First-time homebuyer guide to getting a house in 2024

For a first-time homebuyer, the process of buying a home can be as nerve-wracking as it is exciting, but you’re not alone. The National Association of REALTORS® found that first-time homebuyers accounted for 32% of home purchases last year. As you venture out to look at properties, it pays to research the process first.

This guide will walk you through the homebuying process step by step, so you can feel confident you’re not missing anything important when you begin home shopping.

How to know when you’re ready to buy a home

You’ll know it’s time to buy your first home when you realize you’re ready to put down roots, and you have the financial stability to make it happen.

You should have a steady income, a good credit score (a minimum credit score of 670 or above), and cash in the bank. You should also plan to stay in the area for an extended period of time — several years or more — and have a handle on your bills, with enough left over to manage the inevitable surprises of homeownership.

If this sounds like you, congratulations: You’re ready to be a homeowner.

Step-by-step guide for first-time homebuyers

Being prepared financially is important, but there’s more to buying a house than just your bank account. Mary Barbrack, a nationally ranked real estate agent on The Julia Hoagland Team at Compass, recommends starting with a little help from the pros.

“Step one is to establish your team: A real estate agent, a mortgage professional, and an attorney (if one is required in your area),” she said. “Choose people you trust and you like.”

By gathering your experts first, you have a built-in resource to lean on during the homebuying process.

Here are the steps you’ll follow when buying your first home:

1. Set a homebuying budget

You can get a rough estimate of how much you can afford by calculating 28% of your gross monthly take-home pay. For instance, if you make $5,000 per month before taxes, 28% would be $1,400. If you make $10,000 per month, 28% would be $2,800. Use a mortgage calculator to see what purchase amount will get you to your desired monthly payment. For example, a 30-year, fixed-rate mortgage of $225,000, with an interest rate of 6.5%, will give you a monthly mortgage payment of $1,422.

2. Save for a down payment

You’ve probably set aside a little money for your future home, but if you haven’t, now is the time to start. For a conventional mortgage, 20% is a traditional down payment, but you may be able to put down much less as a first-time homebuyer — as little as 3.5%. On a $300,000 home, 20% down would be $60,000, and 3.5% down would be $10,500. Keep in mind, though, that if you put down less than 20%, your lender might require you to pay private mortgage insurance (PMI), too.

3. Understand hidden costs

PMI is one example of a cost you’ll need to prepare for. Other hidden costs include taxes, HOA fees, repair costs, appraisal and inspection fees, and closing costs such as title insurance, title transfer fees, attorney fees, prepaid interest (or “points”), and origination fees. You’ll receive a detailed list of your closing costs, known as a closing disclosure when your mortgage loan is approved.

4. Get pre-approved for a loan

Your loan pre-approval should happen very early in the process before you begin shopping for your new home. A pre-approval lets you know the amount you may get approved for, and it shows sellers that you’re serious and ready to buy.

5. Look for first-time homebuyer programs

What if you could get money for your down payment, a lower interest rate, or extra funds toward the purchase of a house? These are some of the benefits of first-time homebuyer programs and grants, which are designed to help you afford a home.

In addition to federal programs such as Federal Housing Administration (FHA) loans, your state, county, or city may have programs as well. There are also programs for rural homes, known as USDA loans, and veterans/military families, known as VA loans, so ask your mortgage lender what you could qualify for.

6. Compare rates from different lenders

As with any big purchase, you should shop around to be sure you’re getting the best deal. You can use an online finance marketplace like Credible to see your real, prequalified rates from multiple participating lenders so you can compare terms and find the right home loan for your needs. 

7. Find a real estate agent

A real estate agent is a powerful ally when it comes to buying a home for the first time. They’ll know your local market and can give you invaluable advice and insight.

“This is one of the biggest transactions of your life, and you will want to do whatever you can to avoid unwelcome surprises,” Barbrack said. That includes leaning on an experienced, trustworthy real estate agent.

8. Determine which neighborhoods to shop in

You may already know where you want to live, but if not, your real estate agent can help you find the right neighborhoods to suit your lifestyle and your budget. Ask about previous home sales in the area, neighborhood market trends, and nearby amenities and schools to find a good fit.

9. Create a list of house non-negotiables/nice-to-haves

You might not be able to find the perfect house that contains all of your wish list items, so be sure you prioritize. Decide what is a must-have vs. what would be a nice-to-have, and don’t forget to consider what would be a dealbreaker for you. Share your list with your agent, so they can help you narrow down the search.

10. Shop for homes

At this point in the process, it’s finally time to shop. Your agent can help you pinpoint which listings are worth checking out, schedule showings, and notify you of open houses.

11. Make an offer on a home

Once you’ve found a home that ticks all of your boxes, your agent will help you craft an offer. The offer includes the proposed buying price and any contingencies (conditions that must be met for the transaction to go through). Also add your mortgage pre-approval, anyone else who will be on the title with you, and the expected date of closing. Be prepared to pay earnest money at this time.

12. Get a mortgage

Once the seller has accepted your offer (or made a counteroffer that you accept), you can move forward with your mortgage. You’ll need to finalize an application, but that should go smoothly if you’ve already been pre-approved.

13. Schedule a home inspection

As the mortgage process kicks into gear, you’ll also need to make sure everything with the house is as it should be. Schedule a home inspection to identify any concerns, such as foundation problems, mold issues, or plumbing trouble.

14. Purchase homeowners insurance

Another necessary purchase before you take possession of the home is to line up homeowners insurance. This protects the investment for you and the mortgage lender.

15. Get a home appraisal

A home appraisal is different from a home inspection. The appraisal determines the fair market value of the home, letting you and the mortgage lender know whether the purchase price you’ve set is appropriate. If the home appraises for less than the purchase price, the lender might lower the amount of your mortgage.

16. Discuss inspection findings with the seller

After the home has been inspected, discuss the findings with the seller. If the inspector turns up anything troublesome, you can ask the seller to make repairs or lower the purchase price. If they refuse, and if you had a home inspection contingency in your purchase offer, you can walk away from the sale.

17. Secure necessary repairs

If the seller is willing to work with you, they’ll make the repairs noted in the home inspection report. Making repairs isn’t mandatory; you can also take care of smaller or cosmetic fixes yourself after the purchase.

18. Close on the home

The final step is closing: the day you settle the loan, transfer the title, and complete the purchase. Mortgage closing will require a great deal of paperwork (and patience), so prepare to spend a couple of hours on this step.

A few days ahead of time, you should receive the closing disclosure, which is a document that lists all the necessary details about your new loan: the loan amount, the interest rate, the loan term, your estimated monthly mortgage payment, and the costs associated with closing.

Once all the paperwork is signed, initialed, and complete, you’ve made it: You’re officially a homeowner.

Tips for first-time homebuyers

The most important tip, according to Karen Kostiw, an agent with Coldwell Banker Warburg, is to speak to lenders. That’s how buyers can learn about their purchasing power as well as the many first-time homebuyer programs they may qualify for.

“Understanding what type of mortgage is best for them is challenging, so it is critical to identify a lender they feel comfortable speaking to,” she said.

The right lender will advise you on the right rate, term, and loan type, and can even point you to online and in-person courses to help you on your journey.

In addition to finding the right mortgage lender, you’ll benefit from working on improving your credit score; lenders give their best rates and terms to borrowers with good-to-excellent credit. Getting a better interest rate on your mortgage could save you thousands of dollars over the life of the loan.

Other factors to consider

If you’re almost ready to buy a home, but there are areas you can improve, it might be better to wait and work on what you can. Here are some hurdles to buying your first home that you might want to address before applying for a mortgage:

Evaluate your credit: Lenders typically require a credit score of 620 or higher to qualify for a conventional loan. Though you can qualify for an FHA loan with a credit score as low as 500, you might be better off taking time to improve your credit if you can. 

Build up your savings: Make sure you have enough money to cover not only closing costs but also any emergencies that arise. You might have moving expenses or unexpected home repairs, and you’ll need to be able to handle them. It may not be the right time to buy a house if you don’t have a financial cushion or if you’re emptying your accounts to pay for it.

Assess your debt: If you have a lot of debt — or your credit cards have high interest rates — it might be in your best interest to reduce it before you take on a mortgage. Lowering your consumer debt will also help improve your credit score. 

Stable employment: If you’re worried about your job security, you might not want to take on a significant debt like a mortgage. For example, if you get a 30-year fixed-rate mortgage, you’ll have the same monthly payments for the life of the loan. If you have a job where you risk having your hours reduced, it might be difficult to keep up with payments. 

First-time homebuyer FAQ

How much do I need for a down payment as a first-time homebuyer?

While 20% is the common rule for down payments on a conventional loan, you may be able to put down much less as a first-time home buyer. For instance, FHA loans let you put down just 3.5%. If you have good credit, you may qualify for a conventional loan with just 3% down. Keep in mind, however, that when you put less than 20% down, you’ll likely need to pay PMI.

What are the advantages of using a real estate agent when buying a home?

Real estate agents help you navigate the buying process, answer your questions, and share their expert knowledge of your area’s real estate market. With a real estate agent on your side, you’re more likely to find the home that suits your needs at a price you can afford.

Are there any government programs or grants available for first-time homebuyers?

Government programs are an excellent way for first-time home buyers to save money on a home purchase. The HomeReady, HomePossible, and Standard 97 programs let eligible buyers put down just 3% on a home. The U.S. Department of Housing and Urban Development (HUD) offers 50% off homes for police officers, teachers, firefighters, and emergency responders through the Good Neighbor Next Door program. Your city, county, or state may also offer special government programs for first-time buyers.

What should I look for during a home inspection?

A home inspection should examine the home’s major systems and structures. You should ask the inspector to check the foundation, floors, walls, ceilings, windows, and roof for signs of damage, deterioration, or disrepair. The inspector should also check the plumbing, electrical, heating, and cooling systems to ensure they are in good working order.

How can I estimate my monthly mortgage payments?

Online tools and mortgage calculators are a great way to estimate your monthly mortgage payments. By adjusting the inputs — loan amount, term length, interest rate — you can see what your payments might be for principal and interest. Don’t forget to include property taxes and insurance.