First-Time Home Buying: A Guide to the Beginning

No matter what stage of life you’re in, buying a house is one of the biggest financial commitments you will make. As a first-time homebuyer, things can certainly be overwhelming.  Whether you’re doing it on your own or with somebody else, there are so many questions and little details to figure out. So, where do you begin and how do you find the place of your dreams?

First things first, get your patience ready.

Before I say anything else, I want to stress to you how patient you are going to have to be. Buying a house is a process. Nobody’s experience is the same and from the beginning until the very end, your patience is going to be tested in so many ways. Be prepared to take a couple of deep breaths along the way.

Now, time to get preapproved.

While you might have an idea of the type of home you’d like to buy, you really need to know how much of a loan you can qualify for. To do this, meet with a reputable lender to discuss your plans and together you can determine your price range for your new home.  There are also different types of home loans out there, and depending on your situation, there may be some great options to explore. This can include loans with down payment assistance, loans specifically for first-time home buyers, loans for men and women in the military as well as certain state subsidized loans. Be sure to look into all your possible options.

Get preapproved

No matter what kind of loan you’re in the market for, you will need a few documents to get through the preapproval process:

  • Copy of your driver’s license
  • One month of current paystubs
  • Two months of bank statements
  • Last two years of W2s and tax returns

These documents are required for you and whoever you may be applying with.  If you are self-employed, there is even more documentation that you will need to bring!

What do lenders look at?

Lenders look at a number of things to decide whether or not you’d be a credible borrower. From the documents you provide, they look at your annual earnings, your job patterns and your current gross monthly income. They will also look at your FICO score and credit reports. Credit history is a huge factor in the preapproval process because it’s basically a window into your financial life. Do you have a low or high credit score? Do you have a good history of paying your bills on time? How much total debt do you have?

Lenders will look at the total amount of your monthly debt and compare it to your gross monthly income. This is called your debt-to-income ratio. The smaller this percentage is the better. It means that you make enough money to cover your debt and still have a good amount left over. Lenders aren’t going to give a mortgage to someone who has a ton of debt and a history of not paying it off responsibly.

Good Bad Credit

There are so many lenders out there, how do you know which one to meet with?

There are different kinds of lenders you can look into, such as the mortgage team at your credit union or bank, or companies that specialize in home loans. Another really helpful tool is to ask people you know who recently went through the same process. Fellow first-time home owners can be your best friends throughout the process because they understand the stress and confusion that bubbles up as you move along. Ask them what lenders they looked into, which one they chose and why. Were there any that popped up after the fact that they wish they talked to? What did they learn from it all? Looking back, is there something they’d do differently? Don’t be afraid to ask questions.

A lot of the times, lenders can give you an approximate rate right over the phone. So, if you know your credit score(s), the price range you’d like to stick to and how much of a down payment you are planning on putting down, you can get a quick rate from a few lenders. Your best bet is to go with the lender and rate you feel most comfortable about. This is also known as rate shopping.

Keep in mind, though, that you must do your rate shopping within 14 days. When anything requires a credit check, the credit bureaus see this and understand that you could potentially add more debt. Because of this, your score will drop. However, they understand that as a consumer looking for a mortgage, you have the right to find the lowest score. They give you a 14-day window where credit pulls for home loan purposes will not count against your score. Be sure to contact or meet with potential lenders within this timeframe.

First Time Home Buyers

Congratulations! You’re preapproved. What now?

Don’t make any big changes.

While you are in the home-buying stage of your life, try not to make any huge changes such as taking on new credit, making a big payment on something just to pay it off, taking a big chunk of money out of your savings account or changing jobs. Your preapproval amount is based on your situation at that time. Keep things consistent so you won’t have to provide new information or risk your preapproval amount changing.

Figure out what you can actually afford.

Just because you got approved for a $350,000 home, does not mean you can realistically afford the monthly payment that comes with it. If there is one thing you should pay attention to it’s that no home is worth being broke over. Biting off more than you can chew can cause huge problems down the line.


Here’s a tip: Make a fake budget. Take a piece of paper and on the left side list your net monthly income and on the right side list your expenses. Then, add a pretend mortgage payment in there to see how things would change at the end of every month. Play with it a little to see where you are comfortable. As you look at homes, you can get an idea what price range will keep you in that comfort zone.

Don’t forget about the additional costs.

Your down payment isn’t the only cost you will have to pay to get into the door of your new home. You will also have to fork up some cash for closing costs and pre-paid costs, like insurance and taxes.

What’s the difference?

Home Buying Costs

Be sure to consider all of this when you’re budgeting and planning.

Start visiting homes

When you know what you can afford, it’s time for the real shopping to begin. Remember that patience I mentioned at the beginning? Well, kick it up to high gear. If you’re one of the lucky ones, all it takes is a few visits and boom you’re in the home of your dreams. But, if you’re like me, you’ve started your search months ago and still haven’t found anything you’d like to make your primary residence.

Here are some home-searching tips:

  • If you’re working with a realtor, don’t be afraid to send them homes you’d like to visit.
  • If you find something you’re thinking about putting an offer in for, send it to your loan officer. They’ll be able to give you a pretty good estimate for a monthly payment to see if you can swing it. Or, figure it out on the spot: use a mortgage calculator to get your potential payment right then and there. All you need is the total loan amount (home price minus the down payment), the interest rate and the term of the loan. Keep in mind that the estimated monthly payment does not include taxes, homeowners insurance, PMI or an association fee, if you are looking into a condo or townhouse.
  • Try not to venture outside of your price range. If you find yourself visiting homes that are just at the cusp of being over your budget, reel it back in. They might be beautiful, but if you know you’d just be making it by, it’s not worth the gamble of not being able to afford to live there.

Hopefully this helps guide you through the beginning of your home buying journey. Do you have any tips you’d like to share? Leave a comment and let us know!


2 Responses to “First-Time Home Buying: A Guide to the Beginning

  • Lilian N
    4 years ago

    Attending the first time home buyer’s workshops or taking a first time home buyer’s online course are great resources. This will help the first time home buyers know to expect.

  • Thanks for bringing to my attention the value of getting pre-approved when buying a house. My husband and I have decided that we’re ready to move on from apartment life, so we’re excited to start looking at houses. I imagine that getting pre-approved and knowing exactly how much you can afford would be useful, so we’ll make sure to do that first.


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