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Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
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Henry Schmidt 21 minutes ago
While we strive to provide a wide range offers, Bankrate does not include information about every fi...
While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. So, you’re in the market to buy a home. Whether it’s your first foray into the exciting homebuying process or you’ve been through it before but forgotten the details, this guide provides to prepare you for what’s ahead.
What is a first-time homebuyer
A might refer to someone who has never purchased a home before, but in some contexts, the definition is actually much broader. Homebuyers who don’t have a substantial could be eligible for through , even if it isn’t their actual first time buying a home.
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James Smith 17 minutes ago
To qualify for many of these programs, buyers must simply not have owned a home for at least the pre...
To qualify for many of these programs, buyers must simply not have owned a home for at least the previous three years.
Benefits of being a first-time homebuyer
There are perks to being a first-time homebuyer.
One is programs designed for first-time homebuyers that can make purchasing a home cheaper. Some lenders offer slightly discounted mortgage rates and many states and local governments have programs that offer down payment assistance or other help to people looking to buy their first house.
Some of these programs have other requirements, such as income maximums, while others have no restrictions. Search in your local area for first-time homebuyer opportunities you might be eligible for.
Step-by-step first-time homebuyer guide
Step 1 Assess your finances
Check your credit reports and score, examine your budget and assess your ability to make a down payment and pay .
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Amelia Singh 5 minutes ago
Credit
With a higher credit score, you can get favorable loan terms that will save you lots...
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Charlotte Lee 26 minutes ago
Debt-to-income ratio
Look at how much debt you have relative to your income, or your . Acco...
Credit
With a higher credit score, you can get favorable loan terms that will save you lots of money over the life of your mortgage — although you can still get a loan with a score as low as 500 (for an ) or 620 (for a ). Generally, a score of 760 or higher is enough to qualify you for the lowest rates and most favorable terms.
Debt-to-income ratio
Look at how much debt you have relative to your income, or your . According to conventional wisdom, the ideal spend for housing costs, including the mortgage payment, property taxes, homeowners insurance and homeowners association dues, is 28 percent of your gross monthly income.
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Grace Liu 74 minutes ago
For all of your monthly debt payments, including housing costs, the ideal spend is 36 percent. Many ...
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Henry Schmidt 134 minutes ago
The higher your DTI ratio, however, the more likely you are to pay a higher interest rate for your m...
For all of your monthly debt payments, including housing costs, the ideal spend is 36 percent. Many mortgage lenders look for a DTI ratio of no more than 43 percent, but some go higher, up to 50 percent.
The higher your DTI ratio, however, the more likely you are to pay a higher interest rate for your mortgage because you’re considered a riskier borrower. A higher DTI ratio can also be a strain on your finances.
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Charlotte Lee 41 minutes ago
Down payment
Next is the down payment. If you’re interested in a conventional loan and ca...
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Harper Kim 9 minutes ago
You don’t have to put down 20 percent, however — you can pay as little as 3 percent or 5 percent...
Down payment
Next is the down payment. If you’re interested in a conventional loan and can put 20 percent down, you’ll avoid paying (PMI), which covers the lender should you default on the loan.
You don’t have to put down 20 percent, however — you can pay as little as 3 percent or 5 percent, depending on the type of conventional loan you get, with PMI. If you’re getting a or a , you don’t have to make a down payment at all. FHA loans, meanwhile, require a minimum of 3.5 percent down.
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Harper Kim 6 minutes ago
Savings
Then, assess your ability to pay closing costs, which can range from 2 percent to 5...
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Dylan Patel 20 minutes ago
There’s also the , which is a smaller deposit submitted with your initial offer to buy a home. Som...
Savings
Then, assess your ability to pay closing costs, which can range from 2 percent to 5 percent of the home’s purchase price. Depending on how much your lender charges in fees, you could be paying a significant sum on closing day, so you’ll need to have these funds set aside.
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Lily Watson 1 minutes ago
There’s also the , which is a smaller deposit submitted with your initial offer to buy a home. Som...
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Emma Wilson 34 minutes ago
This is all in addition to the funds you’d ideally have reserved for emergencies. Having considere...
There’s also the , which is a smaller deposit submitted with your initial offer to buy a home. Some states require a deposit of 10 percent of a home’s purchase price from a buyer, while other states might allow earnest money of just a few hundred dollars. Don’t forget: You’ll also want some cash set aside for moving expenses and furniture, or possible repairs or updates you’d like to make before moving in.
This is all in addition to the funds you’d ideally have reserved for emergencies. Having considered these factors and , gather your pay stubs and bank statements from at least the past two months, your W-2 forms and federal tax returns from the past two years and any other information related to other assets and debt you have. This information will help your lender determine what you qualify for.
Step 2 Decide which type of mortgage to get
There are a lot of different . Your first consideration is whether you want a or (ARM).
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Henry Schmidt 35 minutes ago
Fixed or adjustable rate
Fixed-rate loans tend to have slightly higher rates, but the rate ...
Fixed or adjustable rate
Fixed-rate loans tend to have slightly higher rates, but the rate never changes, so you know what your monthly payment will be for the length of your mortgage. An ARM typically starts with a lower rate for a period of time (such as five or seven years), then adjusts up or down at a predetermined interval (such as once a year).
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Ethan Thomas 72 minutes ago
If the rate goes up, your monthly payment will increase with it.
Loan terms
Also consider t...
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Victoria Lopez 115 minutes ago
It’s up to you whether a lower monthly cost or overall savings is more important. Most first-time ...
If the rate goes up, your monthly payment will increase with it.
Loan terms
Also consider the term of your loan, such as 15 years or 30 years. Shorter-term loans have lower rates, but larger monthly payments, so while you’ll have less flexibility in your budget each month, you’ll pay less over the life of the loan in interest.
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Liam Wilson 23 minutes ago
It’s up to you whether a lower monthly cost or overall savings is more important. Most first-time ...
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Ava White 28 minutes ago
Fixed-rate loans offer more stability for those who plan to stay in one place. There are also many l...
It’s up to you whether a lower monthly cost or overall savings is more important. Most first-time homebuyers get a 30-year, fixed-rate loan. If you don’t plan to live in a home for a long time, however, an ARM can be a good way to save some money.
Fixed-rate loans offer more stability for those who plan to stay in one place. There are also many loan programs to choose from, including conventional and FHA loans. Some programs you might not qualify for unless you meet specific requirements, so look into the precise terms to see if any might be a good fit for you.
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Lucas Martinez 191 minutes ago
Step 3 Get quotes from at least three mortgage lenders
Getting a rate quote is a good star...
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Joseph Kim 125 minutes ago
In general, you’ll want to pay the lowest interest rate because that means less money spent monthl...
Step 3 Get quotes from at least three mortgage lenders
Getting a rate quote is a good starting point for comparing loan offers. Because change regularly and can vary considerably from lender to lender, aim to get rate quotes from at least three lenders. Often, you can get a quote for free through the lender’s website if you provide some basic information, like the loan amount you’re looking for, your down payment and credit score range.
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Sebastian Silva 73 minutes ago
In general, you’ll want to pay the lowest interest rate because that means less money spent monthl...
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Isaac Schmidt 73 minutes ago
You can to determine the right time to strike on your mortgage with our daily rate trends. You might...
In general, you’ll want to pay the lowest interest rate because that means less money spent monthly and overall. If it’s your first time buying a home, you might also want to get a sense of how rates fluctuate and the current rate environment so you know what to expect when you seek a quote.
You can to determine the right time to strike on your mortgage with our daily rate trends. You might also consider working with a who can do the comparison-shopping for you. Brokers typically don’t charge borrowers a fee for their services.
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Dylan Patel 137 minutes ago
Keep in mind that while quotes can be a valuable means for comparison, your rate won’t be finalize...
Keep in mind that while quotes can be a valuable means for comparison, your rate won’t be finalized until you with the lender.
Step 4 Get preapproved for a mortgage
After you’ve gotten quotes from a few lenders, you’re ready to get for a mortgage. A preapproval is a preliminary commitment from a lender to loan you a certain amount of money, not a finalized offer.
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Ella Rodriguez 117 minutes ago
Getting one is necessary before you start searching for a home because sellers won’t consider your...
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Mason Rodriguez 125 minutes ago
This is where the paperwork you organized ahead of time comes in handy. Be sure you’re actually ge...
Getting one is necessary before you start searching for a home because sellers won’t consider your offer unless they know you have the financing lined up. The preapproval letter typically spells out how much you’re qualified to borrow, what loan program you’re using and the expected down payment you can make. When you request a preapproval, be prepared for your mortgage lender to dig into all aspects of your financial life.
This is where the paperwork you organized ahead of time comes in handy. Be sure you’re actually getting a . A prequalification could indicate that you might be approved for a mortgage, but is better used to help you determine how much you might be able to afford.
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David Cohen 116 minutes ago
It will not pass muster when you make an offer for a home.
Step 5 Find a real estate agent
...
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Henry Schmidt 15 minutes ago
If you’re not sure how to find an agent, start by asking around for recommendations for a buyer’...
It will not pass muster when you make an offer for a home.
Step 5 Find a real estate agent
A can help enormously in the homebuying process because the agent knows the area and the local housing market well, and can provide valuable insights about neighborhoods, school districts and more.
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Madison Singh 17 minutes ago
If you’re not sure how to find an agent, start by asking around for recommendations for a buyer’...
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Isaac Schmidt 14 minutes ago
Aim to interview at least three buyer’s agents. Ask them about their experience and track record, ...
If you’re not sure how to find an agent, start by asking around for recommendations for a buyer’s agent. Many agents work by referral. You can also research online for highly-rated agents and review testimonials from past clients.
Aim to interview at least three buyer’s agents. Ask them about their experience and track record, and whether they specialize in any particular area, such as condos. Ask for references, as well, to verify whether their experience with the agent was positive.
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Alexander Wang 57 minutes ago
In today’s market, you could be competing against many offers, so you’ll also want an agent who�...
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Nathan Chen 78 minutes ago
You’ll likely need to sign an agreement with the agent, but you won’t have to pay the agent’s ...
In today’s market, you could be competing against many offers, so you’ll also want an agent who’ll be able move quickly on a home you’re interested in and help you navigate a , if that happens. Talk to your agent about their communication style and how they’ve helped guide other buyers through the current market. When you’re ready to look at homes, enlist an agent to help you find the right one and negotiate the best price.
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Noah Davis 59 minutes ago
You’ll likely need to sign an agreement with the agent, but you won’t have to pay the agent’s ...
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Liam Wilson 117 minutes ago
If possible, visit homes in person, and avoid buying a home sight-unseen, even if it seems like the ...
You’ll likely need to sign an agreement with the agent, but you won’t have to pay the agent’s — this is paid by the seller, who also pays the agent representing them in the transaction.
Step 6 Shop for your home
This is the fun part. Talk to your agent about your budget and top requirements so that you don’t waste time looking at homes that don’t meet your needs.
If possible, visit homes in person, and avoid buying a home sight-unseen, even if it seems like the perfect fit based on an online description and photos. During showings, tour the home and the neighborhood.
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Charlotte Lee 33 minutes ago
How would you feel if you discovered the neighborhood was too congested with traffic, is near an air...
How would you feel if you discovered the neighborhood was too congested with traffic, is near an airport or the nearby schools are underperforming? The location is often just as important as the home itself.
For a home in a homeowners association, get a copy of the HOA documents so you know what the rules and fees are.
Step 7 Be prepared to make an offer — fast
If you tour a home in your desired location and price range and like what you see, be ready to make an offer fast.
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Harper Kim 3 minutes ago
Your agent can run an analysis of comparable listings (“”) that have recently sold in the area t...
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Sophie Martin 168 minutes ago
That means that if the home appraises lower than the price you offered or an inspection turns up sig...
Your agent can run an analysis of comparable listings (“”) that have recently sold in the area to help you make a competitive offer. The offer should include an offer price, deadline for the seller to respond (usually within 24 to 48 hours) and any you want to request. At minimum, the offer should include appraisal and home inspection contingencies.
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Scarlett Brown 29 minutes ago
That means that if the home appraises lower than the price you offered or an inspection turns up sig...
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Joseph Kim 49 minutes ago
While some buyers waive contingencies to get their offer accepted, avoid doing this if possible — ...
That means that if the home appraises lower than the price you offered or an inspection turns up significant issues, you can walk away from the deal without losing your deposit. If a bidding war seems likely, the offer should also include an with your top offer limit.
While some buyers waive contingencies to get their offer accepted, avoid doing this if possible — you won’t want to buy a home and later find out it has issues way beyond what your budget can accommodate to repair. However, some very hot markets make it hard to buy a home with certain contingencies, so talk to your realtor about what’s realistic.
Get ready to negotiate on price
Once a purchase agreement is presented to the seller, your offer can be accepted, rejected or countered with a different price.
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Daniel Kumar 123 minutes ago
Tap your agent’s experience to negotiate with the seller for the best possible outcome. If you do ...
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Ryan Garcia 114 minutes ago
Step 8 Negotiate closing costs
If your offer has been accepted, it’s time to apply for y...
Tap your agent’s experience to negotiate with the seller for the best possible outcome. If you do find yourself in a bidding war with multiple offers, it could help to write a letter to the seller describing why you love the home, but don’t get discouraged if you lose out to another buyer. In today’s market, with many homes selling quickly and for above list price, it’s entirely likely you might not get the first home you place an offer on.
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Chloe Santos 5 minutes ago
Step 8 Negotiate closing costs
If your offer has been accepted, it’s time to apply for y...
Step 8 Negotiate closing costs
If your offer has been accepted, it’s time to apply for your mortgage. Within three days of your application, you’ll get a that details the loan terms and estimated closing costs, among other information. Some ; your lender might charge an origination and underwriting fee that could be waived or discounted if you ask, or offer a option that rolls these fees into your loan.
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Mason Rodriguez 267 minutes ago
(You’ll typically pay a higher interest rate to go this route, however.) Ask your lender to clarif...
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Evelyn Zhang 24 minutes ago
If you meet program requirements, you could get a few thousand dollars to help cover expenses. You c...
(You’ll typically pay a higher interest rate to go this route, however.) Ask your lender to clarify any fees you don’t understand. If you need help with closing costs, you could also look to your state’s housing finance agency or local housing organizations for down payment and closing cost assistance programs.
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Evelyn Zhang 108 minutes ago
If you meet program requirements, you could get a few thousand dollars to help cover expenses. You c...
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Sebastian Silva 82 minutes ago
Paying for mortgage points
Another consideration to make is whether you should to reduce yo...
If you meet program requirements, you could get a few thousand dollars to help cover expenses. You can explore on Bankrate.
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Sofia Garcia 108 minutes ago
Paying for mortgage points
Another consideration to make is whether you should to reduce yo...
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Harper Kim 71 minutes ago
Each point you pay usually reduces the rate by 0.25 percent. In general, the longer you plan to stay...
Paying for mortgage points
Another consideration to make is whether you should to reduce your mortgage rate. Effectively, by paying points, you’re prepaying some of the interest on your loan. Generally, each point costs 1 percent of the total value of your loan, so buying one point on a $250,000 mortgage will cost $2,500.
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Scarlett Brown 73 minutes ago
Each point you pay usually reduces the rate by 0.25 percent. In general, the longer you plan to stay...
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Aria Nguyen 61 minutes ago
To calculate the breakeven point, divide the amount you pay for a point by the amount you’ll reduc...
Each point you pay usually reduces the rate by 0.25 percent. In general, the longer you plan to stay in a home, the better it is to pay for points as you’ll recoup the cost of the points by way of the lower monthly payment on your loan.
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Victoria Lopez 252 minutes ago
To calculate the breakeven point, divide the amount you pay for a point by the amount you’ll reduc...
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Lily Watson 60 minutes ago
Step 9 Hire a home inspector
After your offer is accepted, hire a to evaluate the property...
To calculate the breakeven point, divide the amount you pay for a point by the amount you’ll reduce your mortgage payment by each month. For example, if you were to pay $2,500 for one point and that will drop your monthly payment by $30, you’d need to stay in the home for about 84 months ($2,500/$30), or roughly seven years, to break even.
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Joseph Kim 56 minutes ago
Step 9 Hire a home inspector
After your offer is accepted, hire a to evaluate the property...
Step 9 Hire a home inspector
After your offer is accepted, hire a to evaluate the property. Your agent can recommend a home inspector, or you can locate one through the American Society of Home Inspectors, International Association of Certified Home Inspectors and the National Academy of Building Inspection Engineers. As you did when researching agents, consult the Better Business Bureau, HomeAdvisor, Yelp or other online resources to check for complaints and read testimonials.
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Natalie Lopez 30 minutes ago
An inspector will check the home’s structure, roof, heating, plumbing and electrical systems, but ...
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Luna Park 44 minutes ago
Once you have the , review it with your agent and decide how to move forward. If the inspection unco...
An inspector will check the home’s structure, roof, heating, plumbing and electrical systems, but typically won’t check for the presence of lead paint or mold. The inspection can take about two or three hours and range from $300 to $1,000, depending on the home’s size and the extent of the inspection. You and your agent should be present during the inspection so you can ask for clarification on any issues.
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Ava White 19 minutes ago
Once you have the , review it with your agent and decide how to move forward. If the inspection unco...
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Harper Kim 42 minutes ago
If you have an inspection contingency in your purchase agreement and the seller is unwilling to addr...
Once you have the , review it with your agent and decide how to move forward. If the inspection uncovers major problems, you could try to ask the seller to fix them, but the seller might not be willing to if there are other offers that won’t require them to pay for repairs.
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Amelia Singh 100 minutes ago
If you have an inspection contingency in your purchase agreement and the seller is unwilling to addr...
If you have an inspection contingency in your purchase agreement and the seller is unwilling to address the issues, you might choose to walk away instead.
Step 10 Get homeowners insurance finalize your move and finally close
Mortgage lenders require , which helps protect your (and their) investment.
Insurance premiums vary, so get quotes from several companies or work with an insurance broker who can shop rates for you. Assess your needs and ensure you buy adequate coverage to completely rebuild your home if it’s destroyed or seriously damaged. If your home is located in a federally-designated flood zone, you’ll need to buy , too.
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Lucas Martinez 128 minutes ago
Plan your move
Depending on how quickly you plan to move, you’ll likely want to start pla...
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Harper Kim 95 minutes ago
Go to your closing
Finally, it’s time to put pen to paper and seal the deal. The is when ...
Plan your move
Depending on how quickly you plan to move, you’ll likely want to start planning for the move before the closing. As you prepare for move-in day, contact your utility, cable and internet providers to arrange new service for your move-in date. Then and start packing.
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Hannah Kim 47 minutes ago
Go to your closing
Finally, it’s time to put pen to paper and seal the deal. The is when ...
Go to your closing
Finally, it’s time to put pen to paper and seal the deal. The is when you finalize the purchase contract and officially become a homeowner. Just before the closing, get updated pay stubs and other financial paperwork to prove your employment status hasn’t changed and that you’ll be able to make your mortgage payments.
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Ava White 169 minutes ago
If you’re paying closing costs on closing day, obtain a cashier’s or certified check made out to...
If you’re paying closing costs on closing day, obtain a cashier’s or certified check made out to the escrow company for the funds ahead of time. Don’t forget to bring your identification, too.
Within 24 hours of closing, you’ll do a final walkthrough of the property to make sure repairs, if any, were made and that the home is vacant. At the closing table, you’ll sign a lot of paperwork to finalize the loan and transfer ownership of the home from the seller’s name to yours.
What s next for new homeowners
Buying a home can be a long process, but once you move in, there’s still some .
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Henry Schmidt 64 minutes ago
First, assess your home and think about what you might want to change or fix. (The inspection report...
First, assess your home and think about what you might want to change or fix. (The inspection report will be a big help here.) If you haven’t already, start building a home improvement fund for these projects, and set aside separate , too. As time goes on, keep an eye on the housing market, and especially .
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Sophie Martin 1 minutes ago
If home values are rising, you might consider tapping your home’s equity in a or with a (HELOC) or...
If home values are rising, you might consider tapping your home’s equity in a or with a (HELOC) or . If interest rates have fallen, refinancing to a lower rate could save you money. Of course, weigh the pros and cons of each of these options.
Even if a lower-rate environment, the math on a refinance doesn’t always work out positively. Depending on the terms of your loan and how your finances change, you might also want to reevaluate your mortgage payment schedule, such as or .
Consider your goals and whether there are other financial moves you could be making before focusing on a payoff. If you do decide to prepay, talk to your lender beforehand to ensure the extra payments are going to the loan principal, not interest.
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Henry Schmidt 15 minutes ago
Learn more
SHARE: TJ Porter is a contributing writer for Bankrate. TJ writes about a range...
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Hannah Kim 52 minutes ago
Bankrate senior editor for mortgages Bill McGuire has been writing and editing for more than four de...
Learn more
SHARE: TJ Porter is a contributing writer for Bankrate. TJ writes about a range of subjects, from to .
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Liam Wilson 17 minutes ago
Bankrate senior editor for mortgages Bill McGuire has been writing and editing for more than four de...
Bankrate senior editor for mortgages Bill McGuire has been writing and editing for more than four decades at major newspapers, magazines and websites. Chloe Moore, CFP, is the founder of Financial Staples, a virtual, fee-only financial planning firm based in Atlanta and serving clients nationwide.
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Lucas Martinez 113 minutes ago
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Isaac Schmidt 140 minutes ago
First-Time Homebuyer Guide Bankrate Caret RightMain Menu Mortgage Mortgages Financing a home purcha...