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First Time
Home Buyers Guide


You're ready to buy a house! Congratulations—that’s exciting. You know what isn’t exciting, though? Sifting through all the information about the home buying process. Instead, let us walk you through it! For the readers out there, check out the extended version by clicking "read more."

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Traditionally, first time buyers face compromises between:

school district

Once you determine what you are willing to compromise on, you're in a better position to make the best choices in home selection and affordability.

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There are a few parts and pieces of the home buying process where you should never compromise.

Selection of a
mortgage professional

Choice of a
real estate agent

A financial plan
& purchase budget

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How To Plan
and build your budget
Make a Household Budget

Write down an itemized list of all your monthly income

Write down an itemized list of all your monthly expenses

Maintain records & track your budget

compare your expenses to the benchmarks


debt budget




all other expenses





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Get a Credit Check

Ideally, you should get a tri-merge credit report that provides your FICO scores from the three major credit bureaus: Transunion, Experian and Equifax.

It’s important that you check your credit as soon as you’ve decided to buy a house, as repairing bad credit or building new credit can take time.

Set up an "Emergency" Fund

How much money should you have in the bank? If you have nothing saved, then your first goal should be to save one month’s worth of bills / expenses in a savings account.

How to Write Your Financial Plan

Make a list of what you would like to accomplish financially in the next 1-5 years.

Organize this list into time frames of when you want to accomplish your goals.

Put an action plan in place to help you accomplish your goals. Follow the plan. Do it.

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Primary Credit Scoring Factors:

Payment History – Accounts for 35% of your score. This shows whether you make payments on time and how often you miss payments.

Credit Utilization Ratio – This is the 2nd most important factor and constitutes 30% of your score. Credit Utilization Ratio is based on the entire amount you owe versus the entire amount of credit available. The higher the risk the lower your credit score will be.

Length of Credit History – Accounts for 15% of your score. The longer your history of making timely payments, the higher your score will be.

Type of Credit – This makes up 10% of your score. Having a mix of payments, including auto and mortgage loans as well as carefully managed credit cards, will provide the bureau with what they want to see.

Credit Inquiries – Responsible for about 10% of your score. Those actively seeking new credit – with multiple inquiries from various creditors – will feel the credit score ding.

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Mortgage Checklist – Documents Needed for Pre-Approval and Underwriting:

Identity and Income Verification

Full legal name, Social Security number, and birthdate (in some cases, you may be asked to provide a copy of your Social Security card)

Phone number, email address, and current and former residential mailing addresses over the past two years

Primary and secondary income amounts and sources

Government-issued photo ID

Name, addresses, and phone numbers of all employers over the last two years

Values of bank, retirement, investment, and other asset accounts

Monthly debt obligations

Address of property being purchased, year built, estimated down-payment amount, and purchase price

Estimates of annual property taxes, homeowners insurance, and any homeowner association dues

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Selecting your Ideal Home
& Making Your Offer

Once you have narrowed your search to the ideal homes and neighborhoods (based on preferences, compromises and affordability,) it’s time to dig deeper on each home’s data.

Check Neighborhood Comparables:

What are the average sales prices for homes in the area with similar features and characteristics?

What condition is the home in, and what repairs or improvements are needed?

Are similar homes available at a more desirable price?

How long has the home been on the market?

Has the sales price already been reduced?

Is the seller considering other offers at this time?

Your real estate agent will be able to provide you with answers to all these questions via a Comparable Market Analysis (CMA).

When you’ve found the ideal home, generally you’ll have to negotiate an offer. This is something your real estate agent can and should handle.

Once terms, conditions, pricing, and contingencies are agreed, then all parties are “in agreeance” and you are officially under contract. Escrow is then opened and earnest money is deposited.

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tick tock... tick tock...
...and you have a limited amount of time to wrap up your mortgage financing, homeowner’s insurance, and other details to get fully approved by your lender.
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Down Payment

Home buyers purchasing a primary residence will always have lower down payment requirements than an investor or second home buyer. Requirements vary based on loan type, credit rating, and often the urgency of the home seller or advice of the seller’s agent.

Click here for 5 legitimate ways to avoid the 20% down myth...

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down payment assistance

Down payment assistance programs have proven a valuable resource in helping first time home buyers secure their homeownership dream.

The majority of down payment assistance programs carry the same three major restrictive guidelines:
Income limits - Borrower, and sometimes household maximum allowable income is determined by County.

Debt to Income (DTI) - DTI for assistance programs in certain states is limited to 45%. This is well below the FHA allowable DTI.

First Loan Amount Limit – In many states the maximum first loan amount is $417,000 if using a conventional loan, or the FHA loan limit, whichever is less.

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private mortgage insurance (pmi)

PMI is a tool used to protect mortgage lenders against loss on loans that have higher risk factors. Usually, your loan-to-value (LTV) ratio is the trigger. If you have over 80% LTV you are required to pay for PTI, but if you put 20% down on conventional financing (in many situations) then you don’t have to.

Some lenders are restrictive on both the type and provider of private mortgage insurance. It pays to inquire about ALL the mortgage insurance options available:

Single Premium Financed MI – Single premium MI works the same way as the upfront mortgage insurance on an FHA loan – it’s financed into the loan balance.

Lender Paid MI – When your mortgage lender pays the MI they typically do it through an adjustment to the interest rate of your loan. You don’t see the mortgage insurance on your statement, but you are paying for it.

Monthly MI – You pay it every month until you can drop the mortgage insurance from your loan. To drop the MI you need to reach 78% or less on your loan to value.

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closing costs

Include lenders’ fees, as well as third-party fees, for services such as appraisals and credit reports. The survey excludes title insurance, title search, property taxes, property insurance, homeowners’ association fees, interest and other prepaid items.

It also does not include private mortgage insurance premiums.

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5 most expensive states for closing costs...
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Expect to pay at least 2% of your purchase price for
closing costs. In the more expensive states,
and for home purchases at prices lower than
$150,000, you can (and should) expect to pay a higher %.

Here’s what you can expect to pay for major closing fee items.
(for guidance only - please consult with your agent!)

Lender Fees

Appraisal Fee

$450 – $490

Discount Points

1%-2% of the loan amount

Processing Fee

$300 – $800

Loan Origination Fee

0.5%-2% of the loan amount

Underwriting Fee

$600 – $1200

Pre-Paid Interest

You will pay a per diem interest from the day you close till the end of the month.

Flood Certification Fee


Prepaid Items

Hazard Insurance Premium


Pest Inspection



Not all closing costs are negotiable. There may be other ways to handle closing costs.

Home Inspection


The Attorney & Title Fees

Attorney Fee

$300 – $500

Title Insurance Binder


title Search


Wire Fee


Title Insurance

$4.40 per thousand of purchase price

Overnight Fee


Government Fees

Recording Fee

$285 – $450

Transfer Fee

Varies based on state, and is split equally between the buyer and the seller.
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purchase tax benefits

You just signed the dotted

line. You are a

homeowner. Now what?

You will be busy moving for the next few weeks, but after that you will want to start reaping the rewards of home-ownership.

Closing & Home




Costs &


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ownership tax benefits

(for guidance only - please consult with your tax professional!)

As well as purchase tax benefits, homeowners are entitled to on-going benefits so you can continue to reap the tax rewards for as long as you own the home.

Energy Efficient Improvements

Handicap Accessability & Health-Related Renovations

Home Office Expenses

Short-Term Rental Income

Real Estate Property Taxes

Mortgage Interest Deduction (1st Lien)

Mortgage Interest Deduction Part 2

Capital Gains Tax

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Real Estate glossary

We have a full A-Z glossary of home
buying terms available...

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We hope you enjoyed the journey...

We hope you enjoyed this journey through the homebuying process, and that you feel more prepared & empowered in your home ownership quest!

If you’re now ready, set and prepped to buy a house, check out our comprehensive list of homes in your area on Homes.com, and make sure to invite us to the housewarming party!

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