How to Buy your First Home: The Ultimate 8 Step Guide

First Home

T$C is pleased to share another guest post! Guest posts have been pouring in lately and we love it. It’s great to hear from so many different people with different perspectives. This article was written by Sheldon Brown, he has over 17 years in the mortgage industry. Buying your first home can be a very stressful hopefully this awesome guide helps! Enjoy – T$C

Buying your first home is a mix of excitement and confusion, and in my 17 years as a mortgage broker, I’ve been asked them same questions by first-time homebuyers again and again. In order to eliminate some of the confusion, I’ve compiled by best tips and created an eight-step plan to follow when purchasing your first home.

Buying your first home is a mix of excitement and confusion, and in my 17 years as a mortgage broker, I’ve been asked them same questions by first-time homebuyers again and again. In order to eliminate some of the confusion, I’ve compiled by best tips and created an eight-step plan to follow when purchasing your first home.

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Step 1 – Review Your Personal Finances

Before you even start looking for homes or talking to mortgage brokers, you should review your personal finances. Being familiar with your own financial situation gives you a sense of control during the decision making process. Here are a few things to make sure you know:

  • How much money you have saved for a down payment
  • How much debt you have (including credit cards and student loans)
  • How much income you make per month
  • How much money you spend per month (on average)
  • How much you can comfortably spend on a mortgage payment per month

Make special note of the fourth item on this list, “how much money you spend per month”.  Determining this will involve looking back at your bank records, but it also may involve using software or a spreadsheet to track your spending for 1-3 months before moving on to the next step.

T$C Note – If you don’t already using apps like Personal Capital and Mint will make tracking your month cash flow very simple. Both of these companies are free to use! 



Step 2 – Eliminate As Much Of Your Debt As Possible, before buying your first home.

There are two reasons why I recommend paying off your debt before buying a home, and I urge you to consider these reasons before you dismiss this step.  First, you probably already know that it’s difficult to pay off credit card and student loan debt while also having to pay for living expenses such as rent, gas, and food. When you add a mortgage payment and home ownership costs on top of that, you will be sinking in debt even faster than before. Paying off your debt will eliminate this problem before it happens.

The second reason why I suggest paying off your debt first is because the less debt you have the better your mortgage rate will be. In the long run, putting your home purchase off by 6-12 months is well worth it if it allows you to be more comfortable with your finances and secure a better mortgage rate.

While you’re taking a few months to pay down your debt, you can also use this time to improve your credit rating (another way to expand your mortgage options). Use this time period to make a habit of always paying bills on time and avoid accruing any new credit card debt.



Step 3 – Save For Your Down Payment

The higher your down payment is, the more comfortable you will be financially. Although it is possible to buy a house with as low as 3% down, the mortgage rate you will be given is not favorable to you in the long run. I always recommend that homeowners try to have 20% down on their first home purchase.

Unfortunately, saving for a larger down payment could mean postponing your house hunt by 6-12 months, but it’s worth it in the long run.


Step 4 – Get Pre-Approved

If you’re looking for a home in a particularly competitive market, then having a pre-approved mortgage will show sellers that you are a serious buyer. Having this upper hand will be beneficial when negotiating, or when you’re in a situation where the house you want has multiple offers. Taking care of this step before you put an offer in on a house will save time during the offer process, and if a seller is looking to close the deal in short time frame your offer might be given preference.

Of course, one of the other reasons for getting pre-approved is so that you know how much money you’re working with and what you can afford. I think it’s important to know how much the bank or lender is willing to give you, but you also need to keep in mind that you should not stretch yourself out too thin. For example, if you are pre-approved for a $500,000 mortgage that doesn’t mean you should automatically be looking at houses that cost $500,000.


Step 5 – List Out All Of Your Home Ownership Fees

It’s easy to get caught up in the excitement of home buying, which can easily lead to you failing to consider the other costs you will be faced with. Your costs are not limited to your down payment and monthly mortgage payments; you will also need to budget for legal fees, moving fees and home ownership fees.

These fees include (but are not limited to):

  • Home inspection fees
  • Closing costs
  • Legal fees
  • Property tax
  • Home insurance
  • Rental van fees (for moving day)
  • Home repairs and renovations
  • Furnishing your home (including appliances)

In order to get an accurate idea of what your home ownership fees will be, I suggest that you call around for quotes. You can also ask your real estate agent, friends, and family for input on what their expenses are.


Step 6 – Familiarize Yourself Common Mortgage Terms

This step certainly isn’t exciting, but I do believe that first-time homebuyers should do a little internet research on common mortgage terms so that they can feel more confident when meeting with banks or mortgage brokers. Having a better understanding of what the terms mean will also put you in a better position for negotiating.

Simply search Google for things like “common mortgage terms explained” to educate yourself. You don’t need to know everything, but having an understanding of the basic will help you a lot.


Step 7 – Research All Of Your Mortgage Options

Not all mortgages are created equally, which is why you should research all of your options before committing. One of the best tools you can use is a free online mortgage calculator.

Some mortgages are locked in at lower prices for a long period of time – which gives you very little flexibility down the road. Other mortgages may be a bit more expensive right now, but they allow you to pay off your mortgage faster. You need to consider what your future needs may be, not just what you can afford right now.

Step 8 – Get Realistic About What You Need

Everyone dreams about what their first home will be like, and it frequently involves unrealistic expectations such as large walk-in closets and kitchen islands. In order to make a smart home purchase, I suggest you ‘buy with your head, not your heart’.

In order to start the process, you should make a list of what you need to have and what you’d like to have. If you can be realistic with yourself during this step, then you will avoid disappointment down the road. Only when you’ve completed this step (and have been honest about what you needs truly are), then you can start the best part of this process – looking at homes!

This article was written by Sheldon Brown. Sheldon has worked as a mortgage broker for the last seventeen years, and he’s assisted plenty of first-time homebuyers on their journey to purchasing a home.


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16 Replies to “How to Buy your First Home: The Ultimate 8 Step Guide

  1. Great tips! I’m looking to buy within about 18 months and have been pleased that I’ve already begun to process many of the things mentioned here! Thanks!

    1. Kyle!

      Thanks for coming by and leaving a comment. Congrats on starting your process on buying your first home. It’s an extremely fun and stressful journey. You’re already being super savvy thinking ahead into the future and not jumping right in.

      One word of advice from experience. Buy less house than you need. We got approved for way more than we could have afforded at the time. So glad my wife (Brittany) is very level headed and great at making decisions.

      I was SOLD on a house with a finished basement. The house was two down from the one we currently own. $25,000 more in price and many years older. They have already had to replace the driveway lots of $$$. Furnace, water heater, and roof were much older also. We made the right decision going with the smaller house that was in better shape.

      Last thing I promise. Just get passionate about others buying their first house, it’s SO exciting! Get a freaking home inspection! Look around and don’t just use the guy your realtor suggest. A $300 investment that could save you thousands down the road. Totally worth it!

  2. This is a great post! I bought my first home exactly two years ago, and it was the most stressful, confusing process I’ve ever experienced. It can be so difficult to anticipate the unexpected challenges you’ll face, from having your finances examined with a fine-tooth comb to figuring out whether the house is definitely yours or if the deal could still fall apart. So frustrating, but such a great feeling when it does work out!

    1. Totally can relate! Our closing date felt like it got moved a million times. It is a very stressful time but so rewarding at the end. Home ownership is very special. The best advice we can give people looking to buy their first house take your time and wait for the right deal. Always live under your means. A house payment should be about 25%-30% your total income.

      The biggest decision and purchase of your life. Make it the right one! Congrats!

  3. Love this post! I am currently on step #3 trying to save for a downpayment. I will definitely refer back to this post when I am ready for step #4. Thanks for all the great tips!

    1. Your welcome! Glad you found it useful. Congrats on starting the process of buying your first home. A very exciting time in life!

  4. Great advice We are in the process of looking for homes and buying our first one. Steps 5 – 8 are what what we currently need to review. The hardest part about buying is that our ideal neighborhoods in Toronto are so expensive and we really have to decide whether we want to be tied down by a mortgage or live freely and travel lol. Not an easy decision.

    1. Very true! Buying a house definitely takes away some freedom. It’s always best to buy less house than you need. Living under your means allows you to have freedom in life. Always remember experiences > material things.

  5. Thanks for this post!! I’ve decided to wait until my last credit card and car loan have been paid off (approximately another 12-18 months) before I start my house hunting process, but I have already begun researching. I never thought of the ‘need vs want’ list but it’s obviously something that’s needed to make a smart purchase. Thinking about it, some of my needs are actually wants.

    1. Glad you enjoyed the post and got something from it. Sounds like you are getting pretty $avvy with your money. Congrats on seeing the light at the end of the tunnel with your debt. Your doing it right! Hope to see you again soon in our comment section =)

Let the discusion begin!