Buying your first home is exciting, but it can also be overwhelming. The amount you spend, the location of your home, and the mortgage lender you work with are choices that can shape your future for years to come. During this process, it’s essential to work with a lender who understands first time homebuying and has your best interests at heart. 

At Sentry Credit Union, we’re here to guide you from your first question to closing day. With our concierge-style member support, you’ll be able to make confident decisions that will serve your financial future for the best.

How Does First Time Homebuying Work?

If you’ve found yourself wondering, “How do I buy a home for the first time?” you’re not alone. The process can feel overwhelming at first, but understanding the steps can make everything feel a lot more doable.

Whether you’re actively shopping or dreaming of someday, these steps will help you prepare:

Understand All the Costs 

Buying a home isn’t just about how much you can afford monthly, it’s about how all the pieces fit together financially. The more you know upfront, the more confident you’ll feel when it’s time to make a move.

Here’s a breakdown of upfront and ongoing costs to help you start thinking ahead:

Upfront Costs:

  • Earnest money – A deposit to show the seller you’re serious.

  • Down payment – A percentage of the home’s price that you pay upfront.

  • Closing costs – Fees for finalizing your loan and transferring ownership.

  • Time and travel – The little things that add up, like home tours, inspections, and time off work.

Ongoing Costs:

  • Mortgage – Your monthly loan payment.

  • Utilities – Water, gas, electricity, internet, and trash service.

  • Insurance – Homeowners insurance is typically required by lenders and protects your investment from unexpected loss or damage.

  • Repairs and maintenance – From fixing leaky faucets to handling major repairs, ongoing upkeep is part of responsible homeownership.

  • Property taxes – These vary by location and can change over time.

  • HOA fees – Some neighborhoods have homeowners associations with monthly dues or community rules.

Weigh Your Financial Options 

First time homebuying often means making a few lifestyle shifts, but that doesn’t mean you should sacrifice your financial wellbeing to get the keys. The goal is to find a home you love and a payment plan that fits your life.

Avoid draining your savings to maximize your down payment. While a bigger down payment can lower your monthly mortgage, it shouldn’t come at the cost of your emergency savings or financial flexibility. Keeping some savings intact is just as important as securing a competitive loan.

Before you pull money from a certificate of deposit (CD) or investment account, take time to understand the penalties. Some accounts charge fees or reduce your earnings if you withdraw funds early. That loss could outweigh the benefit of putting more down on a home.

Talk to a Mortgage Expert

Once you’ve thought through your finances, it’s time to connect with a lender who can answer the question, “How does first time home buying work?” 

Start by doing a little homework. Different mortgage products come with different rates, requirements, and benefits, especially when it comes to first time homebuying. Look into loan types, down payment assistance programs, and what your credit score might qualify you for.

Gather key documents before your meeting. Most lenders want to see:

  • Proof of income (like pay stubs or tax returns)

  • Bank statements

  • Employment history

  • Government-issued identification

If your financial situation includes something unique, like self-employment or a recent job change, bring documentation that explains it. The more clarity you can provide upfront, the smoother the process will be.

Once you’re ready, schedule a consultation with a mortgage advisor. 

Connect With a Realtor 

A good realtor will help you find a home that fits your lifestyle, goals, and budget. When you’re buying for the first time, it’s important to choose someone who listens closely and understands what matters most to you beyond price and location.

Before committing, ask how they work. What are their fees? How do they communicate? Are they experienced with the first time home buying process? The right realtor will be transparent, aligned with your values, and focused on your long-term satisfaction.

Get Agreement in Principle 

Before you start touring homes, it’s a smart move to get an Agreement in Principle, also known as a pre-approval. This is a statement from your lender confirming how much you're qualified to borrow, based on your financial situation.

Having an Agreement in Principle helps you focus your home search within a realistic price range. It also signals to sellers and realtors that you’re serious and financially prepared, giving you a competitive edge in a fast-moving market.

Keep in mind: your official mortgage application happens after your offer is accepted, but this early step sets the stage for a smoother process.

Common Questions From Mortgage Lenders

Here are a few questions your mortgage lender might ask in your initial meeting: 

1. What is your gross monthly income? (Includes pre-tax earnings and other qualifying income like support payments or pensions) 

2. Do you know your credit score? (Estimate before meeting—helps lenders suggest programs without hard inquiries) 

3. Do you currently own a home or are you selling one? (Affects financing and timeline planning) 

4. What’s your preferred price range? 

5. How much do you currently spend on housing? 

6. What do you have saved or plan to save? 

7. Will you have a co-borrower? 

8. Are you working with a real estate agent? 

9. What’s your ideal timeline? (Quick closings can be competitive advantages—having docs ready helps) 

First Time Home Buying Documents You’ll Need

  • Driver’s license 

  • 2 most recent pay stubs 

  • 2 most recent tax returns 

  • 60 days of bank statements 

  • Understanding of your credit report 

  • 2 years of full tax returns if you have rental income 

  • Investment account statements (401k, trust, insurance payouts)

  • Divorce decree or support orders, if applicable 

  • Realtor name and contact info (if chosen) 

SCU Tip: Aim for a debt-to-income ratio of 43% or lower to best qualify for the best rates and terms. 

Homebuyer Education Course Essentials 

If applying for an FHA-backed loan, you must complete a first time homebuyer course. We recommend the Fannie Mae Homeownership Education Course. It’s free, easy to access online, and packed with helpful information about budgeting, loan options, and what to expect during closing.

Once you finish the course and pass a short quiz, you’ll receive a certificate of completion. This certificate is valid for 12 months and must be shared with your lender as part of your loan application process.

A Term Worth Knowing: Private Mortgage Insurance (PMI) 

Private mortgage insurance protects your lender if you stop making payments on your loan. If your down payment is less than 20% of the home’s price, most lenders will require it.

While PMI doesn’t protect you directly, it can still benefit you in a big way because it will allow you to buy a home without waiting to save up 20%. That means you can start building equity and investing in your future even if you haven’t hit a big savings milestone yet

What Does PMI Cost?

PMI costs are added to your monthly mortgage bill and vary based on loan size, credit score, and lender requirements. In many cases, PMI can be canceled once you’ve built up enough equity in your home.

Ready to Start the First Time Home Buying Process?

First time home buying can feel like a big leap, but with the right partner, it becomes a journey you can navigate with confidence.

SCU’s mortgage team is here to guide you through every step, answer every question, and help you find a path to homeownership that works for you.