 2
   Calculate your DTI

   Add up all monthly debt payments (car, student loans, credit cards), divide by gross monthly income. Lenders want this below 43%; below 36% is ideal.

3. 3
   Save your down payment

   Conventional loans require 3–20%. Less than 20% means paying Private Mortgage Insurance (PMI) — typically 0.5–1.5% of the loan per year added to your payment until you reach 20% equity.

4. 4
   Build your closing cost reserve

   Closing costs run 2–5% of the loan amount ($6,000–$15,000 on a $300k home). These are due at closing and cannot typically be rolled into the loan.

Step 2: Get Pre-Approved

Pre-approval is a lender's written commitment to loan you up to a certain amount, based on verified income, assets, and credit. It is not the same as pre-qualification (which is unverified). Most sellers won't consider an offer without it.

• Gather: two years of tax returns, recent pay stubs, two months of bank statements, and your most recent W-2s
• Apply to 2–3 lenders within a 14-day window — multiple mortgage inquiries in this window count as one hard pull
• Compare loan estimates on the same day for accuracy
• Get the pre-approval letter before touring homes — it sets your real budget

Step 3: Find the Right Home

Your real estate agent works for you — choose one carefully. The seller pays both agents' commissions (typically 2.5–3% each) out of the sale proceeds, so your representation costs you nothing.

1. 1
   Define your non-negotiables

   Bedrooms, commute distance, school district, neighborhood safety. Write them down before you tour — it's easy to compromise emotionally in the moment.

2. 2
   Calculate true monthly cost

   Principal + interest + property tax + homeowner's insurance + HOA fees + PMI (if applicable). The mortgage payment is not the full picture.

3. 3
   Research the neighborhood

   Drive it at night and on weekends. Check crime statistics, flood zone maps (FEMA.gov), and school ratings independently.

4. 4
   Think resale

   Buy in a neighborhood where home values are stable or rising. The best house on the street is the worst investment — surrounding homes pull your value down.

Step 4: Make an Offer and Negotiate

Your offer includes the purchase price, earnest money (1–3% of price held in escrow), contingencies, and a closing date. Contingencies protect you — include a financing contingency, an inspection contingency, and (in some markets) an appraisal contingency.

Step 5: Inspection, Appraisal, and Closing

After your offer is accepted, the clock starts on your contingency periods.

1. 1
   Home inspection ($300–$500)

   Hire your own inspector — never use one recommended by the seller's agent. A thorough inspection protects you from expensive surprises.

2. 2
   Negotiate repairs

   Use inspection findings to request repairs or a price reduction. Focus on safety issues and structural problems, not cosmetic items.

3. 3
   Appraisal

   Your lender orders an appraisal to confirm the home is worth what you're paying. If it comes in low, you can renegotiate, make up the difference in cash, or walk away.

4. 4
   Final walkthrough

   Conduct a walkthrough within 24 hours of closing to confirm the home is in the agreed condition and agreed repairs were made.

5. 5
   Closing day

   You'll sign dozens of documents. Bring a government ID and a cashier's check or wire transfer for closing costs and your down payment. Keys are yours when the deed records.