What credit score do I need to buy a house?

Conventional loans typically require 620 or higher; FHA loans accept 580 or higher. However, the better your score, the lower your interest rate. A 750+ score will unlock the best terms. If you're below 620, spend 3–6 months rebuilding credit before applying—the interest savings alone justify the wait.

Can I negotiate closing costs?

Some fees are fixed (title insurance, recording fees, transfer taxes set by law). Others—lender origination fees, attorney fees, pest inspection—can be negotiated or shopped. Ask the seller to cover closing costs in the offer, or shop rates aggressively. On a $400,000 home, negotiating 0.5% off closing costs saves $2,000.

What happens if the appraisal comes in low?

If the appraised value is below your purchase price, the lender won't fund the gap. You have three options: renegotiate the price down to match the appraisal, pay the difference in cash, or cancel under the appraisal contingency. The seller has negotiating power here; proceed cautiously.

Should I max out my down payment?

Not necessarily. A smaller down payment preserves liquidity for reserves and home repairs. Put down the minimum required to avoid PMI (Private Mortgage Insurance, typically 20% down), then keep reserves of 3–6 months' expenses. This balance gives you financial flexibility while building equity.

How to Buy Your First House: A Step-by-Step Guide for First-Time Buyers

Buying your first home requires more than enthusiasm—it demands clear-eyed financial planning, understanding of credit mechanics, and knowledge of the closing process. This guide walks through the exact steps, real costs, and verification checkpoints from budgeting to keys in hand.

Start with Honest Budgeting and Credit Review

Before contacting a lender, assess what you can actually afford. The traditional rule of thumb: your housing costs (mortgage, taxes, insurance) shouldn't exceed 28% of gross monthly income, and total debt shouldn't exceed 36%. This 28/36 rule isn't law, but it reflects how lenders evaluate risk. If you earn $5,000 monthly, you should target a housing payment around $1,400 or less.

Pull your credit report from all three bureaus (Equifax, Experian, TransUnion) through annualcreditreport.com—your federally mandated free source. Dispute any errors before applying for a mortgage; even small mistakes can cost you 0.25% in interest rate, which adds tens of thousands in payments over 30 years. A buyer with a 750 credit score will qualify for substantially better terms than someone at 650.

Review the last two years of tax returns and recent pay stubs. Lenders verify income, and self-employed buyers will face extra scrutiny—be ready with profit-and-loss statements and potentially two years of returns. Gaps in employment, late child support payments, or recent defaults will trigger manual underwriting and likely cost you access to the best rates. The Consumer Financial Protection Bureau's (CFPB) preparation guide outlines these financial readiness steps in detail.

Your housing costs shouldn't exceed 28% of gross monthly income, and total debt shouldn't exceed 36%—the 28/36 rule that defines lending boundaries.

Build Your Down Payment and Understand Closing Costs

Down payment requirements vary sharply by loan type. Conventional loans typically demand 3–20% down, though borrowers with excellent credit and high income can sometimes access 3% options. FHA loans require just 3.5% down if your credit score is 580 or higher, a significant advantage for first-time buyers with limited savings. VA loans (for eligible veterans) require 0% down; USDA loans (for rural properties and qualifying buyers) also offer no-down-payment options.

Closing costs—the fees paid at the closing table—average 2–5% of the home's purchase price. For a $400,000 home, expect $8,000 to $20,000 in total closing costs. This includes the lender's origination fee (typically 0.5–1% of the loan amount), title insurance, appraisal ($368 average), credit report fees, property taxes, homeowner's insurance escrow, and transfer taxes. Some costs are negotiable; others are fixed by law. The Loan Estimate, required within three business days of application, breaks down every charge—scrutinize it.

A critical calculation: down payment plus closing costs plus 3–6 months of reserves (emergency fund after purchase) is your true out-of-pocket requirement. A buyer purchasing a $350,000 home with 5% down needs $17,500 down, plus $9,000–$15,000 closing costs, ideally plus $12,000–$25,000 reserves. This totals roughly $40,000 before you own anything. Many states and local organizations offer down payment assistance programs, with an average of $18,000 in assistance available. Search HUD's directory for programs specific to your location.

Get Preapproved and Compare Loan Offers

Preapproval is not the same as prequalification. A prequalification is a rough estimate; preapproval involves actual verification of income, employment, and credit. Preapproval shows sellers you're serious and gives you a hard spending cap. Get preapproved before house hunting, not after you've found a house.

Debt-to-income (DTI) ratio is the gatekeeper. Lenders calculate this by dividing your total monthly debt payments (mortgage, car loans, credit cards, student loans) by your gross monthly income. Conventional loans typically cap DTI at 43–50% depending on the loan program; FHA loans allow up to 43% back-end DTI with compensating factors. If you have $2,000 in monthly debt and earn $5,000 gross, your DTI is 40%—you can handle a $600–$700 mortgage payment maximum.

Shop loan offers from at least three lenders. Use the CFPB's Loan Estimate and Closing Disclosure Explainers to decode the paperwork. Rates shift daily; locking in even 0.125% lower saves $15,000 over 30 years on a $350,000 loan. Compare not just rate but origination fees, discount points, and whether the lender allows rate locks. Conventional, FHA, VA, and USDA loans have different strengths—run numbers for each if you're eligible.

Make an Offer and Navigate Inspection and Appraisal

Once you've found a house and are preapproved, your real estate agent will draft an offer. Include inspection and appraisal contingencies—these protect you if the house has structural problems or appraises below the purchase price. A contingency means the deal can fall through without penalty if these conditions aren't met. Never waive these in a competitive market—unexpected foundation cracks or a low appraisal can cost $10,000–$50,000.

After your offer is accepted, you typically have 7–14 days to order a home inspection (average cost: $343–$414). The inspector spends 2–4 hours examining the roof, foundation, HVAC, plumbing, electrical, and major systems. Request a written report and attend if possible. Cosmetic issues are yours to live with; major repairs (roof replacement, HVAC failure, foundation damage) are negotiation points. Some sellers credit closing costs; others reduce price; sometimes you walk away.

The lender orders an appraisal to confirm the home is worth what you're paying. This is non-negotiable; if the appraisal comes in low, the lender won't loan the full amount. You then either renegotiate the price, pay the difference in cash, or cancel under your appraisal contingency. Appraisals average $368 and take 5–7 business days. If it comes in low, you have leverage—ask the seller to reduce price to match the appraisal, not the sales price.

Closing costs average 2–5% of the home's purchase price; a $400,000 home costs $8,000–$20,000 at closing before you own it.

Secure Homeowner's Insurance and Final Underwriting

Your lender will require homeowner's insurance before closing. Shop this separately from your mortgage lender—insurance rates vary dramatically. Typically, insurance costs 0.5–1.2% of the home's value annually. A $400,000 home might cost $2,000–$4,800 per year. Get quotes from at least three insurers, and request discounts for bundling auto insurance or installing safety systems.

Final underwriting occurs after inspection and appraisal. The lender digs deeper: verifying employment one final time, checking for new credit inquiries or debt, and ensuring your financial situation hasn't changed. This is when unsecured debt (credit cards, personal loans) becomes a problem. New car loans or opening a new credit card before closing can tank your approval. Keep your finances static. Answer every verification request promptly; delays can push closing back weeks.

The Clear to Close decision comes 3–5 business days before closing. This means the lender has approved the loan and you're cleared to proceed. If you're denied at this stage, it's usually due to missed documentation or a financial change. Review your Closing Disclosure (the final version of all costs and loan terms) at least three days before closing to catch errors.

Closing Day: Review, Sign, and Take Ownership

Closing happens at a title company or attorney's office. You'll sign the Promissory Note (your legal promise to repay), the Deed of Trust (gives the lender a claim on the home if you don't pay), and the Closing Disclosure. Bring a photo ID and a cashier's check or wire transfer for your down payment and closing costs. Never bring a personal check or cash; lenders require verified funds.

The closing agent will walk through each document and explain your obligations. Ask questions—this is your moment to clarify anything unclear. Common closing costs on the settlement statement include title insurance (protects against prior ownership claims), recording fees, transfer taxes (1–2% in many states), property taxes (prorated to your purchase date), and homeowner's insurance escrow. A typical closing takes 1–2 hours.

After you sign, funds are wired, and the deed is recorded at the county level, the home is legally yours. The title company will typically schedule your keys handoff within 24 hours. At that point, you're the owner. The entire process from preapproval to keys averages 30–45 days if there are no complications.

The Timeline and Cost Breakdown Table

Here's what to expect from application to ownership:

| Phase | Typical Duration | Key Costs | Checks | |-------|------------------|-----------|--------| | Credit review & budgeting | 2–8 weeks | Free (credit report) | Credit score, DTI calculation | | Preapproval | 3–5 business days | $0–$150 (app fee, refunded if denied) | Income verification, hard credit pull | | House hunting & offer | 2–12 weeks | Agent commission (typically 5–6%, paid by seller) | Inspection contingency in writing | | Home inspection | 1–2 weeks | $343–$414 | Roof, HVAC, foundation, plumbing | | Appraisal ordered | 1–2 weeks | $368 average | Value vs. purchase price match | | Final underwriting | 5–10 business days | $0–$500 (various verifications) | Employment re-verification, no new debt | | Insurance shopping | 1–2 weeks | $2,000–$4,800 annually | Quotes from ≥3 insurers | | Clear to Close | 3–5 business days | $0 | Lender final approval | | Closing | 1 day | $8,000–$20,000 (2–5% of purchase price) | Down payment + closing costs wired | | **Total Start to Finish** | **30–45 days (after offer)** | **$40,000–$60,000+ out of pocket** | **Deed recorded = ownership** |

Written by Manclass Editorial Team for Manclass. See our editorial policy for how Manclass is researched and edited.