First-time homebuyer’s guide to getting a mortgage

June 28, 2023

Buying your first home can be a great experience with the right information and the right team in place. We're here to help as you prepare for the homebuying journey.

If you’re new to the homebuying process it can be hard to know where to start. What kind of income do you really need to qualify for a mortgage? What are the steps involved? How do you separate fact from fiction? We’re here to help dispel some mortgage myths and set you up for success.

 

Look beyond the interest rate

Contrary to what you might believe, your mortgage interest rate may not be the most important factor. There are plenty of numbers that go into your monthly mortgage amount and an interest rate is only one piece of the puzzle. Depending on the price of the house a small difference in mortgage interest rates could be manageable. For a home priced at $350k, for instance, you could be looking at a payment difference of $12 to $25 per month for every .125% increase in the interest rate. But note that these amounts do add up over the life of the loan.

Two other crucial factors are the size of the loan you plan to take out and how quickly you want to pay it off. Your costs will be greater the less money you put towards a down payment and the longer your loan term. Other factors that can impact your monthly mortgage payment include private mortgage insurance, property taxes, homeowner’s insurance and association fees.

 

Save for your down payment right away

It’s true that the down payment can be one of the biggest hurdles aspiring homeowners face. It can be an even bigger hurdle if you work in a job that doesn’t have a consistent pay schedule. This is why you want to start saving as soon as possible. 

Start saving what you can each month. For example, if you deposit $250 each month for twelve months into a savings account you will have saved up to $3,000 for a future down payment. Or deposit the difference between your current housing expense and your ideal future monthly mortgage payment. That way you can start building the cushion you need while getting used to the monthly expense.

Most lenders want to know that you’ve got a steady income when considering whether to approve you for a mortgage. But what if you have the kind of job where your income ebbs and flows from month to month? You’re not alone, lots of people are in this category including gig workers, small business owners, contract workers and people who do seasonal work. Don’t worry, buying a home can still be in reach for you. One strategy is to save for a larger down payment which can help you during the approval process. You might also build your savings or have additional income sources as a backup plan in case your income from your primary work drops unexpectedly.

Now that you know the basics, it’s time to put your plan into action.

 

7 steps to buying a house for the first time

From the spark of an idea to the moment you turn the key to your new home, here’s how to go about getting a mortgage:

  1. Pre-qualification: This is a good starting point to get a general idea of what size mortgage you can get. It’s especially helpful for people who are just browsing. To get pre-qualified you meet with a mortgage loan officer and share your income, but you’re not gathering documents at this point. In fact, you can prequalify online. 
  2. Pre-approval: This step takes a deeper look into your financial history than pre-qualification. Depending on your lender, you may be asked to provide documentation of your salary, assets and debts, as well as a credit check. This is the time to understand your credit score and to look at how much debt you currently hold. Depending on your situation, you may need to have a co-signer who has a steady income and good credit history. At the end you’ll have a letter from a lender saying you’re likely to get a specific mortgage, and that can make a big difference to a home seller. (Note: Pre-approval is neither an obligation to buy nor to lend.) 
  3. House hunting: Resist the urge to shop for homes until you know how much of a loan you qualify for. Once you do have your loan amount, go ahead and start shopping. 
  4. Document gathering: Once you’ve decided on a home and made an offer, your mortgage lender will ask you to show your income and provide other documents to support your loan application. Also, you may be asked to pay for an appraisal, which is something the lender schedules to confirm the home’s value aligns with the purchase price. 
  5. Processing and underwriting: Once you’ve applied for the loan, an underwriter evaluates your application. They look at the appraisal and check to see if there are any liens on the property which is called a title search. They also look at your employment, income, credit, assets and where your down payment will come from. While this is happening be careful not to take on any new debt or to make other financial changes that could impact your loan request. If you get conditional approval, the underwriter might request a few more documents. 
  6. Final approval: Once your loan is approved, you’ll be ready to close. You will be given an estimate of the closing costs shortly after you submit your loan application and then just before closing you will receive a Closing Disclosure, or CD, with the terms of the agreement and your final costs. 
  7. Close and sign: When it comes to the homebuying process, closing day is the big finale – the day the house officially becomes yours. At the closing, bring your photo ID and a cashier’s check for the down payment or arrange for a wire transfer. After signing several documents, you will be handed your new keys!

 

Make your mortgage loan officer your ally

Don’t think you have to figure this all out on your own, either. Your mortgage loan officer can be your guide throughout the entire process, giving you options for real estate agents, builders, home inspectors and homeowner’s insurance agents.

Be sure to take full advantage of their experience. They can let you know which loans to consider, how to structure them and how much of a down payment you'll need. Above all else, don’t rule out a house you might want to buy before consulting with your mortgage loan officer.

 

If you’re ready to learn more about mortgages, we're here to help. Reach out to a mortgage loan officer to discuss your situation over the phone, via email or within a branch.

Related content

Avoiding the pitfalls of warehouse lending

Unexpected expenses: 5 small business costs to know and how to finance them

Car shopping: Buying versus leasing your next vehicle

Is it the right time to refinance your mortgage?

Is it cheaper to build or buy a house

6 questions to ask before buying a new home

Should you buy a house that’s still under construction?

A passion for fashion: How this student works the gig economy

8 steps to take before you buy a home

Military homeownership: Your guide to resources, financing and more

What is refinancing a mortgage?

Are professional movers worth the cost?

What to know when buying a home with your significant other

Mortgage basics: How does your credit score impact the homebuying experience?

Mortgage basics: 3 key steps in the homebuying process

Mortgage basics: How much house can you afford?

Mortgage basics: Buying or renting – What’s right for you?

Mortgage basics: Prequalification or pre-approval – What do I need?

How you can take advantage of low mortgage rates

Mortgage basics: Finding the right home loan for you

Home buying myths: Realities of owning a home

Mortgage basics: What is refinancing, and is it right for you?

A checklist for starting a mobility program review

Tips for realtors to help clients get their homeownership goals back on track

How I did it: Turned my side hustle into a full-time job

Closing on a house checklist for buyers

How I did it: Bought a home without a 20 percent down payment

What you need to know before buying a new or used car

Trends in economics, immigration and mobility policy

Leveraging the ASC-842 rule changes in equipment lease accounting

ABL mythbusters: The truth about asset-based lending

Finance or operating lease? Deciphering the legalese of equipment finance

Buying or leasing? Questions to ask before signing a contract

3 reasons governments and educational institutions should implement service fees

Addressing financial uncertainty in international business

Safeguarding the payment experience through contactless

COVID-19 safety recommendations: Are you ready to reopen?

Changes in credit reporting and what it means for homebuyers

What’s the difference between Fannie Mae and Freddie Mac?

Why other lenders may be reaching out to your employees

High-cost housing and down payment options in relocation

Crypto + Relo: Mobility industry impacts

For today's relocating home buyers, time and money are everything

Streamline operations with all-in-one small business financial support

Small business growth: 6 strategies for scaling your business

4 restaurant models that aren’t dine-in

How business owners are managing during the supply chain crisis

How to expand your business: Does a new location make sense?

How jumbo loans can help home buyers and your builder business

How a travel clothing retailer is staying true to its brand values

Checklist: 10 questions to ask your home inspector

Pros and cons of a personal line credit

3 tips for saving money when moving to a new home

What’s a subordination agreement, and why does it matter?

Understanding the true cost of borrowing: What is amortization, and why does it matter?

Know your debt-to-income ratio

Your quick guide to loans and obtaining credit

Checklist: 10 things to look for when touring a home

Overcoming high interest rates: Getting your homeownership goals back on track

For today's homebuyers, time and money are everything

Crypto + Homebuying: Impacts on the real estate market

How I did it: Bought my dream home using equity

Buying a home Q&A: What made three homeowners fall in love with their new home

How I did it: Built living spaces to support my family

Saving for a down payment: Where should I keep my money?

Your guide to breaking the rental cycle

Checklist: 6 to-dos for after a move

What are conforming loan limits and why are they increasing

Uncover the cost: Building a home

The lowdown on 6 myths about buying a home

4 ways to free up your budget (and your life) with a smaller home

Get more home for your money with these tips

Money Moments: Tips for selling your home

First-time homebuyer’s guide to getting a mortgage

Dear Money Mentor: When should I refinance a mortgage?

What is an escrow account? Do I have one?

Mortgage basics: What’s the difference between interest rate and annual percentage rate?

How do I prequalify for a mortgage?

4 questions to ask before you buy an investment property

6 essential credit report terms to know

Test your loan savvy

What types of credit scores qualify for a mortgage?

Common questions about electric vehicles (EVs)

How to choose the best car loan for you

Disclosures

Start of disclosure content

Loan approval is subject to credit approval and program guidelines. Not all loan programs are available in all states for all loan amounts. Interest rate and program terms are subject to change without notice. Mortgage, Home Equity and Credit products are offered through U.S. Bank National Association. Deposit products are offered through U.S. Bank National Association. Member FDIC.