What steps should I take to prepare as a first-time homebuyer? A Step-by-Step Guide
The NFCC often receives questions from readers about their money challenges. We answer common questions in our Ask an Expert series to help readers find the information they need.
Question: What steps should I take to prepare as a first-time homebuyer?
Answer: Dear Reader,
The prospect of becoming a homeowner is very exciting. It’s also the beginning of a long-term financial commitment, and probably the biggest one you’ll ever make.
Many first-time homebuyers find the process a lot trickier than expected. In fact, according to a 2025 survey, most first-time homebuyers said the process was more stressful than finding their first job (71%), planning a wedding (59%), or even finding a long-term romantic partner (56%).
With that in mind, know that being prepared up-front is crucial to having a successful experience. Here are some of the best tips I can offer to help you get started as a homebuyer and choose a home you can afford to stay in for the long term.
1. Review your credit reports and scores early in the process
The first step to becoming a homeowner is to review your credit reports and scores. Having a good credit score is paramount because lenders use it to determine the types of mortgages you qualify for, your interest rates, and the overall terms and conditions of your mortgage.
Many aspiring homebuyers skip this step of the process. But it’s crucial to review your credit as early on as possible — ideally at least a year in advance — since it can take a long time to make significant improvements to your scores.
You can get free copies of your three credit reports (Equifax, Experian, and TransUnion) once a week through AnnualCreditReport.com. Once you have your reports, review them carefully. If you find incorrect information, you need to file a dispute with the credit bureaus to correct it.
Unfortunately, getting your credit scores isn’t as easy as getting your reports. You may have access to a free version of your scores through one of your credit-card issuers or through your bank or credit union. If not, try using FICO’s Free Score Estimator.
2. Determine your financial readiness to buy a home
Your second step is to determine if you’re financially ready to not only purchase your home, but to maintain it.
If you’re a renter, you only pay one monthly fee to cover your house payment. When something needs repairing, you call your landlord to take care of it. As a homeowner, your household payment will include multiple costs:
- Principal (repayment of the loan)
- Interest
- Taxes
- Insurance
- Homeowner Association (HOA) fees (if applicable)
On top of that, you’ll be financially responsible for home maintenance and repairs.
Most people trust their lenders to determine what they can afford. But this is a risky way to go, since lenders only look at a snapshot of your finances.
To get a better idea of how much you can afford, consider how stable your finances are at your current rent price. Is money tight? If so, you’ll have to increase your income and/or reduce your expenses in order to afford a home with an equivalent monthly mortgage payment.
3. Save for your down payment and homebuying costs
About one in three homebuyers say that the most surprising thing about becoming a homeowner is the hidden expenses. To prepare for your home purchase, you’ll need to start saving more than you probably anticipate, including funds for the following:
- Down payment
- Closing costs
- Moving expenses
- New furnishings and appliances
The ideal down payment for a conventional loan is 20% of the home purchase price, since paying this amount frees you up from having to cover private mortgage insurance (PMI). Closing costs vary, but can be between 2% to 5% of the purchase price.
If you can’t come up with those funds, consider looking into a First-Time Homebuyer (FTHB) program or homebuyer assistance program through the federal government, your state, or a local nonprofit. Depending on the program, you could qualify for reduced-price properties, a low-down payment option or even flexible credit score requirements.
4. Shop around for the best mortgage offer
If your credit is in good standing and you’re financially ready to buy a home, your next step should be to shop around for mortgage preapprovals.
The key is to visit at least three different financial institutions, including credit unions, to get the best rates and repayment conditions available. When you’re comparing offers, don’t make the common mistake of just comparing your monthly payment. You should also calculate your total cost to borrow, including the interest payments and the lender’s fees.
5. Work with a realtor to find your home
Once you have your pre-approval, you can start working with a realtor to help you find the home of your dreams. Most homebuyers make the mistake of starting with this step. But unfortunately, it can lead to buying a home you can’t truly afford.
During the step where you shop around for a home, be specific on the kind of home you want, including:
- Price you can afford based on your budget (not what the lender says is your max approval amount)
- Must-have features you can’t live without, versus nice-to-haves
- Your preferred location
Remember, your goal is not just to purchase the home, but to easily afford living there for years or even decades.
6. Close on the home
Once you’ve found the home, your realtor will make an offer. If it’s approved by the seller, you’ll start the loan process.
During this stage, it’s absolutely essential to get a home inspection, even if the seller wants you to waive it. You’ll also need to be patient during the escrow process, making sure not to rush through negotiations or skip reading documents. Some people even recommend working with an attorney to help review contracts and disclosures.
Once all parties involved in the sale sign the documents and exchange any remaining funds, you’ll be handed the keys and you’ll start a new chapter in your life as a homeowner.
How a housing counselor can help
If you’re not sure that you’re ready to take this next step, talk to an NFCC-certified housing counselor. They can help you with nearly every aspect of homebuyer preparation, including:
- Creating and/or reviewing your household budget
- Reviewing your credit reports and suggesting improvements
- Offering resources for managing debt
- Helping you navigate First-Time Homebuyer programs
- Suggesting loan types that fit your situation
- Answering questions about mortgage terms
It is never too early to start preparing for homeownership, and our NFCC-member credit counseling agencies are here to help with every step!
Sincerely,
Matt Ribe, Senior Director of Legislative Affairs and Corporate Secretary
Matt Ribe is the Senior Director of Legislative Affairs and Corporate Secretary for the National Foundation for Credit Counseling (NFCC). At the NFCC, he is responsible for government relations at the state and federal level as well as managing the organization’s Board of Trustees and member governance committees. Ribe is heavily involved in the Coalition of HUD Intermediaries, where he serves as co-chair of the Advocacy Committee. Well versed in the federal student lending programs, Ribe serves as the NFCC’s Subject Matter Expert on student loans and has appeared on ABC News 7 in Chicago and other news publications.
