Steps for First-Time Home Buyers: From Budget to Keys
Home and Family
| 02.10.2025
Buying your first home is an exciting milestone that may feel overwhelming if you’re unsure where to start. Whether you’re dreaming of a cozy starter home or planning for a space to grow, taking it one step at a time will help simplify the process. So, what does home-buying really look like?
Start by identifying your housing needs and preferences before searching for properties that match your criteria; finding a trusted lender might make all the difference. A lender will help you calculate how much you are able to afford and be an ally throughout the entire home-buying journey, ensuring you’re prepared before ever making an offer. Truly understanding your budget and loan options, and even getting pre-approved, puts you in a better position to navigate the competitive housing market and secure a home you love.
With your finances in order, the real search begins, and once you’ve found a potential home you’ll need to make an offer. Only after your offer is accepted will you finalize financing with your lender. The closing stage follows the approval of your mortgage loan, at which time you’ll complete the purchase and take ownership of your new property.
Remember to factor in not only the mortgage payments but other applicable costs like property taxes, homeowner's insurance, and potential maintenance. Additionally, be sure to account for one-time expenses such as closing costs and moving fees. Having a clear understanding of your financial limits helps prevent future strain and ensures you will be able to comfortably afford your new home.
Setting realistic expectations is crucial to your own success, and the pre-approval process often gives a clear idea of your unique circumstances. A pre-approval involves the lender reviewing your financial information, including income, credit score, and debt, to determine how much you may qualify to borrow. This allows your lender to understand your finances upfront—how much house you are able to afford, what loan programs are available to you, and how different scenarios might impact your budget.
Once approved, you’ll receive a pre-approval letter, which shows sellers and realtors that you’re a serious buyer. In today’s competitive market, a pre-approval letter is more than helpful. It might give you an edge over other buyers by demonstrating that you’ve already done the financial groundwork, making your offer stand out to sellers.
Additionally, be sure to research and review any available down payment assistance programs. Many state and local governments offer grants or low-interest loans to first-time home buyers to help cover the down payment and closing costs. These programs often have specific eligibility criteria, so be sure to approach them with a keen eye.
In general, a higher down payment may lead to potential long-run benefits such as reducing your monthly mortgage payments or even eliminating the need for private mortgage insurance (PMI). PMI is a type of insurance that protects the lender if a borrower defaults on their conventional loan. This type of insurance is required for conventional loans when a buyer makes a down payment of less than 20% of the home’s purchase price. Although PMI adds to your monthly mortgage costs, it helps make homeownership more accessible by allowing buyers to purchase with a smaller upfront investment. Keep in mind that in some cases PMIs premiums may be removed once you’ve built enough equity in your home, usually after reaching 20-22% equity. As you consider your home-buying needs, be sure to balance the advantages of a lower down payment option with the benefits of paying more upfront.
Understanding whether you’re experiencing a buyer's or seller's market might impact your strategy. In a seller's market, where demand exceeds supply, you may face stiff competition and need to act quickly once you find a home you like. Conversely, you may have greater negotiation power and selection in a buyer's market where there are more available homes than there are buyers.
Be flexible and prepared to adapt to changing conditions. If home prices are high, you might consider expanding your search to nearby neighborhoods or being open to different types of homes. Make informed decisions throughout your home-buying journey by staying patient and keeping your long-term goals top of mind.
Visit Merchants Bank today to speak with a mortgage lender or start the application process online by choosing a lender.
Start by identifying your housing needs and preferences before searching for properties that match your criteria; finding a trusted lender might make all the difference. A lender will help you calculate how much you are able to afford and be an ally throughout the entire home-buying journey, ensuring you’re prepared before ever making an offer. Truly understanding your budget and loan options, and even getting pre-approved, puts you in a better position to navigate the competitive housing market and secure a home you love.
With your finances in order, the real search begins, and once you’ve found a potential home you’ll need to make an offer. Only after your offer is accepted will you finalize financing with your lender. The closing stage follows the approval of your mortgage loan, at which time you’ll complete the purchase and take ownership of your new property.
Building a Strong Financial Plan & The Pre-Approval Process
Both a proper plan and a thoughtful look at your finances are essential before diving into the home search. Begin by examining your current financial status, reviewing your income, monthly expenses, and any existing debts. Work with your mortgage lender or consider using online tools to identify a comfortable price range for your upcoming home purchase.Remember to factor in not only the mortgage payments but other applicable costs like property taxes, homeowner's insurance, and potential maintenance. Additionally, be sure to account for one-time expenses such as closing costs and moving fees. Having a clear understanding of your financial limits helps prevent future strain and ensures you will be able to comfortably afford your new home.
Setting realistic expectations is crucial to your own success, and the pre-approval process often gives a clear idea of your unique circumstances. A pre-approval involves the lender reviewing your financial information, including income, credit score, and debt, to determine how much you may qualify to borrow. This allows your lender to understand your finances upfront—how much house you are able to afford, what loan programs are available to you, and how different scenarios might impact your budget.
Once approved, you’ll receive a pre-approval letter, which shows sellers and realtors that you’re a serious buyer. In today’s competitive market, a pre-approval letter is more than helpful. It might give you an edge over other buyers by demonstrating that you’ve already done the financial groundwork, making your offer stand out to sellers.
Investigating Mortgage Options with Merchants Bank
As a first-time home buyer, it's essential to explore the various mortgage options available to you before making the best choice for your search. At Merchants Bank, our experienced mortgage lenders are here to guide you every step of the way. We offer competitive rates, flexible terms, and personalized guidance to ensure you find the right loan for your situation. Our home loan options include conventional mortgages, FHA loans, VA loans, and even medical professional home loans. Don’t worry, we’ll help answer any questions about needs and qualifications while making sure you pick the best option for your purchase.- Conventional Mortgages: Standard loans that are not guaranteed or insured by the government. A conventional mortgage typically requires good credit and a down payment, with options existing for as little as 3% down.
- FHA Loans: A loan backed by the Federal Housing Administration. FHA loans are designed for borrowers with lower credit scores or smaller down payments, often as low as 3.5%.
- VA Loans: An option available to eligible veterans, active-duty service members, and some military spouses. VA loans are backed by the Department of Veterans Affairs and offer their own, specific set of benefits.
- Medical Professional Home Loans: Tailored for doctors and other medical professionals. A medical professional home loan features benefits like a low, or no down payment at all.
Grasping Down Payments & Private Mortgage Insurance
The down payment is often one of the most significant hurdles for first-time home buyers. While many conventional loans suggest a 20% down payment, there are numerous alternatives to ease this requirement. In any case, establish a dedicated savings account specifically for your down payment and consider setting up automatic transfers to ensure consistent contributions. Cutting back on non-essential spending and creating a detailed budget will also help to accelerate your savings process.Additionally, be sure to research and review any available down payment assistance programs. Many state and local governments offer grants or low-interest loans to first-time home buyers to help cover the down payment and closing costs. These programs often have specific eligibility criteria, so be sure to approach them with a keen eye.
In general, a higher down payment may lead to potential long-run benefits such as reducing your monthly mortgage payments or even eliminating the need for private mortgage insurance (PMI). PMI is a type of insurance that protects the lender if a borrower defaults on their conventional loan. This type of insurance is required for conventional loans when a buyer makes a down payment of less than 20% of the home’s purchase price. Although PMI adds to your monthly mortgage costs, it helps make homeownership more accessible by allowing buyers to purchase with a smaller upfront investment. Keep in mind that in some cases PMIs premiums may be removed once you’ve built enough equity in your home, usually after reaching 20-22% equity. As you consider your home-buying needs, be sure to balance the advantages of a lower down payment option with the benefits of paying more upfront.
Steering Through the Housing Market
Our current housing market presents unique challenges as well as opportunities. As a first-time home buyer, stay informed about market trends like fluctuating interest rates and the availability of homes in your desired area. Don’t hesitate to attend local open houses or follow real estate news for a sense of what’s happening in your market.Understanding whether you’re experiencing a buyer's or seller's market might impact your strategy. In a seller's market, where demand exceeds supply, you may face stiff competition and need to act quickly once you find a home you like. Conversely, you may have greater negotiation power and selection in a buyer's market where there are more available homes than there are buyers.
Be flexible and prepared to adapt to changing conditions. If home prices are high, you might consider expanding your search to nearby neighborhoods or being open to different types of homes. Make informed decisions throughout your home-buying journey by staying patient and keeping your long-term goals top of mind.
Visit Merchants Bank today to speak with a mortgage lender or start the application process online by choosing a lender.
Loans are subject to credit approval.
