Before you take any steps toward buying a home, it’s important to get educated. Many first-time buyers don’t realize how complex the home buying process can be. That’s why we recommend starting with a free course from the FIT Academy. These lessons cover everything from saving for a down payment to understanding mortgage options.
If you’re unsure where to begin or want to avoid costly mistakes, homebuyer education will give you a strong foundation. Some programs even offer certificates that can help you qualify for down payment assistance.
If you want an even deeper look at the steps to buying your first home, check out our full walkthrough for new buyers.
Before applying for a home loan, request a copy of your credit report from AnnualCreditReport.com. Review it carefully for errors, and make sure your credit history reflects responsible use of credit. Many lenders use your credit score to set your interest rate, so it pays to clean up your report before moving forward.
If you notice any issues, take steps to fix them. Disputing errors and paying down credit card debt can raise your score and improve your chances of approval.
Next, figure out how much you’ll need for a down payment, closing costs, and other upfront expenses. Most lenders require a minimum down payment of 3% to 20% of the home’s purchase price, depending on the loan type. In addition to that, you’ll need cash for an earnest money deposit, inspection fees, and moving costs.
Some buyers qualify for gift money from family or use special loan programs to reduce their out-of-pocket expenses. Even so, you’ll want to save steadily and aim to exceed the bare minimum. That extra cushion will come in handy when unexpected expenses pop up.
Buying a home isn’t just about what you want; it’s about what you can afford. Take an honest look at your income, monthly expenses, savings, and debt. A good place to start is by calculating your debt to income ratio. Lenders use this number to figure out whether you can handle monthly mortgage payments.
You should also factor in additional homeownership costs like property taxes, homeowners insurance, and maintenance. A house might have a low sticker price, but still be out of your budget once all costs are included.
With a clear budget in place, it’s time to get a preapproval letter from a lender. This step involves submitting a mortgage application with supporting documents like pay stubs, recent bank statements, and your credit report. Based on your income, credit, and debt levels, the lender will estimate how much you can borrow.
Getting preapproved shows sellers you’re serious and ready to buy. It also gives you a competitive edge in a tight buyer’s market where multiple offers are common.
There are many types of mortgage loans, and each comes with its own pros and cons. Some common options include:
As you evaluate loan options, pay attention to the loan term (typically 15 or 30 years), the interest rate (fixed or adjustable), and whether the lender charges points or fees. Consider meeting with a certified housing counselor for help comparing offers.
The kind of loan you choose affects your payments, risk level, and even how soon you can refinance. Here are some common loan types:
Ask your lender or housing counselor to help you choose the loan type that fits your goals and financial situation.
If you need help buying a home, you’re not alone. There are many programs that offer grants, loans, or educational support. Examples include:
Veterans can explore VA loan benefits through the U.S. Department of Veterans Affairs, while rural buyers may be eligible for USDA-backed loans. Be sure to research options in your area or talk to a HUD-certified housing counselor for personalized guidance.
Before you sign on the dotted line, ask yourself a few big-picture questions:
Buying a home is a major milestone, but it’s also a long-term commitment. Make sure the decision aligns with your goals and values.
Before your lender issues final approval, they’ll often re-check your credit report and credit history. Any large new debts, missed payments, or changes in income could delay your closing. This is why it’s smart to avoid opening new credit cards or making big purchases until after you’ve closed on the home.
If everything checks out, your lender will issue a clear-to-close notification. This means your mortgage has full approval and your closing day can be scheduled.
Your mortgage is more than just the loan amount. It includes monthly mortgage payments, interest, and sometimes property taxes and insurance wrapped into an escrow account. Review the loan term, which is how long you’ll make payments, most commonly 15 or 30 years.
If you want a lower monthly payment, a longer loan term might help. But keep in mind, longer terms usually mean you’ll pay more in total interest over time. Consider what works best for your long-term financial goals.
The home buying process requires a lot of paperwork. Keep all your documents together, including:
Having organized records makes it easier if you ever need to refinance, dispute charges, or show proof of homeownership.
A good real estate agent can make a big difference in your home buying experience. They’ll help you narrow your search, submit offers, and negotiate with sellers. Look for someone with experience in your local market who understands your goals and budget.
You may also work with a buyer’s agent, who represents your interests, and a seller’s agent, who represents the home’s current owner. Ask for referrals, read reviews, and interview agents before making a decision.
House hunting can be exciting, but also overwhelming. Make a list of what you need versus what you want. Visit homes with your agent and take notes on each one. Compare neighborhoods, square footage, and renovation needs.
Use open houses to get a feel for the market. If possible, tour homes during different times of day to see how traffic, noise, or lighting changes. Take your time; this is a major decision.
Now comes the exciting part: looking at homes! Your agent will help you set realistic expectations based on your budget, credit score, and desired features. When browsing, consider:
Don’t forget to factor in the potential for future value. Even if you don’t plan to stay forever, your home is a long-term investment.
When you find a home you love, you’ll make an offer and include earnest money—a small deposit that shows you’re committed to the real estate transaction. The amount varies, but is usually 1% to 3% of the purchase price.
Your agent will help you draft an offer letter that outlines your price, requested repairs, and desired closing date. The seller may accept, reject, or counter your offer. Be ready to negotiate, and keep your final goal in mind.
Once the seller accepts your offer, you’ll schedule a home inspection. This is a crucial step in the home buying process. A licensed inspector will examine the property’s structure, systems, and safety issues. They’ll look at the roof, plumbing, electrical, HVAC, and foundation.
If serious issues are found, you may renegotiate the offer or walk away without losing your earnest money. If all goes well, the process moves forward to the next phase.
Your lender will order a home appraisal to ensure the house is worth the amount you’re borrowing. A licensed appraiser compares the home to similar properties in the area and determines its appraised value.
If the appraisal comes in lower than expected, your loan may need to be adjusted. You can either negotiate a lower purchase price, make up the difference in cash, or dispute the appraisal with new data.
After the offer is accepted and the inspection and appraisal are complete, an escrow account is opened. This is a neutral third-party account that holds your deposit and other payments until the closing day.
The escrow officer coordinates with the title company, your lender, and both agents to gather the necessary paperwork. This includes verifying property details, clearing the title, and preparing the closing disclosure.
Before your final signing appointment, you’ll receive a closing disclosure from your lender. This document lists all the final numbers: the purchase price, loan terms, closing costs, prepaid taxes and insurance, and the total amount you need to bring to the table.
Review your closing disclosure carefully. Make sure everything matches what you were promised earlier in the loan process. If something looks off, speak up immediately; mistakes can be fixed, but only before the documents are signed.
Closing costs can add thousands of dollars to your total expenses. These are fees you pay for services needed to finalize your home purchase. Some examples include:
Typical closing costs range from 2% to 5% of the home’s price. You might be able to negotiate with the seller to pay part of these costs, especially in a buyer’s market. There are also local and state programs that offer help with these expenses.
Just before closing, you’ll have a chance to do a final walk through. This is your opportunity to inspect the property one last time. Make sure any agreed-upon repairs were completed and that the home is in the same condition as when you made the offer.
Bring your contract, inspection report, and checklist. Turn on lights, test appliances, and check for signs of new damage. If anything seems wrong, let your agent know before the closing meeting.
The closing meeting is where the home officially becomes yours. You’ll meet with the escrow officer, your agent, possibly the seller’s agent, and maybe a representative from your lender. This meeting usually takes place at a title company or attorney’s office.
You’ll sign a stack of documents, including the mortgage note, deed of trust, and final loan paperwork. Once everything is signed and your funds are wired, the deed is recorded with the county, and the home is officially yours.
After the paperwork is complete and the keys are in your hand, you can finally move in. But owning a home comes with ongoing responsibilities. You’ll need to budget for maintenance, repairs, and other costs that renters don’t have.
Make sure you stay current with your monthly mortgage payments, homeowners insurance, and property taxes. Set money aside for emergency repairs, and keep your documents organized in case you ever need to refinance or sell.\
These homeownership preparation tips can help you stay financially strong after the move.
Homeowners insurance protects your investment from fire, theft, weather damage, and liability claims. Most lenders require you to have a policy in place before closing. Choose a plan that covers the home’s replacement cost, not just its market value.
Your policy may also include coverage for personal belongings, temporary living expenses if your home becomes uninhabitable, and liability for accidents on your property. Compare quotes from multiple companies to find the best coverage for your needs.
Many new homeowners are surprised by how much it really costs to maintain a home. In addition to your mortgage, property taxes, and insurance, you’ll need to budget for:
Be realistic about your monthly payment comfort level. Owning a home is rewarding, but it takes smart money management to stay on track.
Your home’s property value affects your ability to refinance, sell, or borrow against your equity in the future. Over time, the market value may rise or fall based on local demand, upgrades you make, or broader economic trends.
If you’re buying in an up-and-coming neighborhood, you might see faster equity growth. But make sure you’re not overpaying just to get into the market. Work with your agent to compare similar listings and understand how property values are trending in your area.
As you make monthly mortgage payments and your home’s value increases, you build home equity. This is the difference between what your home is worth and what you owe on your loan.
While it can be tempting to tap into your home equity with a loan or line of credit, this should be done with caution. Using equity to fund home improvements or consolidate high-interest debt may be appropriate, but using it for vacations or everyday expenses can be risky.
Buying a home at the right time can make a big financial difference. During a seller’s market, prices rise quickly and inventory is low. In a buyer’s market, there’s more inventory and buyers have more negotiating power.
Seasonal trends also affect pricing. Spring and summer tend to be the busiest times for home sales, while winter can offer better deals. Keep an eye on local market conditions and interest rates, and be patient; rushing the process rarely pays off.
These home buying tips for today’s market can help you adapt your strategy based on changing interest rates and housing trends.
Homebuyers have rights under federal and state laws. The Real Estate Settlement Procedures Act (RESPA) and the Truth in Lending Act (TILA) require lenders to disclose key loan details and protect you from hidden fees.
You also have the right to choose your own loan officer, title company, and insurance provider. No one should pressure you to use certain services. And if you suspect discrimination during the buying process, you can file a complaint with the Consumer Financial Protection Bureau or the U.S. Department of Housing and Urban Development.
To separate fact from fiction, it helps to understand some of the most common homebuying myths that confuse new buyers.
Your title company ensures that the property’s ownership is clear. They’ll check public records for issues like unpaid taxes, liens, or ownership disputes. They also issue title insurance, which protects you and your lender in case a problem with the title arises later.
A good title company plays a key role in your real estate transaction, coordinating with all parties and making sure the closing process goes smoothly.
Many new homeowners underestimate how much they’ll spend after the purchase. Be sure to budget for recurring costs like:
These expenses vary depending on where you live, the size of your home, and local tax rates. You can usually find an estimate of annual taxes in the home’s listing or from the county tax assessor.
There are two main categories of mortgages: conventional loans and government-backed loans.
Your lender can help you compare options based on your credit score, income, and long-term plans.
Your real estate agent is more than just someone who finds listings. They guide you through every stage of the transaction: helping you evaluate homes, submit offers, negotiate with sellers, and handle paperwork.
You may also work with a buyer’s agent, whose loyalty is solely to you, or a seller’s agent, who represents the person selling the home. Some agents can act as both in the same transaction, though that requires written agreement in many states.
Finding the right real estate agent—someone you trust and communicate well with—can make your home purchase much smoother.
Sometimes the process becomes overwhelming or confusing, especially for first-time buyers. That’s where a nonprofit housing counselor can help. At Credit.org, our HUD-certified housing counselors offer home buyer counseling to walk you through every step and answer your questions.
They can help you create a personalized action plan, review your credit, compare loan options, and prepare for long-term success as a homeowner. Get counseling today.
Learn how pre-purchase housing counseling can support your decision-making and reduce surprises during the process.
The federal government supports homeownership in several ways. Agencies like HUD, the Federal Housing Finance Agency, and the Consumer Financial Protection Bureau provide resources, education, and oversight to help protect buyers.
Programs like VA loans, FHA loans, and first-time buyer incentives are designed to make owning a home more accessible. You can also find helpful guides and tips at sites like ConsumerFinance.gov, HUD.gov, and USA.gov.
A lot of buyers talk about finding their dream home: the perfect house that checks every box. But in reality, most first homes are stepping stones. Instead of focusing only on wish-list features, think about:
A home that’s right for you now can still help you build wealth and stability over time. Don’t wait for perfect; focus on what’s practical, secure, and within reach.
Keep your expectations grounded by reviewing these first-time homebuyer mistakes to avoid before making your final choice.
Buying a home is one of the biggest decisions you’ll ever make. It can also be one of the most rewarding. With education, preparation, and the right support, you can navigate the journey with confidence.
At Credit.org, we offer free first-time homebuyer education through our FIT Academy, along with personalized home buyer counseling. We also provide guidance on budgeting, saving, and debt management to help you stay financially healthy long after move-in day.
Whether you’re just starting to explore your options or you’re ready to take the next step, we’re here to support your homeownership goals.
