Buying your first home is an exciting step in your financial journey. Making an investment in your own property means you own an asset and you are putting money in building equity for yourself instead of someone else. While it is likely the largest purchase you have ever made, it is one that can benefit you for years to come.

As you begin the process, you may be intimidated by the outdated notion that you have to have an exceptional credit score, very high income, and a 20 percent down payment to put down. Nowadays, that simply is not the case. In fact, as a first-time homebuyer you are in a uniquely advantageous position to make a purchase.

From first-time buyer programs to more lenient lending terms, there are plenty of ways to make your first home-buying experience a financial success. Below you will find some critical steps to follow to guide you through the process:

Step 1: Evaluate Your Financial Health
Before you begin looking for houses, you need to ensure that you are in good financial health. In addition to verifying that you can afford the costs that accompany purchasing a home like monthly mortgage payments, homeowner’s association fees, and maintenance, being in the best possible financial position can also help you qualify for a better interest rate on your home loan.

The first thing you should do when you begin this process is closely analyze your budget and determine how much discretionary income you currently have available and how your estimated mortgage would impact your expenses. If it’s a direct substitute for your rent, or close to it, then that is optimal. But keep in mind, many of the costs that are currently covered by your landlord or property manager will now be your financial responsibility.

Carefully breaking down your expected costs and other aspects that may impact your finances in the near future is essential to ensuring you do not enter into a commitment you cannot afford.

Step 2: Save for a Down Payment & Closing Costs 
In most cases, you will need a down payment to purchase a home. However, if you apply for a first-time buyer program, you will likely be able to put down a much smaller down payment than you otherwise would. In addition to a down payment, you will also have to pay closing costs, which can be several thousand dollars depending on the cost of the home.

Whatever the case may be, it is wise to begin saving as soon as possible if you do not have a safety net already. Establishing a plan with set, measurable goals can help you save for your down payment faster, pay off debt, and create greater financial stability leading up to your purchase.

Step 3: Research Your Mortgage Options
In addition to traditional home loans, there are many more mortgage options that are more flexible if you do not have the ideal financial history but can afford to buy a home. This includes a variety of mortgage programs that are specifically designed for first-time homebuyers, including:
  • FHA loans
  • USDA home loans
  • VA loans
  • HomePath ReadyBuyer Program
  • State-based first-time buyer loans
  • Local first-time buyer programs
If you or your spouse are an active service member or veteran, you should reach out to a VA lender to learn more about VA loans for buying your first home. These loans are a benefit exclusively for those who have served and are guaranteed by the Department of Veteran Affairs to help make homeownership attainable with much better terms.

In addition to down payment assistance, many first-time buyer programs offer more favorable interest rates, closing cost assistance, and loan forgiveness.

What Next?
Once you have made your financial preparations, you can move forward with the more exciting part of the home-buying process. Before you go out and hire a realtor, take the time to determine what type of property you want to buy, which neighborhoods you are willing to consider, and what the non-negotiable features are. This will help you save time during your search and avoid tempting you to consider purchasing something that is outside of parameters or price range.

With the right planning in place, you can find the perfect first home and protect your financial health.