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Guide

First-Time Home Buyer Guide

Buying your first home is mostly a sequence of small, knowable steps — not a leap. Here is the full path, in order, with the numbers and pitfalls that matter.

Key takeaways
  • You almost never need 20% down. Conventional loans go as low as 3%, FHA 3.5%, VA and USDA 0%.
  • Most lenders look for a FICO score of 620+ for conventional, 580+ for FHA. Better scores unlock better rates.
  • Get pre-approved before you shop. A pre-approval letter is what sellers actually take seriously.
  • Budget for closing costs (2-5% of price) and 1-3% of the home value per year in maintenance — separate from the mortgage.

Step 1 — Figure out what you can actually afford

Lenders use debt-to-income (DTI) ratios. Most conventional loans cap your total monthly debts at around 43-45% of gross income, and your housing payment at around 28-36%. But what a lender will approve is usually more than what is comfortable. A safer ceiling is a housing payment under 28% of your take-home pay, not gross — taxes, 401(k), and health premiums come out first.

Run your real number with the take-home pay calculator and then size a home with the affordability calculator.

Step 2 — Build credit and save the down payment

Two scores matter most: your credit score and the size of your down payment. Pay every bill on time for at least 6 months before applying, avoid opening new credit lines, and keep credit-card utilization under 30% (under 10% is better).

What credit score do you need?

  • 620+ for most conventional loans (660+ to unlock the best rates)
  • 580+ for FHA loans with 3.5% down (500-579 may qualify with 10% down)
  • VA and USDA loans have no fixed minimum, but lenders usually want 620+

Down payment: skip the 20% myth

Twenty percent is a threshold for avoiding mortgage insurance, not a requirement to buy. The median first-time buyer in the U.S. puts down closer to 8%. Saving an extra 12% can take years — years you spend paying rent instead of building equity.

Step 3 — Get pre-approved

A pre-approval is a lender's written estimate of how much they'll loan you, based on a real credit pull and document review (W-2s, pay stubs, bank statements, ID). It is different from a quick "pre-qualification" and is what listing agents expect to see with an offer. Shop with at least three lenders within a 14-day window — multiple mortgage inquiries in that window count as one on your credit report.

Step 4 — Shop, offer, inspect, close

  • Shop: tour homes in person, prioritize location and structure over finishes.
  • Offer: your agent submits a written offer with earnest money (typically 1-3% of price), contingencies (financing, appraisal, inspection), and a closing date.
  • Inspect: a $400-$700 inspection is the cheapest insurance you'll ever buy. Negotiate repairs or credits, or walk away.
  • Close: the lender orders an appraisal, you do a final walkthrough, and you sign at the title company or attorney's office. You'll bring closing costs (2-5% of price) plus the down payment as a wire or cashier's check.

Common first-timer mistakes

  • Stretching to the lender's maximum approval instead of a comfortable payment.
  • Forgetting property tax, insurance, HOA, and maintenance in the monthly cost.
  • Opening a new credit card or financing a car between pre-approval and closing — it can kill the loan.
  • Skipping the inspection to win a bidding war.
  • Not shopping rates. A 0.5% rate difference on a $400k loan is roughly $120/month.
Try the math yourself

Ready to run the numbers? Start with the home affordability calculator, then check your real paycheck with the take-home pay calculator.

Frequently asked questions

How much income do I need to buy a $400,000 home?

With 10% down, a 7% rate, and average taxes and insurance, you would typically need a household income of roughly $95,000-$110,000 to keep the payment under 30% of gross income. The exact number depends on your other debts and your state's property tax rate.

Should I pay off debt or save for a down payment first?

Pay off high-interest debt (credit cards, anything above ~8%) first — it improves both your DTI and your credit score, which lowers your mortgage rate. Low-rate student loans usually don't need to be paid off before buying.

How long does the home-buying process take?

From pre-approval to keys in hand is typically 60-90 days: 30-60 days to find a home and have an offer accepted, then 30-45 days to close.

Do I need a real estate agent?

As a buyer, an experienced agent helps with comps, negotiation, and paperwork. After the 2024 NAR settlement, buyer agent commissions are now openly negotiable — agree on the fee and who pays it in writing before you start touring.

HomeAfford provides educational estimates and general information, not financial, tax, or legal advice. Always confirm specifics with a licensed professional.

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