How to Buy a Home: 5 Steps to Take Before You Start House Hunting

Posted on July 15, 2025 |

Updated July 15, 2025

By Michelle Lambright Black

Buying a home is one of the biggest financial decisions many of us will ever make. And while the home-buying process can feel overwhelming at times, it’s also an exciting opportunity to build stability, wealth, and a place to call your own.

Whether you’re a first-time home buyer or it’s been several years since your last move, the current mortgage market may offer some unique advantages. Interest rates are fluctuating but have started to ease slightly in some areas, and housing inventory is slowly improving in many locations. That said, market conditions can shift quickly. That’s why the smartest thing you can do right now is focus on what you can control: your credit, your finances, and your home buying plan.

Here’s a step-by-step guide to help you prepare (and avoid surprises) on your journey to homeownership.

1. Know Your Credit (and Why It Matters)

One of the first factors mortgage lenders evaluate when you apply for a home loan is your credit. That includes your credit scores (most commonly your FICO® Scores) and your credit reports from all three major credit bureaus—Equifax, Experian, and TransUnion.

To get started, you’ll want to review your FICO Scores and your credit reports to know where you stand. Most mortgage lenders require a minimum FICO Score of at least 620 to qualify for a conventional loan. However, some government-backed loans may allow for lower credit scores. Of course, higher credit scores are even better as they may help you qualify for more attractive borrowing terms and lower interest rates.

CreditWriter Tip:

You can check your credit reports for free at AnnualCreditReport.com, and you can access your FICO Score through several banks, credit card companies, or directly at myFICO.com

If your credit isn’t where you want it to be, don’t panic. Some simple actions like paying down credit card balances or disputing errors on your credit report may help you build better credit over time.

Related: What Is Credit Utilization and Why Is It So Important for Your Credit Scores?

2. Build Your Down Payment and Budget for Closing Costs

Next, it’s important to focus on the money you’ll need to purchase a home. One of the most important steps in preparing to buy a home is saving for your down payment and closing costs.

The amount of money you need to purchase a home depends on several factors, including the type of loan you choose. For example:

VA loans typically require no down payment.
FHA loans may allow for down payments as low as 3.5%.
Conventional loans often require 3%–20%, depending on your financial profile.

According to the National Association of Realtors, the median down payment on a home in 2024 was around 18% or 9% for first-time home buyers.¹ You’ll also need to budget for closing costs, which typically range from 2% to 5% of your home’s purchase price and may include appraisal fees, title insurance, taxes, and more. Some buyers qualify for down payment assistance programs or can negotiate seller concessions. So, it’s worth exploring your options early.

3. Know What You Can Afford

Mortgage rates and home prices matter. But the detail that matters most when you’re shopping for a home is the purchase amount you can actually afford without stretching yourself too thin.

Before you start scrolling through home listings or walking into open houses, use a mortgage calculator to figure out your ideal monthly payment based on your income, debt, and savings. Be sure to factor in:

Property taxes
Homeowners insurance
Private mortgage insurance (PMI), if applicable
HOA fees, if relevant
Maintenance and repair costs

You can use tools like the myFICO Home Affordability Calculator to get a rough idea of your home buying range. Knowing your numbers ahead of time can help you stay grounded when emotions run high during your search.

4. Get Preapproved for a Mortgage

Once your credit is in good shape and you have a solid budget, it’s time to talk to lenders. A mortgage preapproval is a letter from a lender stating how much they’re tentatively willing to loan you for a home purchase based on your credit, income, assets, and debts.

Getting preapproved can give you a competitive edge when you make an offer, and helps ensure you’re only shopping for homes within your budget. When seeking preapproval:

Compare offers from at least three lenders to find the best rate and terms.
Watch out for fees and ask about total closing costs.
Request a Loan Estimate to easily compare mortgage options.

According to Fannie Mae, shopping around for a mortgage could save you thousands of dollars over the life of your loan. And if you don’t qualify right away, ask the lender why. Getting denied for a loan can be a big let down. But understanding the lender’s reasons gives you the power to make changes and try again in the future.

5. Work with a Trusted Real Estate Agent

The right real estate agent can make a world of difference during your home search. A trustworthy and experienced agent can help you navigate listings, negotiate offers, and guide you through inspections, appraisals, and closing paperwork.

Look for an agent who:

Has experience in your target area
Understands your goals and budget
Is willing to communicate clearly and consistently

If you don’t already know a great real estate agent, consider asking friends, family members, or your loan officer for referrals. And don’t be afraid to ask questions. A great agent should make you feel empowered and informed—never overwhelmed or pressured.

Final Thoughts: Plan Now, Buy Smarter Later

Buying a home is a big deal. But it doesn’t have to be a scary one. The earlier you start planning, the more time you’ll have to build your credit, save your money, and make confident, informed decisions along the way.

Need help getting organized?

👉 Download the free CreditWriter.com Homebuying Prep Worksheet to track your credit, budget for your down payment, and plan your next steps with confidence.

With the right action plan, your dream of homeownership could be closer to reality than you think.

Michelle Lambright Black is a credit, money, and travel expert with 20 years of experience helping real people make smart, informed decisions about their finances. She’s a nationally published writer, speaker, and credit expert witness with deep expertise in credit reporting, scoring, credit cards, loans, identity theft, budgeting, and debt elimination. Her work appears regularly in top outlets including Forbes Advisor, Reader’s Digest, USA Today Blueprint, Newsweek Vault, Yahoo! Finance, The Points Guy, Fortune Recommends, Buy Side from The Wall Street Journal, FICO, Experian, and more. Michelle also enjoys sharing practical shopping tips and smart travel strategies for families—especially when it comes to maximizing credit card rewards, points, and miles. Connect with Michelle on Instagram (@CreditWriter) and Twitter (@MichelleLBlack).

Sources

1. Nar.realtor.com. https://www.nar.realtor/newsroom/first-time-home-buyers-shrink-to-historic-low-of-24-as-buyer-age-hits-record-high