Know Your Financial Starting Point
Before you start house hunting, you need to understand exactly where you stand financially. This isn't about judgment—it's about clarity. Pull your credit report from annualcreditreport.com and check for errors. Your credit score will directly impact whether you qualify for a loan and what interest rate you'll pay. Most lenders require a minimum credit score of 620 for conventional loans, though 740+ gets you the best rates. If your score is below 620, you've got work to do before applying.
Calculate how much you have available for a down payment. The minimum down payment varies by loan type: FHA loans require 3.5%, conventional loans typically start at 5%, and VA loans (if you qualify) often require zero down. But don't confuse minimum with optimal. A larger down payment means a smaller loan, lower monthly payments, and you avoid private mortgage insurance (PMI) on conventional loans—which can cost $100-$200+ monthly. Use our affordability calculator to see what price range works with your income and down payment.
Add closing costs to your budget. These typically run 2-5% of the home's purchase price and include appraisal fees, title insurance, origination fees, and inspections. A $300,000 home could mean $6,000-$15,000 in closing costs. Some programs let you roll these into your loan, but that increases your total debt. Plan to have this money set aside or negotiate with the seller to cover a portion of it.
Get Pre-Approval (Not Just Pre-Qualification)
Pre-qualification is informal. Pre-approval is real. When a lender pre-approves you, they've verified your credit, income, and assets. This gives you a concrete loan amount you can actually borrow. Sellers take pre-approval seriously because it proves you're not wasting their time.
During pre-approval, the lender will pull your credit report, verify your employment, check your bank statements, and review your debt-to-income ratio (DTI). Ideally, your DTI should be below 43%, though some lenders go up to 50%. If you have high credit card balances, this is the time to pay them down. Don't open new credit accounts or make large purchases right before applying—anything that changes your credit profile can affect your approval.
Get pre-approved by multiple lenders if possible. Shopping around for a mortgage is smart, and comparing offers from 3-5 lenders takes a few hours but can save you thousands in interest. Pay attention to the interest rate, but also the points (upfront fees to buy down your rate), origination fees, and total closing costs. A slightly lower rate means nothing if you're paying significantly higher fees.
Understand Loan Types and Choose What's Right
Conventional loans are the traditional standard. You need a 620+ credit score, typically 5-20% down, and you'll pay PMI if you put down less than 20%. They're faster to close than other loan types and offer more flexibility. If you have the credit score and down payment, conventional loans are usually the way to go.
FHA loans are designed for first-time buyers and people with lower credit scores. You only need a 580 credit score and can put down as little as 3.5%. The tradeoff: FHA loans charge an upfront mortgage insurance premium (1.75% of the loan amount) and annual mortgage insurance premiums that you pay for the life of the loan. Do the math on our mortgage calculator to see if FHA makes sense versus waiting to save more for a conventional loan.
VA loans are exclusively for military members, veterans, and surviving spouses. If you qualify, these are phenomenal: zero down payment, no PMI, and often the best interest rates available. There's a funding fee (unless you're disabled), but it's still a huge advantage. If you're eligible, go for it.
Adjustable-rate mortgages (ARMs) start with a lower rate than fixed mortgages, but that rate adjusts after a set period (typically 3, 5, 7, or 10 years). In 2026, with interest rate uncertainty, ARMs carry significant risk. Unless you're certain you'll sell or refinance before the rate adjusts, fixed-rate mortgages provide predictability and peace of mind.
Find the Right Home at the Right Price
Your pre-approval letter tells you the maximum you can spend. But can you spend it? Just because you're approved for a $500,000 mortgage doesn't mean you should take on that much debt. Factor in property taxes, homeowners insurance, HOA fees, maintenance, and utilities. A good rule of thumb: your total housing payment shouldn't exceed 28% of your gross monthly income.
Understand the market you're buying in. Are there 2 months of inventory or 8 months? Is it a buyer's market or seller's market? Use market data tools to check median sale prices, days on market, and price trends in your target neighborhoods. In a buyer's market with high inventory, you have negotiating power. In a hot seller's market, you need to move fast and be prepared with cash offers or waived contingencies.
Get a good real estate agent who represents your interests, not just the commission. Interview multiple agents, check their track record in your area, and make sure they understand your priorities. They should help you avoid overpaying and spot homes with hidden issues.
The Inspection and Appraisal: Your Protection
The home inspection is your chance to uncover problems before you close. A good inspector will spend 2-3 hours checking the roof, foundation, plumbing, electrical, HVAC, and more. Budget $300-$500 for this—it's the best money you'll spend. If major issues come up (roof needs replacement, foundation cracks, mold), you can renegotiate the price or walk away with your earnest money intact.
The appraisal protects the lender by confirming the home is actually worth what you agreed to pay. The appraiser will research comparable sales and evaluate the property's condition. If the appraisal comes in low, you have a problem: you're agreeing to pay more than the home's value. At that point, you can renegotiate with the seller, increase your down payment to cover the gap, or walk away. Don't assume the appraisal will match the purchase price—always have a backup plan.
Some contracts let you include an appraisal contingency, which protects you if the appraisal is low. Without it, you're on the hook to make up the difference or lose your earnest money. In competitive markets, sellers demand appraisal waivers. Consider carefully before waiving this protection.
Closing: The Final Sprint
A few days before closing, you'll get the Closing Disclosure, which shows your final loan terms, closing costs, and monthly payment. Review it carefully and compare it to your initial Loan Estimate. Some changes are normal, but anything that seems wrong deserves a phone call to your lender.
At closing, you'll sign a stack of documents, verify your down payment and closing cost funds are wired correctly, and receive the keys. Don't wire money from your personal bank account without verbal confirmation with your lender first—closing fraud is real, and criminals have spoofed lender emails to redirect funds.
After closing, you own the home. Set up homeowners insurance before move-in day (lenders require it). Budget for maintenance and repairs—most experts recommend 1% of the home's value annually. A $300,000 home should have a $3,000 yearly maintenance budget. This covers inevitable repairs and prevents small issues from becoming expensive disasters.
Common first-time buyer mistakes: stretching too far financially, skipping the inspection to win a bidding war, not getting pre-approval before house hunting, and failing to check the property tax history. You're not just buying a home—you're taking on a 15-30 year financial commitment. Go in with eyes open, and you'll avoid years of regret.