A Step-by-Step Guide to Buying Your First Home

Buying your first home is an exciting step toward establishing roots, building equity and achieving the American dream. What’s more, being a first-time homebuyer —someone who hasn’t owned a home in the past 3 years—means you have a key advantage in the housing market. You may have access to special programs like no-down-payment loans^{Footnote 1} or favorable terms that can make homeownership more affordable. And, military members and Veterans may have even more advantages, including access to VA loans with competitive rates. 

But before you start house hunting or talking to mortgage lenders, it’s important to make sure you’re ready to start the home-buying process. Throughout this detailed guide, we’ll review the following steps involved in buying your first home:

• Step 1: Determine if you’re ready to buy your first home
• Step 2: Figure out what you can afford
• Step 3: Think about what’s important to you
• Step 4: Decide which type of mortgage loan you want
• Step 5: Get mortgage loan quotes from several lenders
• Step 6: Get preapproved for a mortgage
• Step 7: Find a real estate agent
• Step 8: Research homes within your budget
• Step 9: Make an offer on the house you want
• Step 10: Secure your mortgage loan
• Step 11: Get a home inspection
• Step 12: Go to closing
• Step 13: Get ready to move into your new home
• First-time homebuyer tips for active duty servicemembers and Veterans

Step 1: Determine if you’re ready to buy your first home

Before you start browsing home listings or exploring mortgage options, make sure you’re in a strong position to transition to homeownership. Take time now to evaluate your situation so you can move forward with confidence when you find the best home for you. 

Here are several factors to consider.

How much money you have available

Your down payment is only one aspect of buying property. There are plenty of other upfront expenses that come with homeownership, so your savings should cover more than just your down payment. 

Some loans do offer low or no-down-payment options^{Footnote 1} (including VA loans), but you still should plan to save additional money for closing costs (3%-6% of loan amount), moving expenses, initial repairs, emergency funds and any needed furniture or appliances. 

That means your total savings goals might be substantially larger than your target home price depending on your loan type, location, condition of the home and your individual needs.

Your home-buying budget, income and expenses

Your budget needs to support all aspects of homeownership, not just your new mortgage payment. Consider your monthly military income (including Basic Allowance for Housing (BAH) for servicemembers), job stability and current debts. Look ahead at future home-related expenses like property taxes, insurance, utilities, maintenance and possible HOA fees. 

• A good rule of thumb: Your total monthly home expenses—your monthly mortgage payment, property taxes, home insurance and any HOA fees—shouldn’t exceed 28% of your gross monthly income.

Your current credit score

A solid credit score may open doors to better mortgage rates and terms. Many lenders want you to have a score of at least 620 for conventional loans, with the best rates typically being offered to applicants with credit scores above 720.

To help boost your score and chances of getting a more favorable mortgage rate, focus on making on-time payments and keeping credit card balances low. A higher credit score could help save you money over the life of your loan.

The current housing market

Your local housing market affects your buying power. Research current home prices, mortgage rates and competition from other buyers in your target location. If you’re a servicemember, check out the market near your duty station so you can make informed decisions about your purchase.

How long you plan to live in your new home

If possible, consider staying at least 3 to 5 years in your new home so you can build equity and potentially offset buying costs. Military members should factor in Permanent Change of Station (PCS) timelines and evaluate whether keeping the home as a rental property makes sense. Think about your career goals and family plans, too.

Your readiness to maintain a home

You’ll need to prepare to handle regular upkeep and repairs, which means committing time and money to maintaining your home. Military members should also plan for maintenance during deployments. If you need assistance with these tasks, family members or neighbors may be willing to pitch in. Alternatively, consider working with a property management service to help keep things running smoothly.

Step 2: Figure out what you can afford

After you evaluate your readiness to buy, determine a realistic price range for your home search. Figure out how much home can you afford by getting familiar with all the costs involved. This knowledge will help you shop with confidence and avoid financial surprises.

Here are some of the typical expenses associated with homeownership. Factor these costs into your total budget and how much home you can afford.

Down payment

Your down payment may vary based on loan type and your situation. Conventional loans typically require 3%-20% down, while VA loans for servicemembers often need no down payment. FHA loans start at 3.5% down, and first-time homebuyer programs can help with down payment costs.

Private mortgage insurance

Monthly mortgage insurance costs depend on your down payment amount. Conventional loans typically require private mortgage insurance (PMI) if you put down less than 20%. While VA loans don’t require PMI, they do have a one-time funding fee (which can be waived for disabled Veterans). 

Property taxes and homeowners’ insurance

Property taxes and home insurance vary by location and property type. Research the typical tax rates in your target neighborhoods to get an idea of how much those bills might be. Larger homes, historic districts or flood zones might mean higher insurance premiums. These costs often get folded into your monthly mortgage payment.

Renovations or repairs

Your home repair budget should reflect the property’s condition. New homes might need minimal repairs, while fixer-uppers require a bigger investment. Plan for both immediate repairs and long-term maintenance by saving 1%-4% of your home’s value for annual upkeep.

Additional expenses

Total housing expenses often include utilities, HOA fees (if applicable), regular maintenance and unexpected repairs. Build a comfortable buffer into your budget to handle all these costs while maintaining your lifestyle and savings goals.

Step 3: Think about what’s important to you

Buying your first home is a major investment. Before you start house hunting, take time to identify your must-haves and nice-to-haves. Prioritizing these items helps you focus your search and make better decisions when evaluating properties.

The home’s location

Consider commute times to work, schools if you have children and proximity to shopping, restaurants and entertainment. Research neighborhood safety, future development plans and local tax rates. For military families, think about how easy it would be to rent out the home if you receive PCS orders.

The property’s size

Your space requirements should match both current and future needs. Beyond the number of bedrooms and bathrooms, think about storage space, parking, home office options and room to grow. Also, consider whether you need a 1-story home for accessibility, a finished basement for extra living space or a large yard for kids and pets.

Your desired lifestyle

Your lifestyle preferences influence the type of home that’s right for you. Think about how much time you want to spend on home maintenance tasks, especially if military service means frequent travel or deployment. For instance, a single-family home may offer more privacy and require more maintenance while a townhome may provide the opposite.

Step 4: Decide which type of mortgage loan you want

Understanding your mortgage options helps you choose the loan that best fits your situation. Each type of mortgage has different loan requirements and benefits, especially for military members and first-time buyers.

• Conventional loan. Traditional mortgages come in 15-year or 30-year terms with fixed or adjustable rates. You’ll typically need a credit score of at least 620 and a down payment of 3%-20%.^{Footnote 2} Opt for a fixed-rate mortgage for predictable payments or an adjustable-rate mortgage if you plan to move or refinance within a few years.
• VA loans. Available to servicemembers, Veterans or eligible spouses, VA loans come with no down payment,^{Footnote 1} competitive rates and no PMI requirement. You’ll need a Certificate of Eligibility and a credit score typically above 620 to qualify. The VA funding fee may be rolled into your loan amount. Some veterans may be waived for the VA funding fee. For example, if you receive VA benefits for a service-related disability, the VA funding fee can be waived. Your Certificate of Eligibility can show your funding fee exempt status.
• FHA loans. Federal Housing Administration loans may work well if you have a lower credit score or smaller down payment. These government-backed loans accept credit scores as low as 580 with 3.5% down, but they require mortgage insurance throughout the loan term.
• Specialty loans. These loan options include USDA loans for rural areas (no down payment required) and renovation loans for fixer-uppers that let you finance both the purchase and repairs. While only applicable in specific circumstances, they can be highly beneficial for homes that qualify. 

Step 5: Get mortgage loan quotes from several lenders

Shopping around for a mortgage helps you find the best available rates and terms. Most lenders expect you to compare offers, so getting multiple quotes within a 14-day period counts as only one credit inquiry.

It’s sometimes helpful to seek out mortgage loan quotes from at least 3 different lenders so you can compare offers effectively. Request quotes on the same day since mortgage rates can change daily. 

Look at each lender’s interest rate, APR, estimated closing costs, lender fees and points. For VA loans, find out if the lender has experience with military borrowers. Compare quotes and make sure you’re considering all expected costs (not just the percentage of the interest rate). 

Step 6: Get preapproved for a mortgage

Getting preapproved shows sellers you’re a serious buyer. A preapproval letter can give you a clear budget and can help your offer stand out in a competitive market. 

The mortgage preapproval process involves a thorough review of your finances. You’ll need to present recent pay stubs, 2 years of W-2s and tax returns and bank statements to your lender. Military members should include their Certificate of Eligibility for VA loans and any BAH documentation. Self-employed buyers typically need 2 years of business tax returns. 

After receiving documentation, lenders will check your credit, verify your income and employment and calculate your debt-to-income ratio. If everything checks out, they’ll issue you a preapproval letter that you can present to sellers when submitting an offer.

A preapproval represents the maximum amount you can borrow when applying for a mortgage. Consider getting preapproved for less than your maximum so you can keep your monthly payments more comfortable. That may leave room in your budget for other homeownership costs.

Step 7: Find a real estate agent

Working with the right real estate agent makes your home-buying journey smoother. A good agent serves as your guide, negotiator and local market expert. Look for someone who has experience helping first-time homebuyers, a strong knowledge of your target neighborhoods and a communication style that fits yours. Military families should talk with a Military Relocation Specialist who understands VA loans, PCS timelines and military-specific needs.

Your agent relationship works best with clear expectations, so talk to a few agents before choosing which one you’ll work with. Your agent interview questions should cover their experience, availability and processes. Request references from recent first-time buyers they’ve helped and ask military families about their experience if you’re an active-duty buyer.

Step 8: Research homes within your budget

When searching for a home, it’s important to think about your must-haves. Create a checklist of non-negotiable features (like number of bedrooms) versus nice-to-have amenities (like a finished basement).

Be sure to account for your financial limits, too. You can use your preapproval amount to guide your maximum home price. Search for homes at that threshold and below it to leave room for negotiations. 

A good house-hunting strategy should entail both online and in-person processes. Use real estate websites and apps to preview homes and neighborhoods. Your agent can also set up alerts for new listings and access off-market properties. 

Photos don’t always paint a clear picture, so be sure to visit any properties you’re seriously considering. For military buyers relocating from out of state, virtual tours and video walkthroughs can help you narrow down options before an in-person visit.

Buying a new home is more than just investing in property. You’re searching for the best place to build your life. Research the area’s property values and any future development plans. Consider lifestyle factors like school quality, commute times and nearby amenities. 

Step 9: Make an offer on the house you want

When you find the right home, making a strong offer helps you stand out to sellers. Your real estate agent will guide you through this crucial step.

Your offer package should include the following key components:

• the purchase price
• your earnest money amount, which is typically 1%-3% of the offer price
• your desired closing date
• any contingencies that protect your interests

Some common contingencies may include:

• a home inspection to verify the property’s condition
• an appraisal to ensure the home’s value matches the sale price
• financing to protect your earnest money if the loan falls through
• a military clause that addresses potential PCS orders (for military members)

In competitive markets, your offer strategy might also include a personal letter to the seller. Active duty military, Veterans and their families can share their service story. Many sellers appreciate the opportunity to help servicemembers find a home. Your agent should be able to advise whether this approach works well in your housing market.

Step 10: Secure your mortgage loan

Once your offer is accepted, it’s time to officially apply for a mortgage. The mortgage application process builds on your preapproval. Your lender will request updated versions of financial documents, including recent pay stubs and bank statements. For VA loans, your Certificate of Eligibility and DD-214 (or statement of service for active duty) must be current. To avoid processing delays, be sure to respond quickly to all requests for documentation.

A typical loan processing timeline usually takes 30-45 days. Here’s what typically happens during this time frame:

1. The lender orders a home appraisal.
2. Underwriters review your complete financial profile.
3. A title search confirms the property’s ownership history.
4. You receive and review your loan estimate.
5. Your interest rate can be locked in.

Your chief responsibility during processing is to avoid any major financial changes. Keep documentation of any large deposits to your accounts. Stay in close contact with your loan officer about any questions or concerns that arise.

Step 11: Get a home inspection

A professional home inspection helps you understand the property you’re purchasing. This important step can save you from expensive surprises down the road. Make sure you’re working with a licensed home inspector who can provide a complete review of the condition of the property. 

Items that should be inspected include:

• foundation and structural elements
• roof condition and expected lifespan
• electrical and plumbing systems
• HVAC system efficiency and age
• signs of water damage or mold
• insulation and ventilation
• major appliances that “convey” (are included in the sale)

If something pops up on the inspection report, you have a few options. You can request repairs (curing) from the seller before closing. You could also attempt to negotiate a lower selling price to cover any needed work. 

If the inspection uncovers a serious problem, you could choose to walk away from the sale altogether. If you have an inspection contingency in your contract, it may protect you in this situation.

Step 12: Go to closing

Going to “closing,” or “settlement,” is the time when you sign all the home-buying paperwork and make the deal official. A few days before your closing date, you’ll receive your closing disclosure to review. You’ll also want to complete a final walkthrough 24 hours before closing to verify the current condition of the home and see any repairs that were completed. 

Closing day transforms you from homebuyer to homeowner. Plan to spend about 2 hours reviewing and signing closing paperwork and paying your closing costs (bring a certified check or wire transfer confirmation). Then, you’ll receive the keys to your new home. 

Remember to bring your government-issued photo ID and proof of insurance with you to the closing. Some closings also offer electronic signing options—if you’re interested in this, ask your lender if it’s available in your situation.

Step 13: Get ready to move into your new home

A smooth move starts with good planning, especially if you’re working within a military relocation timeline.

You should start working through your moving checklist about a month before moving day, which may take place before you sign your closing paperwork, depending on your contract details. 

You’ll also need to decide whether you’ll hire a professional mover (military members, check your PCS moving benefits) and start gathering packing materials. 

Schedule to have your new utility services connected the day before your move, if possible. Also, update your address with the services you’ll continue using after the move, including:

• banks, credit unions and credit card companies
• insurance providers
• vehicle registration and driver’s license
• employer and payroll
• subscription services
• USPS for mail forwarding

Before the moving trucks arrive at your new home, tackle basic home preparation tasks. For example, you can change locks, clean up and check smoke detectors. If possible, schedule painters or carpet cleaners to work in the house before you move in your belongings. 

We’re here to help you buy your first home

Buying your first home is an exciting experience, and Navy Federal Credit Union is here to support you every step of the way. Whether you need to build your credit score, increase your savings or explore mortgage options, our team can help you work toward your homeownership goals. 

Check out our MakingCents resources on home buying, credit scores and savings to learn more, or connect with our mortgage team to discuss your home loan options.