First-Time Home Buying 101: How to Buy a Home for the First Time, Step by Step
As the spring housing market heats up, you may be among the many potential homebuyers considering buying your first home.
We’ve put together this first-time home buying 101 guide with tips to help you through the steps toward owning your first home.
In this step-by-step guide, you’ll find out what you need to know to successfully buy your first home, from beginning your search to closing the deal.
What Do I Need to Do Before Buying a Home?
Buying a home is a big commitment. You’re committing not only to a monthly payment but to a place where you want to spend at least the next several years. Make sure you’re ready to take this step.
Ask yourself these questions:
- Do I have a stable income?
- Is this a neighborhood I want to live in for at least five years?
- Do I have emergency funds for expenses in the case of job loss as well as unexpected home maintenance and repairs?
If it’s the right time and the right place, then now is the time for the right kind of preparation.
Prepare Your Finances to Buy a Home
The first thing you will want to do is get your finances in order.
1. Save for a down payment
A down payment is the part of the home’s price that you pay at the time of the purchase. If you can save enough to pay 20% down, you will enjoy lower fees, but Guidance Residential offers options as low as 5% or even 3% down.
Reach out to the financier you are considering and ask about options for down payments that might be available to you.
2. Check your credit score
Your credit score is a number, generally between 300 and 850, that will be important for determining how much financing you will qualify for and the mortgage rates you may pay. That is the case even if you use Islamic financing because it gives the financier an idea of how your financial health and how you have handled financial obligations in the past.
What Is a Credit Score?
Your credit score is compiled using factors such as the number of accounts you have open, how much money you owe, and whether you pay your bills on time.
How Can I Check My Credit Score?
You can check your credit score using sites such as Credit Karma or Credit Sesame. It’s a good idea to check your score and your full credit report periodically. This will give you an idea of what changes you can make to improve it.
How Can I Improve My Credit Score?
If your credit score needs some work, it’s good to know early so you have time to raise it.
Here are the most important actions to take:
- Pay all bills before they’re due
- If you find that you’re late with a bill, pay it as soon as you can anyway; the later it is, the more it affects your score
- Don’t close any credit cards at this time, and don’t apply for new ones; those changes can have a negative impact
3. Research financing options
Many people think financing comes after you find a home, but it’s best to get pre-approved by a financier of your choice at the beginning.
Decide what kind of financing is right for you. All financiers are not equal, and a conventional loan is no longer the only option — Islamic financing is now widely available.
Also, there are many programs that help first-time buyers. Check out these first-time homebuyer programs by state. You can benefit from many of these programs while buying your home the halal way with Guidance Residential.
Why Should I Get Pre-Approved?
It’s tempting to jump right into hunting for your home, but it’s important to get pre-approved first.
Pre-approval means you have completed your application for home financing and received a letter from a mortgage lender or home financier telling you how much the financier has offered to provide.
Here’s why you should get pre-approved before looking for a home:
- It will help you narrow down your search to a price you can afford
- It shows real estate agents that you are serious and ready to buy (many real estate agents will not even show homes to someone who has not been pre-approved)
- When you come across your dream house, you can make your offer quickly without stopping to look for documents
- Sellers are more willing to accept your offer if you have financing lined up
How Can I Get Pre-Approved?
During the pre-approval process, you will need to provide documents to demonstrate your income, assets, good credit, employment, and debts you may have.
1. Choose a financier
The type of financing you have chosen will help you narrow down your search for a financier. Make sure that you feel comfortable with this company and that their values reflect your own. Make sure they are responsive to any questions and concerns you may have.
2. Explore your options
Do you want a 15, 20, or 30-year contract? The longer the contract, the lower your monthly mortgage payments, but a shorter contract will save you money in the long run. If you want to start with a 30-year contract but decide to pay it off sooner, you can refinance later or check if your financier allows extra payments.
Also find out what kind of contracts are available to you. First-time homebuyers may have additional options available. Your Account Executive should be happy to explore your choices with you.
3. Check for first-time homebuyer assistance programs or other specials
First-time home buyers may qualify for additional assistance, especially if they meet certain income requirements and have a strong credit score. Ask your Account Executive if you may qualify for any assistance.
4. Complete your application
Applications can now be completed online, making the process more convenient. Make sure to provide all pages of all documentation required. After you’ve submitted your application, watch for questions and requests for additional documents that may be needed. This will speed up the process so you receive your response faster.
5. Get your pre-approval letter
After reviewing your application and your documents, your financier will give you a letter offering to provide a certain amount of financing under specific terms. Now you’re ready to start looking for your home!
If you’re not ready for Pre-Approval
It’s possible to delay pre-approval and begin with a simpler pre-qualification, which provides a quick idea of the amount you might qualify for based on the numbers you input.
However, in this case, the number is only an estimate. Once you find a home, you will need to become pre-approved and submit documentation to back up your numbers. Completing that step early in the process saves you critical time later on.
How Do I Begin Searching for a Home?
Your home search begins with finding the right agent, then deciding what you’re looking for.
1. Choose your real estate agent
Your real estate agent who will remain your partner throughout this journey. They will help you find and visit homes that meet your criteria. Once you find a home you love, they will assist you with making your offer, inspections, and then closing on your home.
Take time to speak with more than one agent, and make sure they are knowledgeable in your area and you are comfortable with them before beginning your home search with them.
If you are looking for a good real estate agent, you can find one through Guidance Residential’s sister company, Guidance Home Services. This company was created to help fill that need and connect homebuyers with proven agents.
As a bonus, agents registered with Guidance Home Services understand the need for faith-friendly, interest-free financing.
2. Decide on your criteria for your home and neighborhood
Type of home
- Single-family home: most space and privacy, but more maintenance
- Townhouse or condo: more convenient, less upkeep, but less space
- Factor in HOA fees and neighborhood amenities when comparing options
Condition
- Move-in ready costs more upfront but less time and effort
- A fixer-upper can save money on purchase price but requires budget and bandwidth for repairs
Location
- Map out your commute to work, schools, and daily errands
- Do a test drive during rush hour before committing to a neighborhood
Build your wish lists
- Must-haves: number of bedrooms and bathrooms
- Features of secondary importance like a garage or home office
- Nice-to-haves: pool, fenced yard, extra storage — things you can add or find later
- Think about how long you plan to stay; that affects which priorities matter most
One tip for your search: Don’t let paint colors, landscaping, or outdated appliances put you off. Focus on the property itself and the bones of the home. Those are the things that are hardest to change.
How Do I Make an Offer on a Home?
When you find a home you want to make an offer on, it’s time to make a strategy quickly with your real estate agent.
Making an offer on a home is not as simple as offering the price the seller asks for. You have the option of offering less, or in some circumstances, you even might want to offer even more than the asking price. Then there are contingencies to consider as well.
Here are the steps to take:
1. Research
First, determine what is a fair price to pay for the home. Your real estate agent can analyze what similar homes in the area are selling for, known as market data “comps.”
Then consider this: How hot is the housing market in your area? If demand is low and houses are sitting on the market, you may be able to offer a lower price. If demand is high and houses are selling quickly, you may have to offer close to the asking price or maybe even above to be competitive.
You might also ask your real estate agent if they know anything about how motivated the seller is. Knowing their situation can help you craft an attractive offer. An offer that suits the seller is more likely to be accepted.
Finally, consider the home’s condition. If many repairs will be necessary, you may need to reduce your offer so you have money left to fix up the home.
Work with your agent to make an offer that has a good chance of being accepted.
2. Consider contingencies
Contingencies are conditions that must be met for the sale to go through. These clauses are written into your contract, allowing you to walk away from a sale without losing your earnest money (a type of security deposit) if the house does not meet certain criteria.
The most common contingency buyers include is the home inspections, so that if the home fails any major part of the inspection, then you are not bound by the contract you have submitted as your offer.
Other common contingencies include an appraisal, financing, and title. The more contingencies, the less attractive your offer, so seek your real estate agent’s advice and consider it carefully.
3. Decide on earnest money
Earnest money is a deposit that you submit with your offer. It will be held in escrow (an arrangement for a third party to hold it temporarily) and later applied to your down payment. If your offer is not accepted, the money will be returned to you. If your offer is accepted and you later cancel it without a justification related to a contingency, you will lose this earnest money.
The escrow amount is typically one percent to two percent of the total home price. A higher escrow may be more appealing to the seller because it shows that you are ready and serious about buying the home.
4. Making your offer more attractive
If you’re in a hot housing market and you’ve had your heart broken a few times by sellers choosing a different buyer for their home, you may want to adjust your strategy. One possible way to make your offer more competitive is to include an escalation clause, which raises your offer by a certain amount over other offers. (For example, you might offer $5,000 more than other contracts the seller receives, up to a maximum price you set.)
In some circumstances, your real estate agent might even recommend that you include a simple letter with your offer, explaining what the home means to you. Some sellers may take these factors into consideration.
5. Write your offer letter
Your real estate agent will write your offer letter for you. It will include information including the following:
- The name of everyone who will be on the title
- The amount of money you want to offer
- Any contingencies or other concessions you want to ask for
- The amount of your earnest money deposit
- Your pre-approval letter
- The date you expect to close on the home
- The date you want to move in
- A deadline for the seller to respond to your offer
Then the waiting begins.
6. Negotiate after a response
The seller can respond to your offer in one of three ways:
They can accept the offer. In this case, take a moment to celebrate and move on with inspections!
They can reject the offer. You may choose to submit another offer if the home is still available, or you can continue your search.
They may make a counter-offer with a proposed change to the price or other terms. You can accept the counter-offer, reject it, or make another counter-offer yourself.
Your real estate agent will guide you through any negotiations.
After Your Offer Is Accepted
Once your offer is accepted, a flurry of activity begins, leading up to your closing day when your home purchase is complete and ownership of the home is transferred to you.
Get an appraisal
After the seller accepts your contract, your real estate agent will arrange for an appraisal to verify the value of the home. Financiers require this step to ensure that they are not financing an amount that is more than the house is worth.
Get a home inspection
Your agent also will arrange for a thorough home inspection. The inspector will examine the home inside and out and from top to bottom, checking aspects such as the roof, plumbing, HVAC, drainage, and much more. The inspector will provide you with a report that includes recommendations on any repairs that should be made before closing.
Ask for repairs or credits
After you see the report on your home inspection, you will need to consider any problems that the inspector found. If problems were discovered, you may choose to go ahead with the purchase, ask the seller to make repairs or credits, or cancel the contract.
If you decide to ask the seller to address problems, you can request a discounted price, ask the seller to give you credits to cover some of your closing costs or ask the seller to repair the problems.
Your agent will transmit your request to the seller’s agent. If the seller rejects your request, you will need to choose whether to proceed with the sale or to walk away based on the inspection contingency you have likely included in your offer.
Conduct a final walk-through
Before closing day, you should take one last walk through the property to ensure that any repairs have been made, the seller’s items have been removed, and the home has been left in the condition expected. This is your chance to double-check anything on the property one last time.
What Happens at Closing?
Finally, after a month or two of preparation, it is closing day! You will attend a meeting with people including your real estate agent and the seller’s agent.
What to bring:
- Government-issued ID
- Proof of homeowners insurance (your agent will help you obtain this)
- Certified funds for closing costs — cashier’s check, certified check, or money order (personal checks are not accepted)
After you sign a large stack of papers, the home is yours! You will leave this meeting with new joys, responsibilities, and the key to your new home. Congratulations!
Get Started on Your Homeownership Journey
Buying a home is one of the most important decisions you will make. The team at Guidance Residential is here for you every step of the way, from pre-qualification and pre-approval on through to finding the right real estate agent for you and your family. We invite you to explore the home buying process with Guidance Residential today.
Learn more and get started on your home finance journey today.
Your Guidance Residential Account Executive is here to help with any questions. Looking to refinance or purchase? Have a friend or family member who is looking for a home? Call 1.866.Guidance, or start an application today.
Originally published November 2021, updated May 2026.
