The First-Time Homebuyer Guide for 2026
What Every New Buyer Should Know Before Purchasing a Home
Buying your first home is exciting but can also feel overwhelming. With credit scores, down payments, loan options, inspections, closing costs, and today’s competitive housing market, many buyers don’t know where to start. Some buyers are also asking whether now is the right time to purchase a home or if they should continue waiting for rates or inventory to change.
The good news?
You do not need to figure it all out alone.
At Redwood Mortgage Services, we’ve helped homebuyers navigate the mortgage process since 1999. This updated guide covers the major steps first-time buyers should understand before purchasing a home in today’s market.
Why Buying a Home Still Matters
Homeownership is about more than just having a place to live.
For many buyers, purchasing a home may provide:
Long-term stability
The ability to build equity over time
Predictable housing payments
Potential tax advantages*
Freedom to personalize your space
An opportunity to build long-term wealth
While renting may make sense in some situations, many buyers discover that waiting too long can delay their ability to start building equity.
*Consult a tax advisor regarding your specific situation.
Step 1: Understand What You Can Comfortably Afford
One of the biggest mistakes first-time buyers make is shopping for homes before understanding their budget.
A monthly payment includes more than just principal and interest. Buyers should also consider:
Property taxes
Homeowners insurance
HOA or condo dues
Utilities
Maintenance costs
Mortgage insurance (if applicable)
A mortgage professional can help estimate a comfortable payment range based on your goals and financial picture.
General Factors Lenders Review
Most lenders evaluate:
Income
Employment history
Credit history
Debt-to-income ratio
Savings/assets
Down payment funds
Step 2: Review Your Credit Before You Start Shopping
Your credit score can impact:
Loan eligibility
Down payment requirements
Mortgage insurance costs
Interest rate options
Many buyers assume they need perfect credit to purchase a home. In reality, several loan programs are designed to help buyers with a wide range of credit profiles.
Helpful Credit Tips Before Applying
Avoid opening new credit accounts
Pay all bills on time
Reduce high credit card balances when possible
Avoid large unexplained deposits
Do not finance furniture or vehicles before closing
Even small improvements may strengthen your mortgage options.
Step 3: Learn the Difference Between Pre-Qualification and Pre-Approval
This is one of the most misunderstood parts of the mortgage process.
Pre-Qualification
A basic estimate which is based largely on unverified information.
Pre-Approval
A more detailed review of income, credit, assets, and documentation.
In competitive markets, many sellers and real estate agents prefer buyers who are fully pre-approved because it may demonstrate stronger financial readiness.
A strong pre-approval can also help buyers:
Shop more confidently
Move faster when they find a home
Better understand monthly payment expectations
Identify potential issues early
Step 4: Understand Your Loan Options
Many first-time buyers are surprised by how many mortgage programs exist.
Common options may include:
Often used by buyers with solid credit and stable income.
Popular with first-time buyers because they may allow lower down payments and more flexible credit guidelines.
Available to eligible veterans, active-duty military members, and certain surviving spouses. VA loans may offer:
No down payment in many cases
No monthly mortgage insurance
Flexible qualifying guidelines
Learn more about VA financing at VA Loans by Redwood Mortgage Services.
Designed for eligible rural and certain suburban areas. USDA loans may offer 100% financing for qualified borrowers.
Down Payment Assistance Programs
Some local and state programs may help eligible buyers with down payment or closing costs.
Not every program fits every buyer. An experienced lender can help compare options based on your goals.
Step 5: Know What Cash You May Need at Closing
A common myth is that buyers always need 20% down.
In reality, many first-time buyer programs allow much lower down payments for qualified borrowers.
Possible Upfront Costs Include
Down payment
Closing costs
Earnest money deposit
Home inspection
Appraisal
Moving expenses
Initial escrow setup
Some buyers may also qualify for:
Seller closing cost assistance
Builder incentives
Gift funds from family
Down payment assistance programs
Step 6: Build the Right Homebuying Team
Purchasing a home is often smoother when buyers work with experienced professionals.
Your team may include:
Mortgage lender
Real estate agent
Home inspector
Settlement/title company
Insurance agent
Communication between all parties matters — especially in competitive markets or tight closing timelines.
Step 7: Avoid Common First-Time Buyer Mistakes
Changing Jobs During the Process
Employment changes can impact loan approval timing.
Making Large Purchases
New debt may affect qualification.
Skipping the Inspection
A home inspection may help identify issues before closing.
Draining Savings
It’s important to maintain emergency reserves when possible.
Shopping Beyond Your Comfort Zone
Just because you qualify for a certain amount does not always mean you should spend that amount.
Step 8: Understand Today’s Housing Market
Housing markets change constantly.
Interest rates, inventory levels, competition, and affordability conditions may all impact buying opportunities.
Some buyers wait for the “perfect” market conditions — only to find that home prices or competition increase later.
Instead of trying to perfectly time the market, many buyers benefit from focusing on:
Monthly affordability
Long-term goals
Personal financial readiness
Lifestyle needs
Many first-time buyers try to perfectly time the market, but market conditions constantly change. Interest rates, inventory, home prices, and competition can all shift over time. Instead of focusing only on timing, many buyers benefit from evaluating long-term affordability and personal financial readiness. If you are debating whether to continue renting or move forward with buying, you may also find our article helpful on whether now is the right time to buy or wait for rates to drop.
Step 9: Prepare for the Mortgage Process
Most buyers will need documentation such as:
Pay stubs
W-2s or tax returns
Bank statements
Identification
Employment information
Providing documents quickly can help keep the process moving smoothly.
Step 10: Ask Questions
A good lender should help educate buyers — not pressure them.
First-time buyers should feel comfortable asking:
What loan programs fit my situation?
What are my estimated monthly payments?
How much cash may I need?
What could improve my approval strength?
What happens after I am under contract?
The more informed you are, the more confident you may feel throughout the process.
Final Thoughts for First-Time Homebuyers
Buying your first home is a major financial decision, but it does not have to feel intimidating.
Preparation, education, and working with the right professionals can make a significant difference.
At Redwood Mortgage Services, we’ve helped first-time buyers navigate the mortgage process for more than 25 years. Whether you are just starting to explore your options or actively preparing to purchase, our goal is to provide clear guidance and personalized mortgage solutions.
Ready to Learn More?
Explore mortgage resources at Redwood Mortgage Services
Schedule a conversation with Stuart Kiehne here:
Frequently Asked Questions About Buying Your First Home
What should first-time homebuyers do before shopping for a home?
First-time homebuyers should begin by reviewing their budget, credit, savings, and monthly payment comfort level. Getting pre-approved before shopping may help buyers better understand affordability and identify potential issues early in the process.
Do first-time homebuyers need a 20% down payment?
No. Many first-time homebuyers may qualify for mortgage programs with lower down payment options, depending on credit, income, property type, and loan program guidelines.
What is the difference between pre-qualification and pre-approval?
Pre-qualification is usually a basic estimate based on limited information. Pre-approval involves a more detailed review of income, credit, assets, and documentation, which may provide stronger confidence when making an offer on a home.
What loan programs are available for first-time homebuyers?
First-time homebuyers may have access to several financing options including conventional loans, FHA loans, VA loans for eligible military borrowers, USDA loans in eligible areas, and certain down payment assistance programs.
Can first-time buyers qualify with less-than-perfect credit?
In some cases, yes. Several mortgage programs offer more flexible credit guidelines. Lenders typically review the overall financial profile including credit history, income, assets, employment, and debt-to-income ratio.
What costs should first-time homebuyers prepare for?
Buyers should plan for potential costs such as:
Down payment
Closing costs
Earnest money deposit
Home inspection
Appraisal
Homeowners insurance
Moving expenses
Initial escrow setup
Why is working with an experienced lender important for first-time homebuyers?
An experienced lender can help buyers compare loan options, understand estimated monthly payments, prepare documentation, avoid common mistakes, and navigate the mortgage process more confidently.
When should a first-time homebuyer talk to a lender?
Many buyers benefit from speaking with a lender before actively touring homes. Early planning may help buyers understand affordability, improve approval strength, and prepare for a more competitive offer when the right property becomes available.
Are there programs available to help with down payment or closing costs?
Some local, state, and loan-specific programs may offer assistance for qualified buyers. Eligibility requirements vary depending on location, income, loan type, and other factors.
How long does the mortgage process usually take?
The timeline can vary based on the loan program, property type, appraisal timing, documentation, and market conditions. Many purchases close within several weeks, although every transaction is different.
What should buyers avoid doing before closing on a home?
Buyers are generally advised to avoid:
Opening new credit accounts
Making large purchases
Changing jobs without discussing it with their lender
Missing payments
Moving large amounts of money between accounts without documentation
These actions may impact the loan approval process.
Is it better to buy now or wait?
That depends on personal financial goals, affordability, housing needs, and market conditions. Rather than trying to perfectly time the market, many buyers focus on long-term affordability and readiness.
Helpful Resources for First-Time Homebuyers
Should I Buy Now or Wait for Rates to Drop?
How Much House Can You Afford in Anne Arundel County in 2026
The Mortgage Mistake Costing Buyers Negotiating Power
5 VA Loan Myths That Could Cost Veterans Thousands
Top 10 Tips for Choosing a VA Lender
How Does a Construction-to-Permanent Loan Work?
Stuart Kiehne
President | NMLS #92008
Redwood Mortgage Services
Stuart@Redwood-Mortgage.com
410-266-1641
All loans subject to approval. Equal Housing Lender.