7 Essential Steps to Financially Prepare for Your First Home Purchase

“First-time homebuyers make up 26% of the real estate market today, proving that owning a home isn’t just a dream—it’s an achievable goal.” — National Association of Realtors

Buying a home might feel like a massive leap, especially if you’re doing it for the first time. But here’s the truth: with a little planning, it’s absolutely within your reach. Homeownership isn’t just about having a place to call your own—it’s about building stability, wealth, and freedom.

The trick? Preparation. The earlier you start planning, the smoother the process will be. From saving for your down payment to understanding your credit score, every step you take now puts you closer to unlocking that front door for the first time. So, let’s get into it—here are seven practical steps to financially prepare for buying your first home.

1. Know Your Timeline and Start Saving Strategically

Your savings strategy depends on when you plan to buy your home. If you’re aiming for a purchase within the next few years, a high-yield savings account is a solid option. It’s safe, and your money remains accessible while earning interest.

For those with a longer timeline, consider low-risk investment accounts. While investments carry risks, the right approach could help your down payment grow over time. The key is to find a balance between growth and safety, so your funds are there when you need them.

2. Calculate How Much You Need for a Down Payment

The old 20% rule is no longer a one-size-fits-all requirement. Today, first-time buyers often put down as little as 3-8%. For instance, a $300,000 home may only require $9,000-$24,000 upfront.

While smaller down payments can get you into a home faster, aim for as much as you can reasonably save. The larger your down payment, the less you’ll owe over time—and the more favorable your loan terms may be.

3. Budget for Closing Costs and Maintenance Expenses

Closing costs often catch first-time buyers off guard. On average, you’ll need an extra 2-5% of the home’s purchase price for these fees. For a $300,000 home, that’s $6,000-$15,000 on top of your down payment.

Additionally, set aside 1-2% of your home’s value annually for maintenance. Owning a home means being prepared for everything from HVAC repairs to replacing a roof. Planning ahead keeps these expenses manageable.

4. Build a Home Emergency Fund

A home emergency fund is separate from your regular emergency fund. While maintenance covers routine repairs, this fund is for unexpected surprises—like fixing water damage or addressing structural issues.

Start small and add to it regularly. A dedicated account for home emergencies will save you stress when the unexpected happens.

5. Pay Down Debt to Improve Your Debt-to-Income Ratio (DTI)

Your debt-to-income ratio (DTI) is a key factor lenders consider. It’s calculated by dividing your total monthly debt payments by your gross monthly income. Ideally, your DTI should fall between 28-36%, though lenders may approve higher ratios with stricter terms.

Focus on paying off high-interest debt first. Every dollar you reduce in monthly debt improves your borrowing power and eases the approval process for your mortgage.

6. Check (and Improve) Your Credit Score

Your credit score determines the interest rate you’ll qualify for—and how much you’ll pay over time. Here’s a quick guide:

• 760 and above: Excellent—best rates available

• 700-759: Good—decent rates, but not the best

• 620-699: Fair—may face higher rates

• Below 620: Challenging but not impossible

If your score needs improvement, start by paying bills on time, paying down credit card balances, and correcting any errors on your credit report.

7. Avoid New Credit Activity Before Buying

In the months leading up to buying a home, minimize changes to your credit profile. Avoid applying for new loans, credit cards, or even store financing. Hard inquiries can ding your credit score, and lenders prefer stability when assessing your mortgage application.

Stick to your current accounts and focus on maintaining low balances to keep your credit profile strong.

Buying your first home doesn’t have to be overwhelming. By breaking the process into actionable steps and starting early, you’ll position yourself for success. And remember, it’s never too early to start preparing—even if you don’t plan to buy for a few years. The financial habits you build now will make the journey easier and more rewarding when the time comes.

If you’re ready to take the first step or need expert guidance, reach out. Together, we’ll make your home-buying journey seamless and exciting!