Thinking about buying your first home? It can feel like a lot at first. But when you break it down into simple steps, the path forward starts to feel much more doable.

Whether you’ve been planning for years or just starting to explore, a few smart moves can help you save money and feel more confident along the way.

This guide walks you through eight simple ways to get ready for your first home. Let’s start with an important question: are you truly ready?

1. Make Sure You’re Ready to Buy

If you purchase a home before you’re ready, you risk setting yourself up for financial stress and home-purchasing regret. And you may end up costing yourself extra cash. Purchasing a home too soon can mean you spend more money on the house than you would on renting, especially in the early years.

Buying a home costs more than just a monthly mortgage payment. You’ll need to save for a down payment, closing costs, home insurance, and utilities. For some homes, you’ll also need to pay HOA fees. Plus, you’ll want to have some money saved for repairs, maintenance, and other unexpected home emergencies.

Renting vs. Buying: A Simple Cost Comparison

Even if the monthly mortgage payment looks similar to your monthly rent payment, there are extra hidden costs to owning a home. Let’s compare some average costs of renting versus those of buying:

Consider all the costs as you budget to purchase a home.

Check When Buying “Pay Off”

Homes build equity over time, but real estate is usually a long-term investment. Because of upfront costs (closing costs, moving expenses, inspections), it often takes 3-5 years to break even financially compared to renting.

That’s why it helps to ask yourself:

• Do you plan to stay in the home for at least 3-5 years?

• Do you have savings beyond your down payment?

• Is your income stable and predictable?

Buying a home should feel exciting, not financially overwhelming. Understanding the full costs upfront helps you make a confident, informed decision.

2. Set a Realistic Budget (and Stick to It)

One of our top first-time homebuyer tips is to purchase within your means – overbuying is one of the most expensive mistakes homebuyers make.

Just because you qualify for a certain loan amount doesn’t mean you should spend it all. Lenders determine what you can afford based on guidelines. Only you know what feels comfortable month to month. And the lender doesn’t budget for you – only you know how much you spend on other costs throughout the month.

Avoid Becoming “House Poor”

“House poor” is when most of your income goes toward housing costs, leaving little room for other items in your budget. You may be able to afford your mortgage, but only if you can’t afford other necessities like groceries, childcare, car repairs, retirement savings, or emergency expenses.

When you become house poor, you can’t easily afford regular expenses, and you definitely can’t afford fun purchases. This could mean not enjoying vacations, eating out, or hobbies you love. Owning a home shouldn’t mean giving up everything else you enjoy.

Many experts recommend following the one-third rule. This rule states that no more than a third of your monthly income should go towards housing expenses. If you make $5,000 per month, that means you can afford around $1,667 per month for housing expenses.

However, you know your financial needs and habits best. There may be situations where spending a smaller or greater percentage makes sense. Take inventory of your budget and the wiggle room you have to decide on the best house budget for you.

First-Time Homebuyer Budget Example

Let’s say your household brings home $5,500 per month after taxes. An example balanced monthly budget might look like:

• Housing (principal, interest, taxes, insurance): $1,800

• Utilities: $300

• Food: $700

• Transportation: $600

• Insurance (health, auto, etc.): $400

• Childcare or other fixed costs: $600

• Savings (retirement & emergency): $600

• Miscellaneous spending: $500

If your housing payment jumps to $2,500 instead, something else has to shrink.

A good rule of thumb: Leave room in your budget for maintenance and savings. Homeownership works best when it fits comfortably into your life, not when it stretches you thin.

3. Improve Your Credit Before Applying

Your credit score plays a major role in the interest rate you receive on your mortgage. Before applying for a home loan, spend some time building your credit score. Even a small improvement can translate into significant long-term savings.

These are the typical levels of FICO credit scores:

• Poor: 300-379

• Fair: 580-669

• Good: 670-739

• Very Good: 740-799

• Excellent: 800-850

There are several factors that impact your credit score, and some are more important than others. Each of these components contributes a certain percentage to your score: Payment history (35%), amounts owed (30%), length of credit history (15%), new credit (10%), and credit mix (10%).

Taking small steps to improve your credit score can go a long way. Pay attention to the components that hold a heavier weight with your score first, if possible, as working on those will make a bigger difference.

Try these easy credit-improving steps:

• Pay every bill on time (set up autopay if possible).

• Keep credit card balances below 30% of your limit.

• Avoid opening new credit accounts right before applying for a home loan.

• Don’t close old accounts unless necessary.

• Check your credit report for errors and dispute inaccuracies.

• Avoid ‘buy now, pay later’ and pay advance programs

Give yourself a few months before applying if you can. A little preparation goes a long way.

How Much Can a Better Rate Save You?

Imagine you’re borrowing $300,000 on a 30-year conventional loan, and you have a 10% down payment ($30,000).

• With a score of 640, average interest rates fall around 7.0%, as of January 2026. At 7.0% interest, your principal and interest payment is about $2,060 per month.

• With a score of 720, average interest rates are around 6.5%. At 6.5%, it drops to about $1,971 per month.

That’s about a $100 difference each month, or $36,000 over 30 years. But your interest costs also add up over time. With the 6.5% interest rate, you can expect your total interest payments over the life of your loan to be about $32,000 less than they would be with the 7% interest rate.

Small improvements in your credit score can unlock lower rates and better loan options.

4. Work With a Buyer’s Agent Who Helps You Save Money

A buyer’s agent represents you in the homebuying process. They help you:

• Find homes that fit your needs and budget

• Schedule showings

• Write and submit offers

• Negotiate price and terms

• Navigate inspections and contracts

• Get support from a professional experienced in the home purchase process

Understanding Agent Compensation

In the past, both the seller’s and buyer’s agent fees were typically paid by the seller. However, there have been some recent changes to these real estate agent compensation regulations.

Following the National Association of REALTORS® (NAR) settlement, buyer’s agent compensation rules have changed. Buyer’s agent fees are no longer automatically guaranteed to be paid by the seller.

This means:

• Buyers may need to discuss and agree to agent compensation upfront.

• Compensation can be negotiated.

• Some sellers still offer to cover the buyer’s agent fee, especially in competitive or balanced markets, but it shouldn’t be assumed.

Have an open conversation with your agent about how they’re paid before you start shopping.

Why an Agent Can Still Save You Money

Even if you have to pay the buyer’s agent fees in your transactions, it’s usually a worthy investment. Working with an agent can save you valuable time and money in the homebuying process. Insight from a buyer’s agent can also save you from making costly mistakes when you purchase a home.

A skilled agent can:

• Negotiate seller concessions (like closing cost credits).

• Help you avoid overpaying in a bidding war.

• Spot red flags in contracts.

• Guide you through inspection negotiations.

In many cases, strong negotiation skills alone can offset their fee.

However, not all real estate agents are the right fit. Ask friends and family for recommendations, and talk to several agents before deciding to work with one. Look for someone who not only brings experience but also works well with you and your homebuying needs.

5. Consider a Low or No Down Payment Loan

Many first-time buyers believe they need 20% down. In reality, that’s a myth. In fact, the median down payment for first-time homebuyers in 2025 was 10%, according to data from the NAR. While putting 20% down can save you from paying mortgage insurance, it’s not required. And you may be able to buy a home sooner if you don’t need to set aside so much cash for your down payment.

Several loan options allow much lower down payments:

• FHA loans: As little as 3.5% down.

• USDA loans: 0% down for eligible rural areas.

• Conventional loans: Some programs allow 3% down.

Putting your extra savings towards an emergency fund rather than a larger down payment can better prepare you for homeownership. It’s not typically a good idea to drain your savings for a higher down payment. When you own a home, it’s important to have cash reserves for repairs, emergencies, job changes, and other life events that may impact your ability to make your monthly mortgage payment. If you put all your cash into a down payment, you can’t access it if you need extra money for circumstances like these.

Making a smaller down payment can be more financially secure than putting every dollar you have into your down payment. A trusted lender can help you compare the total cost of different loan options.

6. Look for First-Time Homebuyer Assistance Programs

Many first-time buyers don’t realize there are programs designed specifically to help them. Banks and other lenders, state and local housing departments, and local nonprofits often provide grants or other programs to give first-time homebuyers a hand in purchasing a home.

Assistance programs may offer:

• Down payment grants (money you don’t repay)

• Forgivable loans

• Low-interest second mortgages

• Lender credits toward closing costs

Some of these programs may even offer other unique benefits. For example, the Maryland state housing department has a program that will contribute up to $20,000 towards student loan payoff when you purchase your first home.

Eligibility often depends on income, location, and purchase price. Check with your lender for recommendations of programs like these. These programs can significantly reduce the amount of cash you need upfront.

7. Compare Multiple Loan Estimates

Once you’re under contract on a home, lenders provide a loan estimate. This document outlines:

• Your interest rate

• Monthly payment

• Closing costs

• Cash needed at closing

It’s one of the best tools for comparing lenders. This can also be a helpful step towards negotiating with your lender. You can leverage better loan estimates from one lender to try to get costs down with another lender.

A lower interest rate doesn’t always mean lower overall costs. One lender may offer a slightly lower rate but charge higher upfront fees. Another may offer lender credits that reduce your closing costs.

Comparing loan estimates side by side helps you see the full picture.

At Neighbors Bank, transparency matters. Asking questions and understanding your loan estimate isn’t just encouraged, it’s smart. The goal isn’t just to close your loan. It’s to make sure you feel confident about it.

8. Don’t Skip the Home Inspection

A home inspection is one of the smartest small investments you can make.

The average cost of a home inspection is $343, according to data from Angi, but this can vary depending on the size and location of the home. While that may feel like “just another fee,” it can save you thousands.

An inspector evaluates:

• Roofing

• Plumbing

• Electrical systems

• HVAC

• Foundation

• Appliances

A home inspector is trained to find damage or needed repairs in the home. Their report can help you negotiate the purchase price or leave a purchase contract because there are significant repairs needed.

Inspection vs. Appraisal

A home inspection is different from a home appraisal. Both processes are part of the home purchase process, but one is typically purchased by the homebuyer while the other is part of the lending process.

• A home inspector checks the home’s condition and helps the buyer determine if it’s a good investment. In some cases, the seller may purchase a home inspection to provide transparency and help with the sale.

• A home appraiser determines the home’s value for the lender to ensure the home is sufficient collateral for the loan. The appraiser is a third party sent by the lender.

Both are important, but only the inspection protects you from hidden problems.

If the inspection reveals issues, you may be able to negotiate repairs or request a price reduction. A skilled buyer’s agent can help you understand your inspection report and use it to negotiate, if needed.

Free Resources for First-Time Homebuyers

You don’t have to learn everything alone. A final thought in our list of money-saving tips for first-time homebuyers: use your (free) resources. There are many trusted, free resources available to guide you.

Fannie Mae: HomeView® Homebuyer Education

Fannie Mae offers HomeView®, a free online homebuyer education course covering:

• Budgeting

• Credit

• Mortgage basics

• The full homebuying process

The course is self-paced and beginner-friendly. Some loan programs even require completion of a homebuyer education course to qualify, so taking it can prepare you and potentially unlock eligibility for certain loan types or homebuyer assistance programs.

HUD: Find a HUD-Approved Housing Counselor

The U.S. Department of Housing and Urban Development (HUD) provides access to approved housing counselors who offer free or low-cost guidance.

Counselors can help you:

• Review your budget

• Understand loan options

• Create a savings plan

• Prepare for homeownership

Use their search tool to find a counselor near you.

Get Started At Your Pace

Whether you’re still building your credit, saving for a down payment, or ready to start house hunting, we’re here to walk through it with you.

At Neighbors Bank, we believe homeownership should be achievable, and that starts with clear answers and real support, including free credit counseling to help you feel confident about your next step. When you’re ready, get prequalified online and see how close you might be to owning a place to call home.