Buying your first home is the biggest financial commitment you’ll make, and the mistakes are expensive. This guide covers everything from figuring out how much you can afford to closing day — with real numbers, not vague advice.
Step 1: Figure Out What You Can Afford
Before you start browsing Zillow, know your budget:
| Gross Annual Income | Max Monthly Housing (28%) | Estimated Home Price | Down Payment (5%) |
|---|---|---|---|
| $50,000 | $1,167 | $175,000-$200,000 | $8,750-$10,000 |
| $60,000 | $1,400 | $225,000-$260,000 | $11,250-$13,000 |
| $75,000 | $1,750 | $275,000-$325,000 | $13,750-$16,250 |
| $100,000 | $2,333 | $375,000-$425,000 | $18,750-$21,250 |
| $125,000 | $2,917 | $475,000-$525,000 | $23,750-$26,250 |
| $150,000 | $3,500 | $575,000-$650,000 | $28,750-$32,500 |
The 28/36 rule: Keep housing costs under 28% of gross income and total debt under 36%.
See How Much House Can I Afford (50K Salary), 75K Salary, 100K Salary, 150K Salary, 200K Salary.
Step 2: Check Your Credit Score
Your credit score directly determines your mortgage rate:
| Credit Score | Typical Rate (30-yr) | Monthly Payment ($300K) | Interest Over 30 Years |
|---|---|---|---|
| 760+ | 6.50% | $1,896 | $382,560 |
| 720-759 | 6.75% | $1,946 | $400,560 |
| 680-719 | 7.00% | $1,996 | $418,650 |
| 640-679 | 7.25% | $2,048 | $437,280 |
| 620-639 | 7.75% | $2,152 | $474,720 |
| 580-619 (FHA) | 7.25% | $2,048 | $437,280 |
A 100-point credit score difference can cost $50,000+ over 30 years. If your score is below 700, improving it before buying is one of the highest-return financial moves you can make.
See What Credit Score to Buy a House and Credit Score Guide.
Step 3: Save for Your Down Payment and Closing Costs
Minimum Down Payments by Loan Type
| Loan Type | Min Down | On $350K Home | PMI? |
|---|---|---|---|
| Conventional | 3% | $10,500 | Yes, until 20% equity |
| FHA | 3.5% | $12,250 | Yes, for life of loan |
| VA | 0% | $0 | No |
| USDA | 0% | $0 | Small guarantee fee |
| Conventional 20% | 20% | $70,000 | No |
Total Cash Needed to Close
| Expense | Cost Range | On $350K Home |
|---|---|---|
| Down payment (5%) | 3-20% | $17,500 |
| Closing costs | 2-5% | $7,000-$17,500 |
| Home inspection | $300-$500 | $400 |
| Appraisal | $300-$600 | $450 |
| Moving costs | $1,500-$5,000 | $2,500 |
| Total (5% down) | $27,850-$38,350 |
See Down Payment Guide, Average Down Payment, Average Closing Costs, and Closing Cost Calculator.
Step 4: Get Pre-Approved
Pre-approval shows sellers you’re a serious buyer. Here’s what lenders evaluate:
| Factor | What They Check | What They Want |
|---|---|---|
| Income | Pay stubs, W-2s, tax returns | Stable, sufficient for payment |
| Employment | Employer verification, 2-year history | Consistent employment |
| Credit | Full credit report pull | 580-620+ depending on loan type |
| Debt-to-income | All monthly debt payments vs. income | Below 43% (50% max for some loans) |
| Assets | Bank statements, investments | Down payment + reserves |
| Property | Appraisal (after offer) | Worth the loan amount |
Get pre-approved by 3+ lenders. Each will offer slightly different rates and terms. The rate difference between lenders can be 0.25-0.75%, which equals tens of thousands over 30 years. Getting multiple pre-approvals within 14-45 days counts as a single hard inquiry.
See Mortgage Pre-Approval Guide.
Step 5: Choose Your Loan Type
| Your Situation | Best Loan Type | Why |
|---|---|---|
| Veteran / active military | VA | 0% down, no PMI, lowest rates |
| Rural area, income under 115% of median | USDA | 0% down, low fees |
| Credit score 580-619 | FHA | Only option at this credit range |
| Credit score 620-679 | FHA or conventional | Compare costs — FHA may win on rate |
| Credit score 680+ | Conventional 3-5% | Removable PMI saves long-term |
| Move again in <5 years | ARM | Lower initial rate |
| Staying 7+ years | 30-year fixed | Payment certainty |
See Mortgage Types Guide, FHA Loan Guide, VA Loan Guide, and USDA Loan Guide.
Step 6: Find and Inspect a Home
The Home Buying Timeline
| Step | Timeline | What to Do |
|---|---|---|
| 1 | Month 1-2 | Get pre-approved, hire agent |
| 2 | Month 2-4 | Search, attend open houses, tour homes |
| 3 | Week 1 | Make offer (include inspection contingency) |
| 4 | Week 1-2 | Negotiate, reach agreement |
| 5 | Week 2 | Home inspection ($300-$500) |
| 6 | Week 2-3 | Appraisal ordered by lender |
| 7 | Week 3-5 | Loan processing, underwriting |
| 8 | Week 5-6 | Final walkthrough, closing day |
Total: 2-6 months from starting to search to getting keys.
See Home-Buying Checklist, Home Inspection Guide, Home Inspection Cost, and Home Appraisal Guide.
Step 7: Understand Closing Costs
| Closing Cost Item | Typical Range | Paid By |
|---|---|---|
| Loan origination fee | 0.5-1% of loan | Buyer |
| Appraisal | $300-$600 | Buyer |
| Title insurance | $500-$3,500 | Varies |
| Attorney fees | $500-$1,500 | Varies |
| Escrow deposits (taxes/insurance) | 2-6 months pre-pay | Buyer |
| Recording fees | $100-$300 | Buyer |
| Credit report fee | $30-$50 | Buyer |
| Survey | $300-$600 | Buyer |
Negotiating tip: You can ask the seller to cover some or all closing costs (seller concessions). This is common in buyer’s markets. FHA allows up to 6% seller concessions; conventional allows 3-9% depending on down payment.
See Average Closing Costs and Closing Cost Calculator.
First-Time Buyer Programs
| Program | Benefit | Who Qualifies |
|---|---|---|
| State down payment assistance | $5K-$25K grants or low-interest loans | Income limits, first-time buyer |
| FHA loan | 3.5% down, low credit OK | Any buyer (not just first-time) |
| VA loan | 0% down, no PMI | Veterans, active military |
| USDA loan | 0% down | Eligible rural areas, income limits |
| Conventional 97 | 3% down | First-time buyers (haven’t owned in 3 years) |
| HomeReady / Home Possible | 3% down, reduced PMI | Income under 80% of area median |
See First-Time Home Buyer Programs.
The True Cost of Homeownership
Most first-time buyers underestimate ongoing costs:
| Annual Cost Category | Typical Range | Monthly (on $350K home) |
|---|---|---|
| Mortgage payment (P&I) | Varies | ~$2,055 |
| Property taxes | 0.5-2.5% | $146-$729 |
| Homeowner’s insurance | $1,500-$3,500 | $125-$292 |
| PMI (if <20% down) | 0.5-1.5% | $146-$438 |
| Maintenance/repairs | 1-2% of home value | $292-$583 |
| Utilities | $200-$500/mo | $200-$500 |
| HOA (if applicable) | $0-$500/mo | $0-$500 |
| Total | $2,964-$5,097 |
The 1% rule for maintenance means a $350,000 home costs roughly $3,500/year in upkeep. See True Cost of Homeownership, Average Home Maintenance Costs, and HOA Fees.
Common First-Time Buyer Mistakes
| Mistake | Why It’s Costly | How to Avoid |
|---|---|---|
| Buying the max you’re approved for | House-poor, no savings buffer | Stay under 28% of gross income |
| Skipping inspection | Hidden problems cost $10K-$50K+ | Always get an inspection |
| Only getting one lender quote | Missing better rates | Compare 3+ lenders |
| Ignoring closing costs | $7K-$17K surprise | Budget 2-5% of home price |
| Forgetting maintenance costs | 1-2% of home value per year | Budget before buying |
| Making major purchases before closing | Can disqualify your loan | No big purchases until after closing |
| Waiving contingencies | Stuck with problems | Keep inspection contingency |
Rent vs. Buy Analysis
| Factor | Rent | Buy |
|---|---|---|
| Monthly cost | Rent + renter’s insurance | Mortgage + taxes + insurance + maintenance |
| Upfront cost | Security deposit | Down payment + closing costs (~7-25%) |
| Builds equity | No | Yes (slowly at first) |
| Cost predictability | Increases yearly | Fixed P&I (taxes/insurance may rise) |
| Flexibility | Can move easily | Selling takes months, costs 6-10% |
| Tax benefit | None | Mortgage interest deduction (if itemizing) |
| Maintenance | Landlord handles | You pay (1-2% of value/year) |
| Break-even point | Typically 5-7 years |
See Rent vs. Buy Calculator and Rent vs. Buy.
Quick Reference Table
| Milestone | What to Do | When |
|---|---|---|
| Check credit | Get free report, fix errors | 6-12 months before |
| Save for down payment | Aim for 5-10% + closing costs | 6-24 months before |
| Get pre-approved | Apply with 3+ lenders | 2-4 months before |
| Find a home | Work with agent, tour properties | 1-4 months |
| Make offer | Include contingencies | Day of decision |
| Inspect | Hire inspector, negotiate repairs | Within 10 days of offer |
| Close | Sign documents, get keys | 30-45 days after offer |
The Bottom Line
The biggest mistake isn’t buying at the wrong time — it’s buying more than you can afford. Stick to the 28% rule, get pre-approved by 3+ lenders, never skip the inspection, and budget 2-5% for closing costs on top of your down payment. If you’re a veteran, always use a VA loan. If you can’t put 20% down, that’s fine — 95% of first-time buyers don’t. But make sure your total housing costs leave room for retirement savings, an emergency fund, and the inevitable home repairs.
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