First-Time Homebuyer Guide: Everything You Need to Know in 2026
Table of Contents
Buying your first home is exciting, but it can also be overwhelming. This comprehensive guide walks you through every step of the process, from checking your finances to getting the keys to your new home.
1. Assess Your Financial Readiness
Before you start house hunting, take an honest look at your finances. Here's what lenders typically look for:
Credit Score
Aim for 620+ for conventional loans, 580+ for FHA. Scores above 740 get the best rates. Check your score for free at AnnualCreditReport.com.
Debt-to-Income Ratio (DTI)
Most lenders prefer your total monthly debt payments (including the new mortgage) to be below 36% of your gross monthly income. Use our affordability calculator to check.
Emergency Fund
Keep 3-6 months of expenses in savings beyond your down payment and closing costs.
2. Understand Your Down Payment Options
You don't always need 20% down. Here are common options:
| Loan Type | Min Down | Min Credit |
|---|---|---|
| Conventional | 3% | 620 |
| FHA | 3.5% | 580 |
| VA | 0% | No min |
| USDA | 0% | 640 |
Use our mortgage calculator to see how different down payment amounts affect your monthly payment.
3. Get Pre-Approved for a Mortgage
Pre-approval shows sellers you're a serious buyer and gives you a clear budget. During pre-approval, lenders will review:
- Credit history and score
- Income verification (pay stubs, tax returns)
- Employment history
- Assets and bank statements
- Existing debts and liabilities
Tip: Get pre-approved by multiple lenders to compare rates. Each application within a 14-45 day window counts as one hard inquiry for credit scoring purposes.
4. Choose the Right Mortgage Type
Understanding your mortgage options is crucial for long-term financial planning:
Fixed-Rate Mortgage
Interest rate stays the same for the entire loan term. Most popular option. Great for long-term stability and predictable payments.
Adjustable-Rate Mortgage (ARM)
Rate is fixed for an initial period (5, 7, or 10 years), then adjusts annually. Lower initial rates but more risk long-term.
FHA Loan
Government-backed loan with lower credit requirements. Requires mortgage insurance premium (MIP) for the life of the loan.
VA Loan
For eligible veterans and active military. No down payment required, no PMI. Excellent option if you qualify.
5. Find Your Home
Work with a real estate agent to find homes within your budget. Consider these factors:
- Location and neighborhood quality
- School district ratings (affects resale value)
- Commute time and transportation access
- Property condition and age
- Future development plans in the area
- HOA fees and restrictions
6. Make an Offer and Close
Once you find the right home, your agent will help you make an offer. After acceptance:
- Home inspection: Identify any issues before finalizing
- Appraisal: Lender verifies the home's value
- Title search: Ensures clear ownership
- Final walkthrough: Check condition before closing
- Closing day: Sign documents and get your keys!
Pro Tips for First-Time Buyers
- 1
Get pre-approved before shopping — It gives you a clear budget and makes your offers stronger.
- 2
Don't max out your budget — Just because you qualify for $400K doesn't mean you should spend $400K.
- 3
Compare at least 3 lenders — Rate differences of even 0.25% can save you thousands over the loan's life.
- 4
Budget for closing costs — Typically 2-5% of the purchase price. Don't forget moving costs too.
- 5
Consider extra payments — Even $100/month extra can cut years off your mortgage and save tens of thousands in interest.
Ready to see what you can afford?