Introduction
Buying your first home in 2025 is exciting—and complex. Inventory, rates, and lending rules shift quickly. This playbook gives you a clear, repeatable roadmap from “thinking about buying” to 30 days after closing, with checklists you can use in real life.
By the end, you'll know how to set a realistic payment target, navigate pre-approval, avoid costly missteps, and use EverydayBudd's tools to test scenarios before making decisions.
Understanding the Basics: Key Terms & Costs
Before you start, understand the language lenders, agents, and closing attorneys use:
Pre-Qualification vs Pre-Approval
Pre-qualification is a quick estimate based on self-reported info—useful for ballpark planning. Pre-approval means a lender reviewed your documents and pulled your credit; it's stronger with sellers and gives you a realistic price range.
Down Payment
VA/USDA can be 0% for eligible borrowers. FHA typically requires 3.5%. Conventional first-time buyer programs may allow 3–5%. More down = lower monthly payment and potentially no PMI, but don't drain your emergency fund.
Closing Costs
Typically 2–5% of the purchase price. Includes lender fees, title insurance, appraisal, recording, prepaid interest, and initial escrow. Ask about seller concessions or lender credits to reduce cash needed at close.
PITI (+ HOA)
Principal + Interest + Taxes + Insurance. Add HOA dues if applicable. This is your true monthly housing cost. Add PMI/MIP if you put less than 20% down on conventional or have an FHA loan.
PMI / MIP
PMI (conventional) is removable at 80% LTV. MIP (FHA) often lasts the life of the loan unless you refinance to conventional. Both add to your monthly payment—model them in the calculator.
DTI (Debt-to-Income) & LTV
DTI: monthly debts ÷ gross income. Lenders typically want housing ≤28% and total debt ≤36–43%. LTV: loan ÷ home value. Key breakpoints (80%, 78%) affect PMI.
Loan Types
Conventional: most common, flexible terms. FHA: easier credit requirements, MIP applies. VA: 0% down for veterans. USDA: 0% down for rural areas. Each has different PMI/MIP rules, property requirements, and costs.
Earnest Money, Appraisal, Inspection
Earnest money: deposit showing good faith (credited to closing). Appraisal: lender's value estimate. Inspection: your condition check. Never skip inspection—budget for it.
Upfront cost ≈ Down payment + Closing costs (2–5%) + Initial escrow + Move-in repairs
Monthly cost ≈ P&I + Taxes + Insurance + PMI/MIP + HOA
Set Your Real Budget Before You Tour
The first big decision is your price and payment target. Use EverydayBudd tools to see how different scenarios affect your monthly cost and total cash needed.
Step-by-Step Roadmap: Pre-Approval to Closing
Follow these phases alongside EverydayBudd calculators for accurate numbers at each decision point.
Get Financially Ready (6–12+ months before)
- •Pull all 3 credit reports; fix errors; pay down revolving balances below 30%.
- •Build down payment savings + 3–6 months emergency fund (for after closing).
- •Use Mortgage Calculator to find a realistic price/payment range for your income.
- •Decide a target monthly housing cost (% of gross income and actual dollar amount).
Pre-Approval & Lender Shopping
- •Gather docs: W-2/1099, pay stubs, 2 months bank statements, ID, residence history.
- •Get quotes from 3+ lenders within 14–45 days (counts as one credit inquiry).
- •Ask for rate, APR, points, lender credits, and estimated cash to close from each.
- •Compare conventional vs FHA/VA/USDA for your situation; understand PMI/MIP differences.
- •Get a written pre-approval letter you can submit with offers.
Build Your Team & Hunt
- •Hire a buyer's agent (local market expert), loan officer, and insurance agent.
- •Consider a real estate attorney (required in some states) and housing counselor.
- •Filter homes by payment target (PITI + HOA), commute, schools, and condition.
- •For older homes, budget for inspection costs and potential repairs.
Offers, Inspections, Appraisal, Underwriting
- •Write offers based on comps, budget, and market conditions (not just list price).
- •Include contingencies: financing, appraisal, inspection. Consider seller concessions for closing costs.
- •Submit earnest money per local norms (typically 1–3% of price).
- •Order inspections (general + specialty: roof, termite, HVAC if needed).
- •Lender orders appraisal—if low, negotiate price reduction, cover gap, or dispute with comps.
- •Respond quickly to underwriter conditions (additional docs, explanations).
Closing Day & First 30 Days After
- •Review Closing Disclosure (CD) at least 3 days before closing—verify rate, APR, cash to close, escrows.
- •VERIFY WIRE INSTRUCTIONS BY PHONE (call the title company directly to prevent wire fraud).
- •Sign documents, receive keys or possession per your contract.
- •After closing: set up auto-pay, track LTV for PMI removal, file for homestead exemption if available.
- •Re-run numbers annually to check if refinancing makes sense.
Wire fraud is a major threat. Hackers impersonate title companies and send fake wire instructions. Always call the title company directly (using a number you verified independently) to confirm wiring details. Never trust instructions sent only by email.
Scenario Playbook: Different First-Time Buyer Profiles
See how different situations affect the homebuying equation:
Scenario 1: Low Down Payment (5% Down + PMI)
- • Down payment: $14,000 on $400k
- • MIP for life of loan (unless refi)
- • Easier credit requirements (580+)
- • Higher total cost over time
- • Down payment: $20,000 on $400k
- • PMI removable at 80% LTV
- • Typically needs 620+ credit
- • Lower long-term cost if PMI drops
Scenario 2: High Student Loan Debt (DTI Constrained)
Good income ($85k) but $50k in student loans. DTI is the main constraint—lenders may limit how much home you can afford.
- Use the calculator to see how paying down $5–10k of debt affects your price range.
- Income-driven repayment plans may lower your reported monthly payment, improving DTI.
- Consider waiting 6–12 months if it means qualifying for a significantly better home.
Scenario 3: High-Cost City Condo vs Cheaper Suburb Home
Same buyer, different locations: $450k condo in the city vs $350k house 30 miles out.
- • Higher purchase price
- • HOA dues: $400/mo
- • Short commute, more walkable
- • Total PITI + HOA: ~$3,100/mo
- • Lower purchase price
- • No HOA (or minimal)
- • Longer commute + car costs
- • Total PITI: ~$2,400/mo
Use Cost of Living comparison to see how commute, gas, and other expenses affect the total picture.
Scenario 4: Buy Now vs Wait Another Year
- • Start building equity now
- • Pay PMI until 80% LTV
- • Lock in today's prices
- • Smaller emergency fund post-close
- • Lower monthly payment (less PMI)
- • Stronger emergency fund
- • Risk: prices/rates may rise
- • Delay on equity building
There's no universal right answer. The calculator helps you visualize both scenarios.
Stress-Test Your Plan
Model multiple neighborhoods, test different down payments, and compare lender quotes before committing.
Advanced Strategies
Use Down Payment Assistance (DPA) Wisely
Many states/cities offer grants, forgivable seconds, or deferred loans for first-time buyers—often income and price-capped. Check with your state's housing finance agency. Some have homebuyer education requirements.
Negotiate Closing Costs & Rate Buydowns
Seller concessions (seller pays part of your closing costs), lender credits (higher rate = lower closing costs), or paying discount points yourself. Compare cash today vs cost over the life of the loan in the calculator.
Optimize PMI/MIP and Equity Milestones
For conventional, hitting 80% LTV removes PMI. Consider prepaying principal to reach it faster. For FHA, refinancing to conventional once you have 20%+ equity is often the only way to remove MIP.
Strengthen Your Offer Safely
Pre-approval calls from your LO, proof of funds, and reasonable contingency timelines help you stand out. Waiving inspections is risky—only do it if you truly understand the property and have cash reserves.
Consider ARMs Carefully
Adjustable-rate mortgages start lower but reset after the initial period. Model worst-case payments at the rate cap in the calculator before choosing an ARM.
Credit Pay-Downs Before Lock
Paying down revolving balances before your rate lock can bump your credit score and improve pricing. Ask your LO about rapid rescore options.
Common Mistakes to Avoid
- Shopping by list price instead of total monthly cost (PITI + HOA + PMI/MIP)
- Getting only one lender quote—always compare 3+ on APR + fees
- Draining all cash for down payment, leaving no emergency fund
❌ Big purchases or new credit during underwriting
Buying a car, opening a credit card, or using BNPL can tank your approval.
Instead: Wait until after closing for major purchases.
❌ Skipping inspection to win the offer
You could miss $20k+ in hidden problems.
Instead: Keep inspection contingency unless you're truly prepared for any outcome.
❌ Not reading the Closing Disclosure carefully
Escrows, taxes, per-diem interest can differ from estimates.
Instead: Review the CD line-by-line and ask questions before signing.
❌ Forgetting PMI removal / refi opportunities
Conventional PMI can be removed at 80% LTV. FHA MIP often requires refinancing.
Instead: Track LTV annually and run refi scenarios in the calculator.
Frequently Asked Questions
Frequently Asked Questions
This guide is educational, not personalized legal, tax, or lending advice. Always confirm specifics with your lender, real estate agent, and local professionals.
Conclusion & Action Checklist
First-time buyers can feel in control by: defining payment targets, getting a strong pre-approval, using calculators to test scenarios, and following a clear checklist through closing. You've got this.
- Pull credit, build/confirm emergency fund, set a realistic payment target (PITI + HOA).
- Get at least 3 lender quotes and a written pre-approval letter.
- Use EverydayBudd Mortgage and Cost of Living tools to compare at least 3 scenarios.
- Build your team: buyer's agent, loan officer, insurance agent, attorney if needed.
- Order inspections, verify wire instructions by phone, and review your CD carefully.
- After closing, track equity for PMI removal and file for homestead exemption if available.
Ready to Become a Homeowner?
Set your budget, compare neighborhoods, and test scenarios before you tour. EverydayBudd's tools help you see the full picture.
Related Tools & Guides
References
- Consumer Financial Protection Bureau (CFPB): home loan toolkit, rate-shopping guidance, PMI basics
- U.S. Department of Housing and Urban Development (HUD/FHA): FHA down payment & MIP rules
- Federal Housing Finance Agency (FHFA): conforming loan standards and resources
- Department of Veterans Affairs (VA): VA home loan eligibility and funding fees
- USDA Rural Development: guaranteed loan program information
- State Housing Finance Agencies (HFAs): down payment assistance directories
Created by the EverydayBudd Home Finance Team. Built to pair with Mortgage and Cost of Living tools. Uses guidance from CFPB, HUD/FHA, VA, USDA, and state housing agencies.
Educational only—this isn't personalized advice. Always confirm with your lender, agent, and local professionals.