Step 1 — Know your numbers
Before you tour a single house, get a clear picture of three things: your credit score, your monthly take-home income, and your existing debt payments. Lenders use these to calculate your debt-to-income ratio (DTI), which usually needs to land under 43–50%.
- Pull your free credit report from annualcreditreport.com
- Add up minimum monthly debt payments (cards, auto, student loans)
- Aim for a credit score of 620+ for conventional, 580+ for FHA
Step 2 — Get pre-approved (not pre-qualified)
A pre-qualification is a guess. A pre-approval is a verified letter from a lender saying you can borrow up to a specific amount. Sellers and agents take pre-approved buyers seriously — pre-qualified buyers, not so much.
Step 3 — Budget for the full cost, not just the price
The sticker price is the start. Your true monthly cost includes principal, interest, property taxes, homeowners insurance, and (often) mortgage insurance — together called PITI. Add HOA dues if applicable.
- Down payment: 3% (conventional), 3.5% (FHA), 0% (VA/USDA)
- Closing costs: typically 2–5% of the loan amount
- Reserves: 1–2 months of payments in the bank after closing
Step 4 — Shop the home, then shop the loan
Once your offer is accepted, you have a short window (usually 7–10 days) to lock your rate and finalize the loan program. This is when working with a broker pays off — they compare dozens of lenders so you don't have to.
Step 5 — Underwriting and closing
Underwriting is the lender verifying everything: income, assets, the appraisal, the title. Respond fast to document requests and avoid opening new credit lines. Then comes closing day — you sign, you fund, you get the keys.
Common first-timer mistakes to avoid
- Maxing your pre-approval amount — leave breathing room
- Forgetting closing costs in your savings plan
- Changing jobs or making big purchases mid-process
- Skipping the home inspection to win a bid