Your Step-By-Step Path To Buying a Home
Buying a home doesn’t have to feel overwhelming. This simple Homebuying Guide walks you through everything you need to know — from setting your budget and understanding credit to choosing the right loan program and preparing for closing. No confusing jargon, no complicated math — just clear steps that help you feel confident.
1
Start With Your Budget
Before you look at homes, start with your budget. The key number lenders use is your Debt-To-Income (DTI) Ratio — the percentage of your monthly income that goes toward housing and other debts.
What counts as debt?
- Mortgage payment (principal, interest, taxes, insurance, PMI, HOA)
- Credit cards
- Student loans
- Court-ordered payments
- Auto loans
- Personal loans
A comfortable DTI for most buyers is 40%–45%, though some programs allow higher.
To estimate your max monthly payment:
Gross Monthly Income × 0.45 = Safe Housing Budget
Pro Tip: Paying off one or two small debts can increase your approval amount more than increasing your down payment.
2
Check Your Credit
Your credit score and history play a major role in your mortgage approval and interest rate.
- Credit score (based on payment history, balances, credit mix, and inquiries)
- Monthly credit obligations
- Public records (bankruptcies, foreclosures, major judgments)
Typical minimum score ranges:
- FHA 580+
- Conventional: 620+
- VA: 620+ (varies)
- Jumbo: 680+
Higher scores usually mean lower rates, lower PMI, and more flexible loan options.
Pro Tip: A lender’s full credit pull (tri-merge report) is far more accurate than the score in your banking app.
3
Understand Your Income
Not all income is counted the same way in a mortgage application. Lenders need income that is stable, documentable, and likely to continue
Income That Counts:
- W-2 / Salaried: Base income counts fully
- Hourly: Based on current schedule + historical average
- Overtime / Bonus / Commission: Averaged over 24 months
- Self-Employed: Based on tax returns, business profit, and add-backs
- Fixed Income: Social Security, pension, long-term disability
- Rental Income: Based on leases or tax returns (often 75% of rent counts)
Income that usually does not count: short-term gig earnings, temporary unemployment, undocumented cash income.
Pro Tip: Provide 2 years of tax returns + W-2s/1099s + recent pay stubs for the most accurate pre-approval.
4
Plan Your Down Payment
Your down payment can be as little as 0% depending on your loan program.
Common down payment requirements:
VA Loans:
- VA Loans: 0% down
- USDA Loans: 0% down (eligible areas)
- FHA Loans: 3.5% down
- Conventional Loans: 3–5% down
- Jumbo Loans: 10%+ down
Accepted down payment sources:
- Personal savings
- Retirement accounts (401k/IRA loans or withdrawals)
- Gift funds from family
- Equity from selling your home
- Down payment assistance programs (DPA)
You don’t always need 20%. In many markets, waiting to save 20% can cost more than buying now with 5–10%
5
Know Your Monthly Payment
Your mortgage payment includes more than just principal and interest. A full monthly payment typically includes:
- Principal & Interest
- Property Taxes
- Homeowners Insurance
- Private Mortgage Insurance (PMI)
- HOA Fees (if applicable)
Many online calculators don’t include taxes, insurance, or PMI — which means the payment shown is much lower than reality.
Pro Tip: Ask for a real lender estimate that includes all payment components so you know exactly what to expect.
6
Compare Loan Programs
The best mortgage is the one that fits your goals, timeline, and financial profile.
FHA Loans
- 3.5% down
- Flexible credit requirements
- Great for first-time buyers
Conventional Loans
- 3–5% down
- PMI can cancel once you reach 20% equity
- Better rates for strong credit
VA Loans
- 0% down
- No monthly PMI
- Powerful benefit for eligible Veterans
Jumbo Loans
- Higher loan limits
- Typically need stronger credit and larger down payment
Non-QM Loans
- Bank statement loans
- Investor DSCR loans
- Flexible programs not based on tax returns
7
The 10-Step Homebuying Process
Simple, clear, and stress-free when you follow the right steps.
Talk to
a lender
Write
offers
Sign Closing Document
Get Pre
Approved
Open
Escrow
Get your
keys
Hire a real estate agent
Order inspection & appraisal
Start home
shopping
Lock Your
Rate
8
How To Stay Qualified While You Shop
One wrong move can delay or deny your loan — so check with your lender before making big financial changes.
Do's
- Keep deposits stable
- Pay bills on time
- Respond quickly to document reque
- Keep your job/hours stable
Dont's
- Buy a car
- Open new credit cards
- Move money between accounts without explanation
- Make large cash deposits
FAQs
Frequently
Asked Questions
Still have a question?
JLLendingTeam: A collaborative group specializing in providing tailored lending solutions and financial support for clients.
How much house can I afford?
Most buyers stay in the 40–45% DTI range for comfort.
Do I need 20% down?
No — most programs allow 0–5% down.
How long does the homebuying process take?
Typically 30–45 days once under contract.
What are closing costs?
Usually 2–3% of the purchase price including lender, title, escrow, and prepaid taxes/insurance.
Still have a question?
JLLendingTeam: A collaborative group specializing in providing tailored lending solutions and financial support for clients.