A nine-step guide for first-time homebuyers
What You Need to Know Before Buying a Home
Buying your first home is exciting, but a clear plan matters more than rushing the decision. These nine steps will help you understand your finances, compare your options, and prepare for life in your new home.
Before You Begin
Your path to homeownership will depend on your finances, local market, and the home you choose. Give yourself time to research, compare options, and find a home that fits both your needs and your budget.
Before you start checking off the boxes, ask yourself:
- How much square footage do I want or need, and does it fit my budget?
- How much money should I put toward my down payment?
- Are home prices in my desired neighborhood increasing or decreasing?
- Is the home a reasonable distance from my workplace?
- Are the nearby schools a good fit for my family?
1. Check Your Credit
Your credit profile is one factor lenders consider alongside income, existing payments, assets, and the loan program. Review your credit reports for errors before applying. Requirements vary, so compare your options rather than relying on one score cutoff.
For more on low-credit mortgage options, read Can You Buy a Home with Low Credit?
2. Review Your Budget
You’ve probably spent a lot of time keeping track of your finances already, but take another look with homeownership in mind. Your mortgage payment is only part of the picture.
Plan for upfront costs
- Down payment
- Appraisal and inspection fees
- Document preparation, underwriting, and origination fees
- Title and title insurance fees
- Transfer taxes and other closing costs
Make room month to month
- Mortgage principal and interest
- Property taxes and homeowners insurance
- HOA dues, when applicable
- Maintenance and utilities
- Mortgage insurance, when applicable
Use lender estimates and local quotes for your budget. Include taxes, insurance, any HOA dues, maintenance, and mortgage insurance when applicable. Keep a cushion for moving and unexpected expenses.
Go deeper: How to Budget for Your First Home.
3. Find a Good Realtor
An experienced real estate agent can help you compare homes, understand the market, and negotiate an offer. Review the services, compensation, and payment responsibilities in your buyer agreement. Seller contributions may be negotiated, but aren’t guaranteed.
4. Preapproval & Mortgage Structure
Preapproval helps establish a borrowing range and can strengthen your offer, but it is not final loan approval. Compare the rate, loan term, monthly payment, closing costs, and mortgage insurance.
DTI uses monthly debt payments divided by gross monthly income; requirements vary by lender and loan program.
See our guide to structuring your mortgage for more information.
5. Start Shopping
You’ve probably got a very specific set of wants and needs for your first home. You should prioritize the features you need, but it’s important to be flexible.
Chances are, you won’t find everything you’re looking for within your budget. Most homeowners don’t. Consider the cost and feasibility of renovations, including any permits or HOA restrictions.
Have your realtor send you home listings to suit your needs. They can set up showings for you as well.
Just keep the health of the home in mind. Sure, your home can be a blank canvas ready for renovations, but it shouldn’t be falling apart either. Take a look at the home’s structural integrity, the condition of the roof, water pressure, and electrical issues.
If you’re not careful, these issues could end up making your dream home a nightmare.
6. Make an Offer
One of your final steps is to make an offer. This is where your realtor comes in handy.
Your realtor should begin with a comparative market analysis (CMA). Essentially, you’ll receive an estimate for a fair offer price depending on the price of similar homes in your area.
Earnest money is a deposit that demonstrates your commitment. It is typically credited toward your cash due at closing. Understand the contract’s contingencies and deadlines, including when the deposit may be refundable or at risk.
7. Inspection & Appraisal
Arrange an inspection within your contract’s deadlines. Depending on the findings and contract, you may negotiate repairs or credits.
The lender generally evaluates the property’s value before final approval. If the appraisal is low, discuss options such as renegotiating the price, contributing additional cash, or using an applicable contingency.
8. Move In!
Review your Closing Disclosure, complete the final walkthrough, and confirm when you receive possession before scheduling your move.
Close with the seller, set up your utilities, and enjoy your new home. But before you go, we have one more step that we want to share with you.
9. Save from the Start
Getting the keys is a milestone. Having a plan for what comes next helps you enjoy the home you worked for.
Money Max Account brings your budget, cash flow, balances, and goals into one financial picture. Explore how different spending and payment choices could affect your future balances, interest costs, and projected payoff timeline.
Using the information you enter and maintain, your Action Plan helps turn that picture into next steps. Keep your progress in view and adjust as your finances change. Your home, your family, and your future all deserve room in the plan.
Schedule a free one-on-one Money Max walkthrough and see how the pieces could fit together for you.
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