Nobody Taught You How to Buy a House. So Here You Go

A First-Time Homebuyer’s Guide for People Who Have Absolutely No Clue Where to Start

So, you want to buy your first house.

Congratulations! You’ve officially entered a world where grown adults casually throw around words like escrow, underwriting, earnest money, appraisal, PMI, points, and debt-to-income ratio and somehow expect you to know what they're talking about.

You don't.

And that's completely normal.

High school taught you the mitochondria is the powerhouse of the cell. Very important stuff. But how to qualify for a $350,000 mortgage?

Apparently, we ran out of time.

So, here's what you actually need to know.

STEP 1: PLEASE DON'T START WITH ZILLOW

I know.

Too late.

You've already found the house.

Four bedrooms. Great kitchen. Fenced backyard. You've mentally arranged the furniture, picked your bedroom and invited everyone over for Thanksgiving.

There's just one small problem:

You have absolutely no idea if you can afford it.

Before seriously shopping for homes, start with the mortgage.

A good loan officer will review your income, employment, credit, monthly debts, available funds and financial goals to determine what you can qualify for—and, just as importantly, what you're actually comfortable paying.

That's your pre-approval.

And don't be embarrassed about your finances.

Credit isn't perfect? Tell me.

Student loans? Tell me.

Changed jobs? Tell me.

You have $46 in checking because Amazon apparently delivers happiness overnight?

Definitely tell me.

After more than 20 years in mortgages, I promise you're probably not going to shock me.

I'd much rather know everything upfront and develop a strategy than discover something three days before closing when everyone suddenly needs blood-pressure medication.

STEP 2: UNDERSTAND WHAT A MORTGAGE ACTUALLY COSTS

Your mortgage payment isn't necessarily just principal and interest.

Depending on the property and financing, your total housing payment may include:

Principal + Interest + Property Taxes + Homeowners Insurance + Mortgage Insurance + HOA dues, if applicable.

That's why asking, “What's the rate?” doesn't tell the whole story.

Interest rate matters—a lot—but so does the loan program, mortgage insurance, closing costs, points, taxes and insurance.

Two loans with the same purchase price can have very different monthly payments and upfront costs.

My job isn't simply to quote you an interest rate.

It's to help you understand the entire financial picture.

STEP 3: NO, YOU DON'T AUTOMATICALLY NEED 20% DOWN

Somehow, this myth has survived longer than Blockbuster.

Depending on your qualifications and the property, there are conventional options allowing eligible borrowers to put down as little as 3%. FHA loans can offer another low-down-payment option. Eligible veterans and service members may have VA financing available, and qualified buyers in eligible areas may have USDA options.

There may also be down-payment-assistance programs available depending on your situation and location.

But here's the important part:

The smallest down payment isn't automatically the best option.

And neither is putting 20% down just because your uncle told you that's what he did in 1987.

Maybe keeping $20,000 in savings is more valuable than putting every available dollar into the house.

That's where we compare scenarios.

STEP 4: CASH TO CLOSE IS MORE THAN YOUR DOWN PAYMENT

This one surprises a lot of first-time buyers.

Let's say you're buying a $300,000 house and putting 5% down.

That's a $15,000 down payment.

But that doesn't necessarily mean you only need $15,000.

You may also have closing costs and prepaid expenses associated with the transaction. Those can include things such as lender/title-related charges, appraisal costs, homeowners insurance, prepaid interest and money used to establish escrow accounts for taxes and insurance.

Depending on the transaction, seller concessions, lender credits or other programs may help with some costs.

That's why we discuss cash to close, not simply your down payment.

No one enjoys discovering they need several thousand additional dollars the week before closing.

Surprises are great for birthdays.

Not mortgages.

STEP 5: FIGURE OUT YOUR REAL BUDGET

There's a major difference between:

“I qualify for this payment.”

and

“I actually want this payment.”

Maybe the numbers say you can qualify for a $3,200 monthly housing payment.

But perhaps you want to stay around $2,500 because you enjoy traveling, eating out, going to football games and occasionally walking into Costco for paper towels and leaving $417 poorer.

Tell me.

Your mortgage should fit your life.

Your life shouldn't have to fit your mortgage.

STEP 6: NOW YOU CAN GO HOUSE SHOPPING

This is where your real estate agent really comes into the picture.

Your agent helps identify properties, schedule showings, evaluate homes, structure your offer and negotiate with the seller.

Eventually, you'll find THE ONE.

You'll make an offer.

If it's accepted, congratulations!

Now things get real.

You'll typically provide earnest money, move forward with inspections, finalize your mortgage and start working toward closing.

Meanwhile, your lender begins working through the loan process.

STEP 7: WELCOME TO UNDERWRITING

Underwriting sounds terrifying.

It's really just the lender verifying that everything we've been saying is actually true.

Income.

Assets.

Employment.

Credit.

Debts.

Property.

Documentation.

You may be asked for updated bank statements, pay stubs, explanations or additional documents.

And yes, occasionally you'll think:

“Didn't I already give you this?”

Probably.

Welcome to mortgages.

The important thing is to respond quickly and ask questions when something doesn't make sense.

STEP 8: GET THE HOME INSPECTED

An appraisal and home inspection are not the same thing.

The appraisal primarily deals with the property's value and applicable lender requirements.

The home inspection is about discovering whether the beautiful 1950s bungalow you're obsessed with has plumbing installed sometime during the Eisenhower administration.

An inspector can help identify potential issues so you can make a more informed decision.

Pretty countertops are great.

Working electrical is better.

STEP 9: DON'T DO ANYTHING STUPID BEFORE CLOSING

You've almost made it.

Now is NOT the time to finance a truck.

Don't open three credit cards.

Don't buy $18,000 worth of furniture.

Don't co-sign for your cousin.

Don't move $37,000 between accounts without telling anyone.

And preferably don't quit your job because you've decided to “follow your passion.”

Your lender may verify aspects of your financial situation again before closing.

Until you have those keys, talk to your loan officer before making any significant financial changes.

Please.

My blood pressure appreciates it.

STEP 10: CLOSING DAY

Eventually, underwriting gives the green light, the appraisal is complete, insurance is established and your final numbers are prepared.

You'll receive your closing disclosure and have an opportunity to review the final figures.

Then comes closing.

You sign what feels like approximately 47,000 documents.

Your hand cramps.

Someone explains escrow one more time.

And then…

You get the keys.

You're officially a homeowner.

HERE'S WHAT I REALLY WANT FIRST-TIME BUYERS TO UNDERSTAND

You don't need perfect credit.

You don't necessarily need 20% down.

You don't need to understand every mortgage term.

And you definitely don't need to have everything figured out before calling me.

That's the point of having someone guide you through it.

If you're thinking about buying your first home—even if you're six months or a year away—I'd rather have the conversation early.

Maybe you're ready today.

Maybe we need six months to improve credit, save money or eliminate some debt.

Either way, now we have a plan.

No pressure.

No stupid questions.

No expectation that you're supposed to understand an industry you've never dealt with before.

We'll figure out where you are, where you want to go and what it's going to take to get you there.

And hopefully we'll have a few laughs along the way.

Ryan Guess
Taking the Guesswork out of mortgages since 2005.