Buying your first home is one of the biggest financial decisions you will ever make. In 2026, median home prices hover around $420,000 nationally, and mortgage rates have settled near 6.5–7.0%. That makes preparation more critical than ever — the difference between a well-prepared buyer and an unprepared one can be tens of thousands of dollars over the life of a loan.
This guide walks you through every step of the home-buying process, from checking your credit score to getting the keys. Each section includes specific 2026 numbers, actionable tips, and common mistakes to avoid.
Step 1: Check Your Financial Readiness
Before you browse listings, answer these three questions honestly:
- Credit score: You need a minimum 620 for a conventional loan, 580 for FHA (3.5% down), or 500 for FHA (10% down). Scores above 740 qualify for the best rates — even a 0.5% rate difference on a $340,000 loan saves $37,000+ in interest over 30 years.
- Debt-to-income ratio (DTI): Lenders want your total monthly debts (including the new mortgage) under 43% of gross income. Calculate yours: add all monthly debt payments, divide by gross monthly income.
- Emergency fund: Keep 3–6 months of expenses in savings after your down payment and closing costs. Buying a home with zero reserves is one of the most common regrets new homeowners report.
Step 2: Save for Down Payment & Closing Costs
The 20% down payment myth stops many first-time buyers. The truth: most first-time buyers put down 6–8%. In 2026, your main options are:
- Conventional loan: As low as 3% down with private mortgage insurance (PMI). PMI typically costs 0.5–1.15% of the loan annually and drops off at 20% equity.
- FHA loan: 3.5% down with 580+ credit score. Mortgage insurance premium (MIP) of 0.55% annually is required for the life of the loan if you put under 10% down.
- VA loan: 0% down for eligible veterans and service members. No PMI. Often the best deal available.
- USDA loan: 0% down in eligible rural areas (more areas qualify than you might expect). Income limits apply.
- Down payment assistance: Over 2,000 DPA programs exist nationwide. Many offer grants or forgivable loans of $5,000–$25,000. Check your state housing finance agency.
Step 3: Get Pre-Approved (Not Just Pre-Qualified)
Pre-approval involves a lender pulling your credit, verifying income and assets, and issuing a conditional commitment for a specific loan amount. It is far more powerful than pre-qualification (which is just an estimate).
Get pre-approved by at least 3 different lenders within a 14-day window (counts as one credit inquiry). Compare the Loan Estimate forms — look at the interest rate, APR, origination fees, and total closing costs. Even 0.25% difference in rate matters significantly over 30 years. Use our Mortgage Calculator to model different scenarios.
Step 4: Find Your Home & Make an Offer
Work with a buyer's agent — their commission is typically paid by the seller. A good agent helps you navigate pricing, negotiate repairs, and avoid overpaying.
When making an offer, consider these factors:
- Comparable sales: Research what similar homes in the area sold for in the last 3–6 months.
- Days on market: Homes sitting 30+ days may accept below-asking offers. Hot markets may require offers at or above asking.
- Inspection contingency: Always include one. Home inspections cost $300–$500 and can uncover $10,000+ in hidden issues.
- Earnest money: Typically 1–3% of the purchase price, held in escrow. This shows the seller you are serious.
Understanding Closing Costs
Closing costs typically range from 2–5% of the home price. On a $420,000 home, expect $8,400–$21,000. Common line items include:
- Loan origination fee (0.5–1% of loan amount)
- Appraisal fee ($300–$600)
- Title insurance ($1,000–$3,000)
- Attorney/escrow fees ($500–$2,000)
- Prepaid property taxes and insurance (2–6 months)
- Recording fees and transfer taxes (varies by state)
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Frequently Asked Questions
How much house can I afford in 2026?
A common guideline is to keep your total housing payment (mortgage, taxes, insurance) under 28% of your gross monthly income. With a $6,000/month gross income, that means a maximum housing payment of about $1,680. At 6.75% interest with 10% down, this supports roughly a $260,000–$280,000 purchase price. Use our Mortgage Calculator for an exact number based on your specific situation.
Is it better to buy or rent in 2026?
It depends on how long you plan to stay. The breakeven point — where buying becomes cheaper than renting — is typically 4–7 years in most markets in 2026. If you plan to move within 3 years, renting is usually cheaper after factoring in closing costs, maintenance, and transaction fees. Use our Rent vs Buy Calculator for a personalized comparison.
Should I pay points to lower my mortgage rate?
Each discount point costs 1% of the loan amount and typically reduces your rate by 0.25%. On a $340,000 loan, one point costs $3,400 and saves about $57/month. The breakeven is about 60 months (5 years). If you plan to stay longer than 5 years, points can save money. If you might move or refinance sooner, skip them.
What credit score do I need to buy a house?
The minimum varies by loan type: 580 for FHA (3.5% down), 620 for conventional, and no minimum for VA (though most lenders want 620+). However, scores above 740 qualify for the best interest rates. If your score is below 700, spending 3–6 months improving it before applying could save you thousands in interest over the life of your loan.