Buying your first home is exciting, complicated, and expensive – often all at the same time. Between credit scores, pre-approvals, down payments, inspections, and closing costs, it’s easy to feel like everything is happening at once.
It doesn’t have to be overwhelming. Here’s the process broken into clear steps so you know exactly what to do and when.
Step 1 – Get Your Finances in Order First
Before you look at a single listing, know where you stand financially.
Credit score – the minimum credit score to qualify for a conventional mortgage has historically been 620. FHA loans are available with scores as low as 580 with 3.5% down, or even 500 with 10% down. The higher your score, the better your interest rate – and over a 30-year mortgage, a half-point rate difference adds up to tens of thousands of dollars. Check your score through Credit Karma and give yourself 6-12 months to improve it if needed.
Debt-to-income ratio (DTI) – lenders look at how much of your monthly income goes toward debt payments. The 28/36 rule is a useful guideline: housing costs shouldn’t exceed 28% of your gross monthly income, and total debt payments shouldn’t exceed 36%.
Down payment – it’s a common misconception that you need to put 20% down. With a conventional loan you can put as little as 3% down. FHA loans require a minimum of 3.5% for qualified borrowers. If you want to avoid paying for private mortgage insurance (PMI), you’d need to put down 20%.
Closing costs – buying a home costs roughly $32,000 in extra costs beyond the down payment in 2026. Budget 2-5% of the purchase price for closing costs on top of your down payment.
Step 2 – Get Pre-Approved Before You Shop
Pre-approval is not optional. In most markets, sellers won’t take your offer seriously without a pre-approval letter.
To get pre-approved, gather your most recent 30 days of pay stubs and two months of bank or asset statements, then complete a loan application outlining your income, assets, debts, and two-year employment and residence history. Your lender will review this information, pull your credit, and determine the loan amount you may qualify for.
Shop around with at least three lenders or a mortgage broker to increase your chances of getting a low interest rate. Rates vary more between lenders than most people realize – a few hours of comparison shopping can save thousands.
See our full mortgage guide: How Mortgages Actually Work
Step 3 – Define What You Actually Need
Before you start touring homes, be honest about your priorities. Separate needs from wants.
Needs: number of bedrooms, commute distance, school district if applicable, parking, accessibility requirements.
Wants: granite countertops, open floor plan, finished basement, proximity to coffee shops.
Consider proximity to schools, work, and recreational activities, as well as the area’s overall ambiance. A great house in the wrong location is rarely a good purchase. The location is permanent – everything else can be changed.
Use Zillow, Redfin, Realtor.com, and Trulia to research neighborhoods, recent sale prices, and what your budget actually buys in your target area. Spend time on this before committing to a real estate agent – you’ll have much better conversations when you know the market.
Step 4 – Find a Real Estate Agent
A buyer’s agent represents your interests and is typically paid by the seller – not by you directly. In most transactions there’s no cost to using one.
What to look for: local market expertise, responsiveness, and experience with first-time buyers. Ask for references. Interview two or three before committing.
One important note: the average real estate commission rate in the US is 5.49% but varies by state. Recent rule changes mean commission structures are more negotiable than they used to be – understand how your agent is being compensated before signing any agreement.
Step 5 – Make an Offer
When you find the right home, your agent will help you craft an offer. The offer includes:
- Purchase price
- Earnest money deposit (typically 1-3% of the purchase price, held in escrow)
- Contingencies – home inspection, financing, appraisal
- Proposed closing date
After you locate your ideal home, formally express your interest by having your agent put in an offer. This should detail the price you’re willing to pay, any contingencies, and a proposed closing timeline.
Contingencies protect you. The inspection contingency lets you back out or negotiate repairs if the inspection reveals problems. The financing contingency protects your earnest money if your loan falls through. Don’t waive them lightly – especially in a competitive market where pressure to skip contingencies can be real.
Step 6 – Inspection, Appraisal, and Underwriting
Once your offer is accepted, three things happen roughly simultaneously:
Home inspection – hire an independent inspector (not one recommended by your agent or the seller). A thorough inspection covers structure, roof, electrical, plumbing, HVAC, and more. Based on the results, you may need to renegotiate the sale amount or request repairs or credits. If the seller won’t budge, your contingency lets you back out and recover your earnest money.
Appraisal – your lender orders this to confirm the home is worth what you’re paying. If it comes in below the purchase price, you’ll need to renegotiate or make up the difference in cash.
Underwriting – your lender verifies everything you submitted in your application. Don’t open new credit cards, make large purchases, change jobs, or move large sums of money during this period – any of these can delay or derail your closing.
Step 7 – Final Walk-Through and Closing
The final walk-through is your opportunity to check the state of the home and make sure it’s in the agreed-upon condition – clean, damage-free, vacated, and everything is working properly. Do this – it’s your last chance to flag problems before the sale is final.
At closing, you’ll sign a significant amount of paperwork, pay your closing costs and down payment, and receive the keys. The whole process from accepted offer to closing typically takes 30-60 days.
The Real Costs to Budget For
Beyond the down payment and closing costs, first-time buyers consistently underestimate:
- Moving costs: $1,000-5,000+
- Immediate repairs and updates
- New appliances if not included
- Ongoing maintenance: budget 1-2% of the home’s value annually
- Property taxes and homeowners insurance added to your monthly payment
Owning a home means you pay for everything that breaks. A robust emergency fund – separate from your down payment savings – is essential before you close.
Related: How Mortgages Actually Work – Plain English, No Jargon