PHOENIX, August 07, 2025 –– Buying your first home is a big deal. In fact, it’s one of the most important financial commitments you’ll likely make. Yet many first-time homebuyers enter the process without a clear understanding of what financial steps to take beforehand.
“New buyers often get caught up in the excitement of house-hunting and overlook the importance of fully grasping their finances,” said Manuel Salazar, CEO of Take Charge America, a nonprofit credit and housing counseling agency. “Laying the proper groundwork before applying for a mortgage will support a smoother homebuying journey and better long-term financial health.”
Salazar shares tips to help first-time buyers prepare:
Build strong credit. Credit scores are one of the first things lenders review. A higher score typically means lower interest rates and better loan terms. Aim for a score of at least 620 (ideally 700 or above) before applying for a mortgage, and review credit reports early to correct any errors that could hurt your chances.
Pay down existing debt. Your debt-to-income (DTI) ratio, or how much you owe versus how much you earn, plays a major role in mortgage approval. The lower your DTI, the more lenders will trust your ability to take on a mortgage — so pay off as much debt as you can.
Save for a down payment and closing costs. While putting 20% down isn’t always required, contributing more up front can reduce monthly payments and other costs down the road. Struggling to save? Down payment assistance programs can help. And don’t forget to budget an additional 2%–5% of the home’s price to cover closing costs like inspections, insurance and lender fees.
Reserve emergency funds. It’s inevitable: Homeownership comes with surprise expenses. Set aside three to six months of your typical spending as a “just in case” financial cushion.
Create a realistic post-purchase budget. Beyond the mortgage, factor in costs such as property taxes, insurance, utilities, maintenance, repairs and HOA fees before you start shopping.
Seek out housing counseling and education. Take advantage of free resources offering outside perspective on your finances, plus guidance throughout the homebuying process.