What Do First-Time Homebuyers Need to Buy a House

As a first-time homebuyer, the journey to homeownership can feel overwhelming. From understanding the financial requirements to working with a real estate agent to choosing the right lender, it’s difficult to know where to start. 

However, taking the time to understand the homebuying journey from start to finish will help you stress less and stay focused on finding the home of your dreams. 

When you know what to expect, you not only reduce uncertainty but also increase your buying power. For example, having your finances in order will help you secure better loan terms and get pre-approved for a mortgage, giving you an edge when you’re ready to make an offer on a home.

A little due diligence goes a long way when buying your first home. Here’s what you need to know to make the experience run smoothly.

What Do You Need to Buy a House?

Although this list is not exhaustive, there are several key factors that can reduce the friction and roadblocks many first-time homebuyers encounter on their journey.

Strong Financial Foundation

Lenders will take a deep dive into your finances, and a good credit score will help you qualify for better mortgage rates. But if your credit is less than perfect, you still have options. For example, Federal Housing Administration (FHA), Veterans Affairs (VA), and United States Department of Agriculture (USDA) home loans have less stringent credit score requirements than many conventional loans. 

In addition to your credit history, lenders will also look for a healthy debt-to-income ratio (DTI), stable employment, and proof of income to demonstrate that you are financially prepared to take on a mortgage.

You will also need savings for a down payment and closing costs. If you don’t have 20 percent to put down on a home, no problem. Certain mortgages, such as FHA loans, require as little as 3.5 percent of the purchase price down. However, it’s important to note that if you put less than 20 percent down on an FHA loan or a conventional mortgage, you will be required to carry private mortgage insurance (PMI). 

VA loans are backed by the Department of Veterans Affairs and don’t require a down payment or PMI. However, these loans have stringent qualification requirements and you will be responsible for a VA funding fee.

Closing costs vary depending on the loan amount, the region where you're buying, and the type of mortgage, but you can expect to pay between 2-6 percent of the loan amount. 

Mortgage Pre-Approval

Getting pre-approved for a mortgage is a homebuying power move. With your pre-approval in hand, you know how much house you can afford and gain leverage with sellers because they know you’re ready to buy.

If you’re worried that you aren’t financially ready to submit your pre-approval application, a mortgage calculator can help you estimate your monthly house payment, including principal and interest, taxes, insurance, and PMI. If your calculations put you in a gray area, talking to an experienced mortgage lender can help you make the best decision for your circumstances. 

Home Search Strategy

Buying a home is a huge commitment that requires research, financial planning, and some soul searching. 

Start with a clear understanding of your priorities by identifying your must-haves versus your nice-to-haves. Researching neighborhoods and market trends will give you insight into pricing, amenities, and future value, helping you zero in on homes that truly meet your needs.

As you tour homes, pay close attention to potential red flags, such as structural issues or signs of poor maintenance. Staying informed and open-minded will help you find a home that fits both your lifestyle and your budget—and avoid unpleasant surprises.

Competitive Offer and Negotiation Plan

Low housing inventory is making the market ultra-competitive in some regions, which means your offer has to stand out. Understanding the local market conditions will help you submit a strong, yet reasonable, offer.

If a seller counters, knowing how to respond quickly and strategically is key. A skilled real estate agent can guide you through negotiations, so you strike the right balance between not overpaying and making an offer that sellers will accept.

You Made It to Closing—Now What?

You’re almost at the finish line. Just a few steps stand between you and the keys to your new home.

Start by scheduling a home inspection and appraisal to confirm the property's condition and value. Next, ensure you have enough funds for closing costs, which typically include lender fees, taxes, and insurance. Because requirements vary, check with your lender for specifics.

As closing day approaches, gather all required paperwork and double-check that you 

have the necessary legal documents. Keep them in a safe place so nothing gets lost in the excitement of officially becoming a homeowner!

Want more tips for navigating the road to homeownership? Check out our “First-Time Homebuyer’s Checklist.”