Buying your first home: a complete guide

1. Build and check your credit

Your credit score is the single biggest factor in what rate you'll be offered. Lenders pull all three bureau scores (Equifax, Experian, TransUnion) and typically use the middle score. Here's how scores map to conventional loan pricing:

Check your reports for free at AnnualCreditReport.com before applying. Dispute any errors — a single incorrect late payment can cost you a full rate tier. If your score needs work, the fastest ways to raise it are paying down revolving balances (credit card utilization) and not opening new accounts in the months before applying.

2. Know your budget

Lenders use two debt-to-income ratios to qualify you:

• Front-end DTI — your proposed housing payment (principal, interest, taxes, insurance, HOA if any) divided by gross monthly income. Most conventional loans want this below 28%.
• Back-end DTI — all monthly debt payments including the housing payment, divided by gross income. The conventional limit is typically 43–45%; FHA allows up to 57% with compensating factors.

A common rule of thumb is that you can afford a home priced at roughly 3–4× your annual income, but your actual number depends heavily on current rates, your down payment and local property taxes. Use our mortgage calculator to run real numbers with current rates.

3. Down payment and closing costs

You'll need two pools of cash at closing: the down payment and closing costs.

Down payment minimums by loan type:

• Conventional — 3% (first-time buyers) or 5% (standard), 20% to avoid PMI
• FHA — 3.5% with a 580+ credit score; 10% with a 500–579 score
• VA — 0% (for eligible veterans and service members)
• USDA — 0% (in eligible rural areas)

Closing costs typically run 2–5% of the loan amount and include lender fees (origination, underwriting), third-party fees (appraisal, title search, title insurance) and prepaid items (homeowner's insurance, property taxes, prepaid interest). On a $350,000 loan, expect $7,000–$17,500 in closing costs.

Some lenders offer "no-closing-cost" loans that roll fees into a slightly higher rate — useful if you're short on cash but more expensive over time.

4. Choose the right loan type

For most first-time buyers, the choice comes down to conventional versus FHA:

VA loans (0% down, no PMI, competitive rates) are the best option for eligible veterans and active service members. USDA loans offer 0% down in designated rural and suburban areas. See our full loan types guide for a complete breakdown.

5. Get pre-approved

A pre-approval is a written commitment from a lender stating how much they'll lend you, based on a hard credit pull and verification of your income and assets. It's different from pre-qualification (which is just an estimate based on self-reported info).

To get pre-approved, you'll typically need:

• Two years of W-2s and federal tax returns
• Recent pay stubs (last 30 days)
• Two to three months of bank statements
• Photo ID and Social Security number
• Information on any other debts or assets

A pre-approval letter is typically valid for 60–90 days. Shop at least three lenders — rates and fees vary significantly, and multiple mortgage inquiries within a 45-day window count as a single hard inquiry on your credit report under FICO's rate-shopping rules.

6. Shopping for a home

Once pre-approved, you know your price ceiling. A few things to keep in mind while shopping:

• Don't max out your budget. Qualifying for $450,000 doesn't mean you should spend $450,000. Leave room for maintenance, repairs and life changes.
• Property taxes vary dramatically by location. A $400,000 home in a high-tax area might carry $8,000/year in taxes vs $2,000 in a low-tax area — a $500/month difference in your payment.
• Get a buyer's agent. In most transactions, the seller pays both agents' commissions, so your representation is typically free. Your agent can help with offer strategy, negotiation and inspections.
• Don't make any major financial moves — new credit, large purchases, job changes — between pre-approval and closing. Lenders verify employment and pull credit again before funding.

7. Under contract: what happens next

Once your offer is accepted, you'll have a set number of days to complete your due diligence and finalize your mortgage. The typical timeline after going under contract:

• Days 1–3: Submit mortgage application to your lender. Pay for appraisal (typically $500–$800). Schedule home inspection (typically $300–$600).
• Days 3–7: Receive Loan Estimate from lender — a standardized form showing your rate, monthly payment and all fees. Review it carefully.
• Days 7–21: Underwriting. The lender verifies everything. They may issue "conditions" — requests for additional documents. Respond quickly to avoid delays.
• Days 21–30: Appraisal is completed and reviewed. Title search is conducted. Homeowner's insurance is bound.
• 3 business days before closing: Receive Closing Disclosure — final version of the Loan Estimate. Compare it carefully to the LE. Flag any significant changes.
• Closing day: Sign documents, pay closing costs, receive keys.

8. Closing day

Closing typically takes 1–2 hours. You'll sign a large stack of documents including the promissory note (your promise to repay), the deed of trust (the lender's security interest in the property) and the Closing Disclosure.

You'll need to bring:

• Government-issued photo ID
• Certified or cashier's check (or wire confirmation) for closing costs and down payment
• Any outstanding documents requested by the lender

After signing, the lender funds the loan, the title company records the deed and you receive your keys. Congratulations — you're a homeowner.

9. Down payment assistance programs

Many first-time buyers don't realize how much help is available. Programs exist at the federal, state and local level:

• State housing finance agencies (HFAs) — Every state has one. They offer below-market rates, down payment grants and second-lien loans. Search "[your state] housing finance agency" to find yours.
• HUD-approved programs — The U.S. Department of Housing and Urban Development maintains a directory of local homebuying programs at hud.gov.
• Employer programs — Some large employers, hospitals and universities offer homebuying assistance for employees purchasing near their workplace.
• Fannie Mae HomeReady and Freddie Mac Home Possible — Conventional loan programs with 3% down and reduced PMI for low-to-moderate income buyers.
• Good Neighbor Next Door — HUD program offering 50% discounts on homes in revitalization areas for teachers, firefighters, EMTs and law enforcement.

Income limits and eligibility requirements vary by program. A HUD-approved housing counselor can help you identify what you qualify for at no cost.