First Step to Buying a Home - Where Do I Start?

Reader Question: What is the first thing I need to do to buy a home?

We have an article on the main website that explains the ten basic steps to buying a home. That's probably worth reading, since it's relevant to your question.

As the first step in this process, I recommend a thorough review of your financial and credit situation, to find out where you stand in terms of mortgage qualification. That way, you'll know what you need to work on before you start house shopping and applying for mortgage loans.

Get copies of your credit reports from all three reporting agencies and read through them with an eye out for errors. If you find any mistakes within your reports, dispute them through the company that produced the error. It's good to make this one of the first steps to buying a home because the correction process can take a while. It's important to make sure your credit reports are accurate, because errors can hurt your credit score (which also hurts your chances of getting approved for a loan).

Checking your credit score is another one of the first steps to buying a home. When you apply for a home loan, the mortgage lender will review all aspects of your financial background -- including your credit score. If your score is low, you could have trouble getting approved for the loan. This is why I recommend starting with a good review of your financial picture. If you find out that your credit score is below average, you can focus on repairing the score before you apply for a mortgage. So it's wise to make this one of the first things you do before buying a home.

I also recommend that you determine your home buying budget. You can use a mortgage calculator to determine what the monthly payments might be for a certain sale price / range. For example, you can start with a $200,000 loan at 6% interest over 30 years, and the mortgage calculator will tell you what your monthly payment will look like. You can then determine if this is affordable for you, based on how much you make each month (gross income) and how much you spend on other things (car payment, groceries, savings, etc.). Setting a budget is one of the first steps you should take when buying a home because it prevents you from overspending on your mortgage loan.

These are the things I recommend starting with when buying a house for the first time. If you'd like to see a complete overview of the process, check out our 101 Steps to Home Buying article. It's one of the most popular tutorials on the website, because it explains each of the steps with links to related information.