Your guide to buying a home for the first time in 10 steps
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The process of buying a house for the first time is hardly a simple one, and if you're a first-time homebuyer, you probably have a lot of questions.
This comprehensive guide will walk you through how to buy your first home — from starting to save, to understanding your financing options, to finding an agent, to negotiating an offer — so you can buy your first home with confidence, whether you're buying now or planning for the future.
Before you can start the search for your first home, you should have a strong idea of what you want to spend and how much you can afford. Crunch the numbers sooner rather than later so you know how much to save and how long it will take you.
Here are a few of the different costs that you need to plan for before you buy your first home:
The biggest expense you need to save for is your down payment. The down payment is a percentage of the home’s purchase price that you need to pay up front in order to get a home loan. While many people aim to save a 20%, what home, mortgage, and lender, you choose will impact how large your down payment really needs to be.
There are conventional loans for first time home buyers with good credit that allow down payments as small as 3%, so don’t let the idea of a 20% down payment hold you back.
→ Use a mortgage calculator to figure out how much house you can afford
When you do finally get to close on a home, get ready to pay. Closing costs are fees and expenses you need to pay when you close on the sale of a home. Most closing costs are paid by the buyer — but don’t worry, buyers don't typically have to pay real estate agent fees.
Typically, you spend about 2% to 5% of the loan’s amount on closing costs. In some cases, the seller will pay a portion of the closing costs or cover the cost of inspections, so you can try to negotiate either option during your contract. In the meantime, prepare for the full bill and save up to pay the expected closing costs.
Whether you decide to move down the street or across the country, you’ll need to have some money left over to pay for your move. Once you get to your new home, you may also need to have some money set aside to cover the cost of repairs, appliances, and furniture. It helps to have a bit of a cushion here.
Consider some of these expenses:
Related: Check out these first-time homebuyer mistakes to avoid
When you're preparing to buying a house for the first time, you'll need to make sure your finances are in check.
Before you even begin to think about applying for a mortgage loan, spend some time with your credit score. When you apply for a mortgage, your credit score can greatly impact if you qualify, how much you qualify for, and what your interest rate will be. You can get your hands on a free copy of your credit report from each of the three major credit bureaus (Experian, Equifax and TransUnion) annually. Review your reports carefully and if any of them contain errors, alert the credit bureau that has an inaccurate report accordingly.
If you find your credit score is lower than you would like it to be, you can improve it if you pay all of your bills on time, pay off debts, and keep your credit card balances low. If you're married, you should think about whether to put one or both spouses on the mortgage
Your assets can be a boon when buying a home. If you have savings accounts like a 401(k), you may be able use some of that money towards your home purchase. You might even consider selling stock to boost your cash reserves.
In addition to your assets, you’ll need to review your debts — like student loans — too. Your debt-to-income ratio can affect your mortgage rates, so getting it under control before you apply can lead to a more affordable mortgage.
There are a few different types of mortgages on the market and it’s worth doing some research on which type of mortgage would be right for you.
Plenty of states have first-time home buyer assistance programs designed to help people buy their first homes. Typically, these programs offer mortgages with lower interest rates, provide some sort of down payment assistance, or help cover closing costs.
There are also often tax credits available to first-time home buyers, so look at your city, state, and federal options for assistance and don’t forget to see what your options are for tax credits come tax season.
Buying a home is the biggest purchase most Americans make in their lives, and crunching the numbers can be intimidating — for anyone, but especially for first-time buyers who haven’t been through the process before. Try not to get discouraged, especially this early in the process.
“The biggest thing I hear is that it's not possible right now,” says Kennedy Kirschbaum, Orchard Home Advisor in Denver. “And I do think that comes from the doom and gloom world that we live in. But, you don't know until you actually reach out to a lender.”
→ Learn whether or not buying a house is worth it
Before you apply for your official mortgage you’ll apply for preapproval. Once you get a preapproval letter from a lender, you’ll know the amount they are willing to lend you. (Remember: This is a tentative amount that can change when you submit supporting documentation. The more accurate — and honest — you are with lenders when you apply for preapproval, the better chances you have of getting a similar offer once you apply for a mortgage.)
This letter can also give confidence to sellers that if they choose your offer, you’ll follow through with financing, which can help you compete in a seller’s market — where low supply and high demand give seller’s an edge over buyers.
If you’re feeling like you missed the boat on the historically low interest rates following the pandemic, Kirschbaum offers a silver lining: “A climate of increasing interest rates is actually kind of a blessing in disguise.'' Although many people feel priced out by rising interest rates, the market is finally leveling out.
Once a seller accepts your offer, you’ll apply for a mortgage. You should apply for multiple mortgage loan estimates, so you can compare the rates and fees of each one to see which will cost you less in the short and long run.
→ Here 11 documents you need for a mortgage application
Working with a great real estate agent is crucial for first-time homebuyers who may need a little extra coaching through their first home purchase. “Your agent is going to be your number one advocate,” says Kirschbaum. So look for an agent who is ready to answer all of your questions and talk you through the process in-depth.
To find a great real estate agent, try getting referrals from recent buyers and interviewing multiple agents. Don’t be afraid to ask the tough questions and take your time. The process will be a lot less stressful if you have the right real estate agent on your side.
Location is everything in real estate, and choosing the perfect one for you can be an overwhelming task. Check out the city and suburbs and visit different neighborhoods to get an idea of which community is the right fit for you.
Once you have a few areas in mind, investigate the local scene:
And don’t forget to test out your commute. You may have found the perfect neighborhood but does it make your commute impossible? Try the full commute to work (and school, and anywhere else you frequent) to ensure you aren’t hit with a nasty rush hour surprise after move-in day.
→ Learn how to choose the right home location
Weigh the pros and cons of single-family homes, condos, and townhouses. All of these home types have their merits, so which one is “best” truly just depends on which one can meet your personal and financial needs. Your preapproval letter will also come in handy here as you’ll know which houses are in your budget, so you don't accidentally get your heart set on a home you can’t afford.
Try attending home tours of multiple types of homes to test the waters and see which one fits your needs best. You might even consider buying a new construction home or buying a fixer upper.
→ 10 common types of houses to know
When you attend an open house, begin by taking a close look at the outside of the home to get an idea of what condition the full home is in. Do the same for the inside, and ask the seller about the fine print. Things like homeowners association dues, replacing an aging roof, or fixing an appliance that is no longer under warranty can be an unwelcome surprise after move-in.
→ Here are 9 things to look for on home tours
“A lot of first-time home buying is figuring out what you want,” says Kirschbaum, who encourages first-timers to see as many homes as possible. However, this can be difficult for people buying the traditional way because they have to fit home tours in on their agent’s schedule.
But Orchard’s team of touring specialists can help you see as many homes as you want — on your schedule. Interested in learning more? Get started today.
Once you find the right home, you have to make an offer. Another reason you want the right real estate agent on your team is because they’ll help you navigate the tricky negotiation process with the seller and respond to any counteroffers. How much negotiation power you have will depend greatly on if you’re in a buyer’s or seller’s market.
Your real estate agent should be able to give you a good idea of what the market is like and how tough you can be during any negotiations.
If all goes well and the seller accepts the offer, you should schedule a home inspection and appraisal to better understand the home's condition and what it's worth.
The inspection will give you an idea of any problems that exist in the structure and the appraisal will help the mortgage lender determine the home they're lending you money to buy is priced correctly. If the appraiser finds an issue with the property, you may need to negotiate further to determine who will pay to fix the problem.
Once the inspection is over you can move on to closing, which also includes like getting title insurance and homeowners insurance. You'll also have to appear on the closing date, which is when you'll sign a lot of paperwork and pay your closing costs. Once you’re done, the home is all yours.
→ Learn more about the ins and outs of the closing process
Here are some additional questions you may have about buying your first home.
On average, it takes around six months to buy a home, but it can vary greatly depending on a variety of factors, like:
The step that tends to take the longest is actually finding a home you love and is within budget, which can be especially tricky when the market is hot.
The best way to buy a house for the first time is in a way that makes financial, emotional, and practical sense for yourself. There isn’t a perfect solution for everyone, so focus on buying a house you can afford, ensuring you’re ready for the responsibilities of homeownership (vs renting), and finding a house that serves your needs.
There are a few things you should do before buying a home:
How much money you need to save will depend on how much the home is and the type of mortgage you use to purchase it. In most cases, you will likely spend 3% to 20% of the purchase price on a down payment, and 2% to 5% in closing costs.
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