Assess Your Financial Readiness

Before you start browsing listings, take an honest look at your finances. Three numbers matter most: your credit score, your debt-to-income ratio, and your savings.

Your credit score directly affects whether you qualify for a mortgage and what interest rate you receive. For most conventional loans, you need a score of at least 620. FHA loans are more forgiving, accepting scores as low as 580. If your score is below where you want it to be, spend a few months paying down balances, disputing errors on your credit report, and avoiding new credit applications before applying for a mortgage.

Your debt-to-income (DTI) ratio measures how much of your monthly income goes toward debt payments. Lenders generally want your total debts — including the new mortgage — to stay below 43% of your gross monthly income. If you earn $5,500 per month and already have $600 in monthly debt payments, your lender will want your new mortgage payment (including taxes and insurance) to keep your total DTI under $2,365 per month.

Your savings need to cover three things: the down payment, closing costs, and a reserve fund. Down payments can be as low as 3% to 3.5% for many first-time buyers, but closing costs typically add another 2% to 5% of the loan amount. On a $300,000 home with 5% down, you would need $15,000 for the down payment and roughly $6,000 to $15,000 for closing costs — a total of $21,000 to $30,000 in cash before moving in.

Determine How Much You Can Afford

Affordability is not just about what a lender will approve you for — it is about what you can comfortably pay each month while still saving, investing, and enjoying life. A common guideline is the 28/36 rule: spend no more than 28% of your gross monthly income on total housing costs (mortgage, taxes, insurance, HOA fees) and no more than 36% on all debt combined.

On a gross monthly income of $6,000, the 28% cap means your total housing payment should stay under $1,680. Keep in mind that this guideline is a starting point, not a rule. Your lifestyle, family size, location, and other financial goals all affect what feels comfortable.

Use our Affordability Calculator to plug in your income, debts, and down payment to see a realistic price range. Then verify the monthly payment with our Mortgage Calculator so you know what to expect before you start shopping.

Explore First-Time Home Buyer Programs

Many first-time buyers are unaware of the assistance programs available to them. These programs can make homeownership accessible with less cash upfront and lower monthly costs.

FHA loans, backed by the Federal Housing Administration, allow down payments as low as 3.5% and are available to borrowers with credit scores of 580 or higher. They are one of the most popular options for first-time buyers.

Many state and local housing finance agencies offer down payment assistance grants, forgivable second mortgages, or low-interest loans that can cover part or all of your down payment and closing costs. These programs often target buyers with moderate incomes and may require you to complete a homebuyer education course.

Conventional loans with 3% down — such as Fannie Mae HomeReady and Freddie Mac Home Possible — are designed for low-to-moderate-income buyers and offer reduced mortgage insurance rates compared to standard conventional loans.

If you are a veteran or active-duty service member, VA loans require no down payment and no ongoing mortgage insurance. USDA loans offer similar benefits for eligible rural and suburban properties.

Get Preapproved for a Mortgage

Preapproval is a lender's conditional commitment to lend you a specific amount at a specific rate, based on a review of your income, assets, and credit. It is stronger than prequalification, which is an informal estimate without verification.

Getting preapproved before you start house hunting has two benefits. First, it tells you exactly how much you can borrow, so you shop within your budget. Second, it signals to sellers that you are a serious, qualified buyer — which can make the difference in a competitive market.

To get preapproved, you will typically provide W-2s or tax returns, recent pay stubs, bank statements, and authorization for a credit check. The lender will give you a preapproval letter stating the loan amount you qualify for. This letter is usually valid for 60 to 90 days.

House Hunting and Making an Offer

With a preapproval letter in hand, you can start viewing homes within your budget. Consider working with a real estate agent who knows the local market. A buyer's agent can help you search for homes, evaluate properties, prepare offers, and navigate negotiations and closing. How the agent is compensated can vary by transaction, so review your buyer representation agreement and ask your agent to explain any fees or compensation before you commit.

When you find a home you want, your agent will help you craft an offer. The offer includes the price you are willing to pay, an earnest money deposit (typically 1% to 3% of the purchase price), your proposed closing timeline, and any contingencies — conditions that must be met for the sale to proceed.

Common contingencies include a financing contingency (you can back out if your loan is not approved), an appraisal contingency (you can renegotiate or withdraw if the home appraises below the sale price), and an inspection contingency (you can request repairs or withdraw based on the inspection results). In a competitive market, some buyers waive contingencies to make their offer more attractive, but this increases your financial risk.

If the seller accepts your offer, you enter a contract and move into the closing phase. If they counter, you can negotiate until both sides agree or walk away.

Home Inspection and Appraisal

After your offer is accepted, schedule a home inspection as soon as possible. An inspection is not required, but it is one of the most important steps for a first-time buyer. A professional inspector examines the home's structure, roof, plumbing, electrical system, HVAC, and appliances, then provides a report detailing any defects or safety concerns.

If the inspection reveals significant issues — a failing roof, outdated wiring, foundation cracks — you can ask the seller to fix them, reduce the price, or credit you cash at closing. If the problems are more than you want to take on, you can usually withdraw your offer and recover your earnest money if you included an inspection contingency.

Your lender will also order an appraisal — an independent estimate of the home's value. The appraisal protects the lender by ensuring the home is worth enough to secure the loan. If the appraisal comes in below the sale price, you may need to make up the difference in cash, renegotiate the price, or, in some cases, challenge the appraisal.

Closing on Your Home

Closing is the final step — the day you sign the paperwork, pay your remaining closing costs and down payment, and receive the keys. A few days before closing, your lender will give you a Closing Disclosure that lists every number in the transaction: the loan amount, interest rate, monthly payment, and a line-by-line breakdown of all costs.

At closing, you will sign the promissory note (your promise to repay the loan), the mortgage or deed of trust (which gives the lender a lien on the property), and a stack of other documents. You will also pay your down payment and closing costs, usually via wire transfer or cashier's check.

Closing costs typically run 2% to 5% of the loan amount. On a $300,000 loan, that is $6,000 to $15,000. Our guide to Understanding Closing Costs breaks down every fee you can expect so there are no surprises.

Once the paperwork is recorded with the local government, the home is yours. Congratulations — you are a homeowner.