Step 1: Work out a realistic housing budget
Start with the monthly payment you can support, not only the maximum loan amount a lender may approve. Include principal and interest, property taxes, homeowners insurance, mortgage insurance when applicable, HOA dues, maintenance, and room for savings.
Estimate your budget
Use your income, debts, down payment, and property costs to compare scenarios before you shop.
Open Affordability Calculator →Step 2: Check credit, debt, and cash reserves
Credit requirements vary by loan program and underwriting method. For example, current Fannie Mae rules distinguish between manually underwritten loans and Desktop Underwriter (DU) casefiles rather than applying one universal score cutoff to every conventional mortgage.
Also calculate your debt-to-income ratio and review how much cash you can keep after the down payment and closing. A lower down payment may increase the loan amount or mortgage-insurance cost, while a larger down payment can reduce borrowing costs but also reduce your cash cushion.
Step 3: Compare down-payment options
You do not always need 20% down. The CFPB notes that some mortgage options allow low down payments, while eligible VA or USDA borrowers may have different requirements. A 20% down payment can still be useful because it often avoids conventional PMI and reduces the amount borrowed.
Keep closing costs, moving expenses, near-term repairs, and emergency savings separate from the down-payment decision.
Step 4: Shop lenders and review the Loan Estimate
Rates and fees vary by lender and borrower. Compare offers using the same loan amount, term, points, and lock period. After applying, the standardized Loan Estimate helps you compare interest rate, projected payments, closing costs, lender credits, and cash to close.
Step 5: Get pre-approved, but treat it as a financing step
A pre-approval can help you understand the range a lender may consider based on the information reviewed. It is not a guarantee of final approval, and it should not replace your own affordability analysis. Rates are not automatically locked just because you are pre-approved; ask the lender whether a rate is locked and for how long.
Step 6: Evaluate the property as carefully as the loan
- Separate must-have features from preferences.
- Review property taxes, insurance, HOA dues, and known maintenance needs.
- Consider commute, location, resale factors, and neighborhood conditions.
- Understand what inspections, disclosures, and contingencies apply in your transaction and state.
Step 7: Review closing costs and cash to close
Your down payment is not the same as cash to close. The Loan Estimate and final Closing Disclosure separate loan costs, other closing costs, prepaids, escrow funding, credits, deposits, and other adjustments. For covered mortgages, the lender generally must provide the Closing Disclosure at least three business days before closing.
Step 8: Recheck your finances before closing
Large new debts, changes in income or employment, or unexplained changes in available funds can affect underwriting. Ask your lender before taking on significant new credit or making financial changes while the loan is being finalized.
Useful first-time buyer resources
- CFPB Owning a Home: loan shopping, Loan Estimate, Closing Disclosure, and homebuying worksheets.
- HUD: homebuyer education and information on FHA-related programs.
- State and local housing agencies: assistance programs vary by location and eligibility.
First-time buyer checklist
- Set a monthly housing budget.
- Check credit reports and calculate DTI.
- Choose a down-payment range while preserving cash reserves.
- Compare multiple lender offers on equivalent terms.
- Review the Loan Estimate carefully.
- Research the property-specific tax, insurance, HOA, and maintenance costs.
- Understand inspection and contract contingencies.
- Compare the final Closing Disclosure with the earlier estimate.