The average first-time buyer spends 12 months preparing and then rushes through the actual purchase. Here's how to flip that: know exactly what you need before you start looking.
Step 1: Check Your Credit Score and Fix Issues
- •Minimum credit score: 620 for conventional, 580 for FHA (with 3.5% down)
- •Best rates: 740+ — the difference between 620 and 760 can cost $200+/month on a $400k loan
- •Pull your free credit report at AnnualCreditReport.com — dispute any errors
- •Pay down credit card balances below 30% utilization before applying
- •Don't open new credit accounts in the 6 months before applying
Step 2: Know How Much House You Can Actually Afford
Step 3: Save for All the Costs (Not Just the Down Payment)
- •Down payment: 3%–20% of purchase price (FHA: 3.5%, conventional: 3–20%)
- •Closing costs: 2%–5% of loan amount — often $8,000–$20,000 on a $350k home
- •Moving costs: $1,000–$5,000 depending on distance
- •Immediate repairs/upgrades: Budget 1–3% of home value for the first year
- •Emergency fund: Keep 3–6 months of expenses AFTER buying
Mortgage Types: Which Should You Choose?
- •Conventional: Best credit, most flexibility, no MIP after 20% equity
- •FHA: 3.5% down with 580+ credit score, but mortgage insurance lasts the life of the loan
- •30-year fixed: Predictable payment, most common choice for first-timers
- •15-year fixed: Lower rate, higher payment, faster equity building
Get pre-approved (not just pre-qualified) before shopping. Pre-approval involves a hard credit pull and income verification — sellers take it seriously. Pre-qualification is just an estimate and means nothing in competitive markets.
The true cost of homeownership is 1.5–2× the mortgage payment when you include taxes, insurance, maintenance, and HOA. Make sure your budget accounts for all of it, not just the mortgage.