Buying a Home Is Easier Than You Think

Learn how to find, finance and close on the right home for you

Buying Your First Home

You’ve decided to take the leap toward homeownership, an exciting and often intimidating process for many first-time homebuyers.

Before starting the house hunt, you should first boost your credit, begin saving for a down payment and decide on your ideal home location and type. This will help you in assessing your finances and getting preapproved for a home loan, which will in turn influence the loan options available to you and how long the homebuying process will take.

You can seek professional assistance from lenders and real estate agents to help you approach this important purchase with confidence and close on the right home at the right price.

Get Pre-Approved

Credit Score

620 or higher (lower may qualify)

Realtor Fee

About 6% (paid by the seller)

Mortgage Payment

Up to 30% of monthly income

The First 3 Steps to Buying a Home

1. Work on Your Credit Score and Down Payment

Pay off any outstanding credit card balances, ensure that all your bill payments are on time and get a copy of your credit report to check for errors. It is also wise to begin setting aside as much money as possible for your future down payment.

2. Pick a Location

Consider your lifestyle, career and family plans when deciding on your ideal city and neighborhood.

  •  Geography and climate suitable for your lifestyle
  •  Urban or rural
  •  Proximity to employers
  •  Safety
  •  Childcare availability
  •  School districts
  •  Proximity to extended family and loved ones
  •  Diversity, activities and cultural offerings

Borrow Wisely Tip

Government-backed loan programs can assist in securing a mortgage for those with bad credit, so even small improvements in credit scores are worth pursuing. Get started early, because time is the most powerful tool for improving credit.

3. Decide on a Residence Type

Size, investment and independence are the major factors to think about when deciding on the type of residence you’d like to purchase.

Single-Family Home

  • More space for growing families
  • Better investment vehicle; higher demand and freedom to build and renovate
  • Owner typically responsible for all maintenance, with no association fees
  • Maximum independence in expanding and renovating property
  • More expensive than a condo or townhouse


  • Less space; may be ideal for singles or couples
  • Weaker investment than a home; harder to differentiate
  • Building maintenance managed by homeowner’s association for a fee
  • Limited renovation options and no expansion options
  • Less expensive than a single-family residence


  • More space than a condo, sometimes with yards or gardens
  • Weaker investment than a home but stronger than a condo; fewer neighbors and more property
  • Building maintenance managed by homeowner’s association for a fee
  • Limited renovation and expansion options
  • Less expensive than a single-family residence

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Assess Your Finances and Get Preapproved

How Much House Can I Afford?

Affordability is typically calculated as a residence that costs two to three times your gross annual salary, with mortgage payments that do not exceed 30 percent of monthly income. A good start is to ensure that you have saved enough to pay a down payment and closing costs. Although a 20 percent down payment is typically required, many loan programs offer mortgages with much lower down payments. Closing costs may range between 3 percent and 5 percent of the home price and include appraisal, legal and home inspection fees.

Prequalification vs. Preapproval

Before starting to view homes, get concrete confirmation of what mortgage options are available to you through a lender.

  • Prequalification is conducted without a credit check and is meant to illustrate how much house you can afford. It will not affect your credit score.
  • Preapproval is a written commitment from a lender to issue you a loan, and will require a comprehensive credit check and review of your income and debts. It will affect your credit score.

You are not obligated to take out a loan after going through the prequalification or preapproval process.

Buying a House With Poor Credit or No Money Down

  • Larger down payment. Lenders typically expect a larger down payment from borrowers with poor credit, typically 20 percent or more of the home value. This gives the lender more confidence in the borrower’s ability to pay back the loan, and benefits the borrower in increasing their initial equity in the property.
  • Higher interest rates. Borrowers with poor credit can expect to pay a higher interest rate on their mortgage as well, resulting in higher costs over time.
  • Cosigner. Having a family member or friend with good credit co-sign on your mortgage could greatly improve your down payment and interest requirements. If you default, the cosigner is responsible for repaying the loan.
  • Federal homebuyer programs. Borrowers with credit scores of at least 580 can consider federal homebuyer programs. Government-backed mortgages such as Federal Housing Administration loans offer down payments of as low as 3.5 percent. They come with steep mortgage insurance requirements that can exacerbate costs, however.
  • No money down. Active-duty military members, veterans or buyers looking at eligible rural properties may be qualified for zero down mortgages.

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Should I Hire a Real Estate Agent?

With so much information available at your fingertips, you may consider buying a home without paying for the services of a real estate agent — aka, Realtor. A well-selected agent can streamline the homebuying process and potentially save you more money than you would going it alone.

Using a Real Estate Agent
  • A commission of about 6 percent of the home price is paid by the seller, although this fee can be priced into the asking price of the house
  • Access to more listings, inside information and history of properties
  • Support throughout the legal and administrative processes of homebuying
  • Less time invested by buyer
  • Buyer has less freedom in viewing and selection
Buying on Your Own
  • No commissions charged to seller; buyer can potentially negotiate a lower price
  • Buyer is responsible for searching for listings, arranging viewings and negotiating prices
  • No legal or administrative support; will likely require hiring a lawyer to draw up contracts
  • More time invested by buyer
  • Buyer has more freedom in viewing and selection

How to Select a Realtor

  • Ask for recent client references
  • Ensure the agent is knowledgeable about your neighborhood
  • Check the agent’s profile on your state’s real estate licensing board
  • Consider how long the agent has been in business
  • Confirm that the agent can working during hours that suit you

From Offer to Closing — and Beyond

You’ve found a house you love and you’re ready to proceed. Here are the next steps.

Making an Offer

Your offer should be fair and competitive.

  • Check comparable sales. Assess the purchase price of similar homes in the area to derive an appropriate price.
  • Prepare for negotiation. Make a sincere offer, but expect that the seller will negotiate higher.
  • Add contingencies. Ensure that your offer includes appropriate contingencies for home inspection and financing.
  • Pay the earnest money. An earnest money deposit – aka a good faith deposit – into an escrow account demonstrates your commitment to the seller. This money will eventually go toward your deposit and is not a fee. You lose this money if you back out of the deal.
  • Shop for homeowners insurance. Some lenders require it to approve the mortgage.

Securing Your Mortgage

Once your offer on the home is accepted by the seller, your home inspection is completed, and you have obtained homeowners insurance, you will submit your mortgage application. You should already have a good understanding of what loan option is best for you and the likelihood of approval from the preapproval process taken before house hunting.


Prior to closing on the home, you will take a walk-through of your new residence and review a document called the Closing Disclosure. Your lender is required to provide you with the Closing Disclosure three business days prior to signing. Compare the costs in the disclosure to the loan estimate your lender provided during prequalification or preapproval. This is your last opportunity to check for inconsistencies or unnecessary fees. The final costs should not exceed 10 percent of the original estimate.

Signing and Paying Your Mortgage

Once all of the closing paperwork is in order and the final physical evaluation of the property is complete, you will sign the contract and receive the keys to your new home. Before picking out drapery colors, however, remember to check what date your first mortgage payment will come due. Typically, it is the first day of the month following your close date.

What is Escrow?

An escrow or title company is a neutral, third party that will hold your earnest money deposit and distribute it to the seller once appropriate legal measures are met. This protects the buyer from paying the seller with no guarantee of getting the home.

Closing Disclosure

The Closing Disclosure aims to ensure that the buyer is clear on all loan parameters and costs associated with the home purchase. It includes:

  • Loan terms
  • Projected payments
  • Costs at closing
  • Loan costs
  • Other costs
  • Cash-to-close calculation
  • Summaries of transactions
  • Loan disclosures

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Learn More About Buying a Home