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Buying a home, step by step

Six steps from credit check to closing day, with a calculator at each one.

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Score my mortgage readiness

1. Improve your credit

Your credit score is the biggest single lever on your mortgage rate. A 40-point improvement on a $400,000 loan saves roughly $100 a month, or $36,000 over 30 years. Check your score, reduce utilization and dispute any errors before you start shopping.

  1. Credit Score Simulator
    The effect of paying down balances or opening new credit.
    Calculator
  2. Utilization Optimizer
    The balance per card that reaches your target score.
    Calculator
Rule of thumbAim for 760 or above to qualify for the best conventional rates.
Check my mortgage readiness

2. Save your down payment

A 20% down payment removes PMI, which costs about 0.5% to 1.5% of the loan amount a year. The FHA minimum is 3.5%, and some conventional programs accept 3%. Run the numbers on what waiting 6 to 12 months to save more would change.

  1. Emergency Fund Calculator
    Check that saving the down payment does not leave you cash-poor at closing.
    Calculator
  2. Buy Now vs Wait
    A five-year cost model of buying now against waiting to save more.
    Calculator
Rule of thumb20% down avoids PMI. 10% to 19.9% still gets strong rates. Under 10%, add PMI to your monthly budget.

3. Find the right loan program

FHA, VA, USDA and conventional loans have different eligibility rules, rates and costs. Veterans should almost always use their VA benefit. FHA allows lower credit scores but requires mortgage insurance. USDA has income limits but no down payment.

  1. Loan Program Finder
    Eight questions to see which programs you qualify for.
    Calculator
Rule of thumbVA loans have no PMI and no minimum down payment. If you qualify, it is the best deal in mortgages.
Read: Fixed vs adjustable-rate mortgages

4. Get pre-approved

Pre-approval strengthens your offer and shows the number lenders will approve. It differs from pre-qualification: you provide documentation and the lender verifies income, assets and credit.

  1. Home Affordability Calculator
    Your affordability before the lender works it out: DTI, PMI and cash to close.
    Calculator
Documents to gather
  • Last 2 years of tax returns
  • Last 2 pay stubs
  • Last 2 bank statements
  • W-2s or 1099s
  • Employment verification letter
Rule of thumbLenders approve more than most people can comfortably afford. Base your number on your budget rather than their limit.
Read: The true cost of homeownership

5. Shop homes and make an offer

In competitive markets, financing in order, clear limits and a decisive mindset win. Do not bid beyond the maximum you set in advance. Inspection contingencies protect you; in most situations, keep them.

Rule of thumbLocation and structure over cosmetics. Paint and fixtures are cheap; school districts and commutes are fixed.
Read: Earnest money and contingencies, Condos vs townhouses vs single-family, Buying a co-op apartment, House hacking explained

6. Close and maintain your home

Closing costs run 2% to 5% of the loan amount. After closing, watch rates for a refinance: a 1-point drop on a $400,000 loan saves about $240 a month and typically breaks even within 24 months.

  1. Refinance Analyzer
    Break-even months and lifetime interest savings on a refinance.
    Calculator
Rule of thumbSet aside 1% to 2% of the home value each year for maintenance. Houses cost more than the mortgage.
Read: Closing costs explained, Flood insurance explained, First-time home buyer guide

Are you ready to buy?

The Mortgage Readiness Score rates your credit, DTI, down payment and cash reserves in about 4 minutes, with a verdict and next steps.

Educational disclaimer. Everything on WealthSerene.com is educational and is not investment advice. Projections and calculations are illustrative; actual results depend on market conditions, your situation and factors outside this tool’s scope. For a decision specific to your situation, consult a qualified financial professional. View full disclosures