The Ultimate Home Buying Guide: From Saving to Mortgage

1 Determine Your Budget

Before house hunting, understand what you can afford:

• Calculate your debt-to-income ratio (should be below 43%)
• Consider the 28/36 rule: No more than 28% of gross income on housing, 36% on total debt
• Factor in property taxes, insurance, and maintenance (1-2% of home value annually)

2 Save for Down Payment & Closing Costs

While 20% down is ideal to avoid PMI, many loans allow as little as 3-5% down. Also save 2-5% for closing costs.

Tips to save faster:

• Set up automatic transfers to a dedicated savings account
• Cut discretionary spending temporarily
• Consider down payment assistance programs

3 Check and Improve Your Credit

Your credit score significantly impacts your mortgage rate. Aim for a score of 740+ for the best rates.

Quick credit boosters:

• Pay all bills on time
• Keep credit card balances below 30% of limits
• Avoid opening new credit accounts before applying for a mortgage

4 Get Pre-Approved for a Mortgage

A pre-approval letter shows sellers you're a serious buyer and helps you shop within your budget.

Documents you'll need:

• Last 2 years of tax returns
• Recent pay stubs (last 30 days)
• Bank and investment account statements
• Photo ID and Social Security number

5 Find the Right Home and Make an Offer

Work with a trusted real estate agent to find homes that meet your needs and budget.

When you find "the one":

• Research comparable sales in the area
• Consider the home inspection contingency
• Be prepared to negotiate on price or terms

6 Choose the Right Mortgage

Compare loan options to find the best fit for your situation:

• 30-year fixed: Lower payments, more interest over time
• 15-year fixed: Higher payments, less interest, builds equity faster
• FHA/VA loans: Lower down payment options
• ARM loans: Lower initial rates that adjust over time