Finance Blog

Buying a Home? 5 Things Every First-Time Homebuyer Must Do

Written by Ilyce Glink on July 15, 2013 in Real Estate  |   6 comments

Buying a home is exciting, but it can also feel overwhelming. Before you take the plunge into the real estate market, learn what you can do to prepare yourself and your finances for one of the biggest purchases you’ll ever make.

First-time homebuyer, buying a homeIf buying a home is in your not-so-distant future, now is the time to get your finances in order for the big purchase. In doing so, you can avoid many of the stressors other first-time homebuyers face.

According to TD Bank’s Mortgage Service Index, released in April, 69 percent of homebuyers find buying a home to be stressful, with about one-quarter of those surveyed describing home buying as “extremely” or “very stressful” and 45 percent classifying the process as “somewhat stressful.”

To make the home-buying process run as smoothly as possible—and to keep your sanity long enough to enjoy your new place—consider these five tips to start preparing your finances now:

1. Order a copy of your credit report.

Credit is one of the first things lenders assess in a prospective homebuyer, so pull a copy of your credit report to get an idea of where you stand. Every consumer is entitled to one free credit report each year from each of the three national credit reporting agencies through annualcreditreport.com. To access your credit score, you will need to pay about $9.

Mortgage lenders will evaluate your credit based on your FICO Score, which will be close, but maybe not identical, to the credit score you access through annualcreditreport.com. By knowing your current credit score, you’ll get an idea of how your credit history will look to a lender, and it will help you shop around before applying for a loan.

2. Address any issues or discrepancies on your credit report.

Reducing your debt can reflect positively on your credit history, so make sure that all of your accounts are in good standing (which means you have paid at least the minimum balances).

Any inaccurate information in your credit report may also impact your credit score. If you have been a victim of fraud, or if a creditor incorrectly reports your account as delinquent, it may harm your score and affect the terms and interest rate of your loan.

If any of your account information is incorrect, you can file a dispute with the credit reporting agency for free. At Equifax, you can file your dispute online, by mail, or by phone. You can also contact your creditor directly to dispute inaccurate information.

3. Figure out what you can afford.

You should plan to spend between 25 percent and 33 percent of your gross monthly income on just your housing expenses, depending on how conservative you want to be with your finances.

Comparatively, mortgage lenders generally agree you can pay between 28 percent and 36 percent of your gross income in total debt service. This means that your mortgage principal and interest payments, along with your other debt payments, can’t be more than 36 percent of your gross monthly income.

Remember to keep a close eye on mortgage interest rates, which are likely to climb until they return to their normal 6 percent or 7 percent and could affect how much you can afford.

4. Set a savings goal.

Once you know what you can afford, take a hard look at your current lifestyle and determine how much you need to save—and where you can make some cuts. Reducing unnecessary daily expenses, like buying gourmet coffee or eating meals out, can turn into big savings each month.

If you are saving up for your down payment, you will need at least 3.5 percent of the purchase price in cash for an FHA home—more if you’re using conventional financing—and you also need to account for closing costs and the price tag that will come with your move.

It can be tempting to borrow money from your retirement savings to put toward a down payment, but you may want to think twice about doing so. Borrowing now from your 401(k) or IRA means you’ll have to reimburse your retirement account later, after you’ve taken on the extra expense of a mortgage.

If you do borrow from your 401(k) or other retirement accounts, borrow only a small percentage and pay it back within a few years, with interest.

5. Educate yourself on current lending guidelines, and collect all the information you need to present to a lender.

As you prepare for the big purchase, work on getting all of your documentation together so you are ready to apply for your home loan. You’ll find current copies of lending guidelines online for Freddie Mac, Fannie Mae and the Federal Housing Administration.

Gather and organize all of the documents your lender will need, like W2 forms; copies of completed federal tax forms for the last two or three years; copies of one month’s worth of pay stubs; and copies of the last two or three bank statements for every bank account, IRA, 401(k), or other retirement or brokerage accounts.

By preparing now for your home purchase, you can avoid the hassles that come with buying a home.

What other tips do you have for first-time homebuyers? Share them in the comments.

Ilyce Glink is the author of ten books, including the bestselling 100 Questions Every First-Time Home Buyer Should Ask. Her nationally syndicated column, “Real Estate Matters,” appears in more than 125 newspapers and Websites, and her online “Ask Ilyce” columns are read by hundreds of thousands of people every month. She is a top-rated radio host on WSB Radio in Atlanta, the Home Equity blogger at CBS MoneyWatch.com, host of the Internet program “Expert Real Estate Tips,” managing editor of the Equifax Personal Finance Blog, and publisher of ThinkGlink.com.


  1. Darryl Gaylor says:

    Equifax, you have dropped me from your database! Each time I try to fix this you state you cannot find my membership. I explain that you dropped me and the problem does not get fixed.

    • EFX Moderator, KB says:

      Darryl Gaylor, we would like to help address your matter. You can send your matter/inquiry, along with your legal name, city/state, & email address used for your Equifax registration, to equifaxsupport@facebook.com. A Customer Support agent will respond to you directly.

  2. Drew says:

    Before you buy or even think about buying a home you should pull a Housefax report on the property. It’s just like a Carfax on a car. Lets you know about all sorts of issues your new home could have encountered before someone possibly fixed it and didn’t bother telling you about it. From water damages to fire incidents; the list goes on and on.

  3. Jennifer says:

    What is the Equifax phone number and mailing address for filing a credit report dispute?

Leave a Comment

Name :

Commenting guidelines

We welcome your interest and participation on this forum, but be aware that comments will be published at Equifax's sole discretion. Please don't use this blog to submit questions or concerns about your Equifax credit report or raise customer service issues. Instead, you should contact Equifax directly for all such matters and any attempts to do so in this forum will be promptly re-directed.

Some other factors to consider when commenting:
  1. Registration and privacy. While no registration is required to visit our forum, participants wishing to post a message must register by creating an account. All personal information provided by forum members incident to registration is governed by our Terms of Use and Privacy Policy.
  2. All comments are anonymous. We'll delete your name, e-mail address, and any other identifying information, including details about your investments.
  3. We can't post or respond to every comment - As much as we'd like to, we can't post every comment, nor can we guarantee that we will respond to each individual message. All questions or comments about your Equifax credit report or similar customer service issues should be handled by contacting Equifax directly.
  4. Don't offer specific legal, tax or financial advice. All of the materials on this Site are for information, education, and noncommercial purposes only and this forum is not intended as a means of expressing views or ideas regarding any specific legal, tax, or investment advice. While offering general rules of thumb is both permitted and encouraged, recommending specific ideas or strategies regarding investments, taxes, and related matters is prohibited.
  5. Credit Repair. This blog is not intended as a venue for the discussion or exchange of ideas regarding credit repair or other strategies intended to assist visitors and community members improve or otherwise modify their credit histories, ratings or scores.
  6. Stay on topic. Your comment should be concise and pertain to the specific post in question.
  7. Be respectful of the community. The use of profanity, offensive language, spam, and personal attacks will not be tolerated and egregious or repeat offenders will be banned from future participation. We encourage disagreement and healthy debate, but please refrain from personal attacks on our WordPresss and contributors.
  8. Finally: Participation in this forum may be terminated by Equifax immediately and without notice for failure to comply with any guidelines or Terms of Use. As such, you should familiarize yourself with all pertinent requirements prior to submitting any response through the blog or otherwise. All opinions expressed in this forum are solely those of the individual submitting the comment, and don't necessarily represent the views of Equifax or its management.

Equifax maintains this interactive forum for education and information purposes in order to allow individuals to share their relevant knowledge and opinions with other members and visitors. We encourage you to participate in discussions about personal finance issues and other topics of interest to this community, but please read our commenting guidelines first. Equifax reserves the right to monitor postings to the forum and comments will be published at our discretion. Do you have questions or comments about your Equifax credit report or customer-service issues regarding an Equifax product? If so, please contact Equifax directly. All opinions and information expressed or shared in blog comments are solely those of the person submitting the comments, and don't necessarily represent the views of Equifax or its management.

Real Estate Archive

Stay Informed Sign up for our FREE Equifax email Newsletter