First-Time Home Buying Guide

Want to Score Cash for Free?

Buying your first home is an exciting life event, but boy can it get complicated. There are so many financial and logistical hurdles to overcome, and finding a home you like that’s also within your budget always seems to be harder than you expected it to be.

Don’t despair just yet. Lots of people, including millennials, figure out how to end up in a home they love — without wanting to put their head through the wall. Below, you’ll find the steps you need to follow in our home buying guide, along with various helpful tips, to find your perfect abode.

Want to see if you qualify for a mortgage? You can easily compare offers from top mortgage lenders in just a few minutes:

Top Savings Options: Home Buying

COMPANYLOAN AMOUNTLOAN TERMS (YEARS)DETAILS

Loan Depot Buy a Home

$1.5M

Maximum Loan Amount

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10 - 40

Get Started

  • Min. down payment: 3.5%
  • Loan types and products: Purchase, Refinance, Home Equity, Jumbo, Fixed, Adjustable, FHA, VA, USDA
  • Government mortgage programs, including VA, FHA, and USDA
  • Mortgages available in all 50 states
  • Unlike most nonbank lenders, it offers a home equity loan program
  • Has 180 affiliated loan stores nationwide for customers who prefer face-to-face service
  • The number of loan products nearly rival banks
  • Get Started

$3M

Maximum Loan Amount

10-30

  • Min. down payment: 10%
  • Loan types and products: Purchase, Refinance, Jumbo, Fixed
  • No application or origination fees
  • Doesn’t charge mortgage insurance — even on loans for which less than 20% is put down
  • An entirely digital mortgage application to make the process easier for borrowers
  • Get Started

1. Do The Research

Getting approved for a mortgage is actually pretty simple and can be done in minutes with LendingTree. But generally, you want is primarily staying within certain ratios underwriters use to determine how much you are able to afford for a mortgage payment. Large monthly debt payments such an auto loan or student loans will generally limit the amount of the mortgage approval you are qualified for. It is smart to pay these debt payments off first or avoid taking any new loan payments prior to applying for your first mortgage.

As a way to get started, consider using an online home affordability calculator to estimate what your budget is. Make sure you understand the full cost of home ownership, which includes the home itself, utilities, taxes, homeowner association fees, maintenance, repairs and lawn care.

Chances are, you’ll need a mortgage loan to afford your new home.

To qualify for a mortgage, you’ll need:

  • Money for a down payment: A typical down payment is 20 percent, but many lenders now allow first-time buyers to put down as little as three percent. Keep in mind, though, that a smaller down payment can mean higher costs in the long run. If you are looking for ways to generate some extra money for your down payment you check this helpful article: Best Side Gigs To Make Extra Money
  • Good credit: You might able to get approved with a score in the 600s, but LendingTree to get the best rates. LendingTree can help you get there. It will provide you a free credit report card — including your credit score. It breaks your score down and grades different aspects of your credit profile.
  • Proof of stable employment: The lender will also want proof of employment. If you’re self-employed, you’ll need to provide your tax returns from the last two years.
  • A variety of documents: You’ll need to have lots of documentation on hand, including residence history, employment history, bank statements, evidence of homeowner’s insurance and more.

Make sure you also save money for closing costs, which typically amount to between two and five percent of your loan amount. You’ll also likely want to set some funds aside for furniture, appliances and any minor fixes and upgrades.

2. Prepare The Paperwork

Get all the necessary documents like work history and income details together before applying for pre-approval to help expedite the process. I used to compile all these documents so I know them by heart. These include:

  • W-2 forms from the previous two years, if you collect a paycheck.
  • Profit and loss statements or 1099 forms, if you own a business.
  • Recent paycheck stubs.
  • Most recent federal tax return, and possibly the last two tax returns.
  • A complete list of your debts, such as credit cards, student loans, car loans and child support payments, along with minimum monthly payments and balances.
  • List of assets, including bank statements, mutual fund statements, real estate and automobile titles, brokerage statements, and records of other investments or assets.
  • Canceled checks for your rent or mortgage payments.

2. Finding an Agent

This home buying guide may help you get started in your search for your first home, but it’s just a start. Buying a home is very involved and not to be taken lightly, so you’ll need lots of additional resources along the way. One of your most valuable resources will be your real estate agent.

Finding the right agent is an essential part of the home buying process. Look for one who's knowledgeable, motivated and with whom you get along well. Don't call the listing agent. They work for the seller, and their goal is to sell the home for as much as possible.

Making sure you understand the role of your agent will help the relationship and home buying process go smoothly. Make sure that the expectations of both parties are clear. Sign a buyer's broker agreement and agency agreement, but make sure you understand all forms before you sign them.

3. Find A Lender

Talk to your bank or credit union. If you have a good relationship with your current financial institution, it makes sense, to begin with, a quote from them. If you have a long relationship with them, you should know whether they are a reputable institution. However, it is important to shop around for other options. A good place to start is with friends and family. Ask who they received their mortgage from and if their experience has been good. If so, talk to the lenders that they work with and ask about their rates. Tip: Generally credit unions have the lowest interest rates.

3. Picking a Home

Once you’ve got the finances and agent situation figured out, it’s time to actually start looking at homes. This part may be more enjoyable than the previous two steps, but it can be just as tricky.

Before you start looking at homes, define what you want and need in a house by creating a home buying checklist. Making this list will help you prioritize what you're looking for and separate the essentials from the nice-to-haves.

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In making these distinctions, pay attention to what you may one day be able to change and what you can’t. For example, you can buy new countertops or install a pool in a few years. You can even redo a bumpy or unattractive yard to create the green space of your dreams. You can't, however, change how far the home is from your work or your kids' school.

Also, as tempting as it can be not to, stay within your budget.

4. Closing

Once you’ve found your dream home and made sure you can afford it, you’re almost done. The final step of the home buying journey is closing. Your real estate agent will play a prominent role in this part of the process. They’ll help you make a strong offer, win over the seller if there are multiple prospective buyers and negotiate for savings. Take care in this stage to avoid a bidding war that gets away from your budget.

Some other steps you’ll need to complete are buying homeowner’s insurance and having someone conduct a home inspection. Attend this inspection, and feel free to ask questions about it.

Once you’ve reached an agreement with the seller, it’s time, in earnest, for closing. Before the closing meeting, make sure you review the HUD-1 Settlement Statement, which summarizes the transactions that will occur at closing.

At the closing, you will sign the mortgage note and pay the down payment, closing fees and any other outstanding fees, such as a real estate commission. Make sure you give all of the documents the proper attention and don’t be afraid to ask questions about them.

You’ll also get the title and keys to the home at closing. After that, you’re finished! Well, except for moving in and everything that comes along with that. Once you move in, you can finally settle into your home and enjoy the feeling that comes with being a happy first-time homeowner.

Have any questions about our home buying guide? Revisit your top savings options below:

Top Savings Options To Buy a House

COMPANYLOAN AMOUNTLOAN TERMS (YEARS)DETAILS

Loan Depot Buy a Home

$1.5M

Maximum Loan Amount

10 - 40

Get Started

  • Min. down payment: 3.5%
  • Loan types and products: Purchase, Refinance, Home Equity, Jumbo, Fixed, Adjustable, FHA, VA, USDA
  • Government mortgage programs, including VA, FHA, and USDA
  • Mortgages available in all 50 states
  • Unlike most nonbank lenders, it offers a home equity loan program
  • Has 180 affiliated loan stores nationwide for customers who prefer face-to-face service
  • The number of loan products nearly rival banks
  • Get Started

$3M

Maximum Loan Amount

10-30

  • Min. down payment: 10%
  • Loan types and products: Purchase, Refinance, Jumbo, Fixed
  • No application or origination fees
  • Doesn’t charge mortgage insurance — even on loans for which less than 20% is put down
  • An entirely digital mortgage application to make the process easier for borrowers
  • Get Started

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Brian Meiggs
Brian Meiggs
Brian is the guy behind TopSavings and My Millennial Guide and is a personal finance expert who has spent the last few years writing about how people can save and make more money. He has been quoted in several online publications, including Yahoo! Finance, NASDAQ, MSN Money, AOL, Discover Bank, GOBankingRates, Student Loan Hero, Fit Small Business, Cheapism, SmartAsset, Bankrate, RISE Credit, AllBusiness, Cheddar, Commonbond, Niche, Rewire, Credit Donkey, Debt.com, and more. He uses the free Personal Capital app to manage his cash flow and net worth.

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