How To Get Your First Mortgage

Buying your first home is an exciting milestone—and one of the biggest financial decisions you’ll ever make. It’s exciting, but let’s be real: Navigating the mortgage process for the first time can feel overwhelming. From understanding loan options to budgeting for costs you didn’t even know existed, there’s a steep learning curve.

The good news? You don’t need to figure it all out in one sitting. This guide breaks down the essential steps to getting your first mortgage, so you can feel more prepared, less stressed and confident in every decision you make along the way.

Step 1: Understand What a Mortgage Is

Unless you’ve recently won the lottery, you’re probably not buying your first home with a suitcase full of cash. That’s where a mortgage comes in.

A mortgage is a type of loan used to purchase property. What makes it different from other loans—like a personal loan or auto loan—is that it’s secured by the home itself. That means your house acts as collateral: If you don’t keep up with the payments, the lender can foreclose on the property and sell the home to recover their money.

That sounds intense, but it’s how millions of Americans afford to buy homes. Understanding this up front helps you see a mortgage not as a trap, but as a financial tool that, when used wisely, can open the door (literally) to long-term stability and wealth building.

Types of mortgages

You may qualify for various types of mortgages. Before narrowing in on one choice, compare your options and assess the pros and cons of each.

The common options are:

• Conventional mortgages: You can get conventional mortgages from banks, credit unions and nonbank lenders. Conventional loans are the most common type of mortgage, and they include most mortgages that aren’t part of a government-backed program.
• Nonconforming loans: Conventional loans that don’t conform to certain guidelines are called nonconforming loans. For example, a jumbo loan is a conventional loan that’s larger than the conforming rules allow. Nonconforming loans tend to have stricter requirements or higher interest rates than conforming conventional loans.
• Government-backed loans: Federal agencies support several loan programs that can make it easier for qualifying individuals to get a mortgage and buy a home. Federal Housing Administration (FHA), Department of Veterans Affairs (VA) and U.S. Department of Agriculture (USDA) programs are three options. They tend to be for first-time homebuyers, veterans and people who want to live in rural areas, respectively.
• State and local programs: As a first-time homebuyer, look for local and state assistance programs that might help you get a mortgage, cover part of your down payment or subsidize your monthly payment. These programs tend to be for low- and moderate-income households.

Step 2: Assess Your Financial Readiness

Before applying for a mortgage, take a close look at your financial picture. Lenders will evaluate several factors to decide how much they’ll lend you and the loan’s interest rate, but three are especially important:

• Your down payment: This is the portion of the home’s price you pay up front. The required down payment can vary—and some mortgage loans don’t require any down payment—but it’s often around 3% to 5% of the purchase amount. However, putting down at least 20% can help you get better rates and avoid extra costs, like mortgage insurance.
• Your credit scores: Mortgage lenders may pull your credit reports and scores from all three major credit bureaus (TransUnion, Equifax and Experian). Credit score requirements can vary depending on the type of mortgage and your down payment, but a higher score will generally help you qualify for the best loans.
• Your debt-to-income (DTI) ratio: This measures how much of your monthly income goes toward debt payments. Lenders will compare your gross monthly income (before taxes and withholdings) to your monthly housing and debt payments. If your DTI is above 36%, you might not qualify unless you have a high credit score.

In general, a larger down payment, higher credit scores and lower DTI can help you qualify for the best offers.

Suggested next steps

• Review your monthly income and debt payments to calculate your debt-to-income ratio.
• Start saving for a down payment. Set up a separate high yield savings account just for your house fund, and consider automating transfers each payday to build momentum.
• Check your credit scores from all three bureaus. You can also find out one of your credit scores and how to improve it when you enroll in Synchrony’s free credit score program with VantageScore®.

READ MORE: What Is a Credit Score and Why Is It Important?

Step 3: Budget Beyond the Mortgage Payment

Many people focus on how much they should save for their down payment, but it’s not the only cost to consider. Other homebuying expenses can sneak up on you if you’re not prepared:

• Closing costs: These fees cover things like lender charges, title services, attorney’s fees and taxes. They typically total around 2% to 5% of the loan amount, but can vary depending on the type of loan and lender. If you can’t afford the closing costs, you might be able to “wrap" (add) them into your mortgage, but that will increase your monthly payment.
• Prepaid and supplemental property taxes: Your property taxes can depend on the home’s value, and you can look up property tax rates in the areas where you want to live. You may need to prepay several months’ worth up front, especially if you’re paying the taxes through your loan servicer. Additionally, you may have supplemental property tax bills if you purchased the home for more than its previously assessed value.
• Prepaid homeowners insurance: Insurance rates can vary significantly depending on the home and its location. You may also want or need to purchase additional insurance, such as flood or earthquake insurance, from state insurance programs. In addition to paying the premiums for your policy, you may need to prepay several months’ worth of premiums if you’re paying for insurance through your loan servicer.
• Mortgage insurance: Government-backed mortgages and some conventional mortgages require you to purchase an additional insurance policy that protects the lender. There may be an up-front cost plus monthly premiums for the policy.
• Required repairs: Depending on where you purchase a home and the home’s condition, you may be required to make certain repairs or improvements to satisfy the lender’s conditions or the local government’s requirements.
• Optional move-in costs: You may also want to budget for a few niceties, such as furniture, appliances or other changes that are easier to make before you move in, such as painting or a deep clean.

Suggested next steps

• Estimate your closing costs and start saving now. Consider using bucketing as a savings strategy.
• Get quotes for homeowners insurance.
• Check local property tax rates in areas you’re considering.
• Create a moving budget (moving costs, repairs, paint, furniture, etc.).
• Research whether mortgage insurance will apply to your situation.

Step 4: Budget for the Ongoing Cost of Homeownership

Once you own a home, your monthly budget will likely look very different from when you were renting. Yes, you will now have a mortgage payment, but also be ready to pay for:

• Insurance and property tax payments: You may be allowed or required to include these in your monthly mortgage payment. The mortgage servicer will hold the money in an escrow account and then pay the bills. Otherwise, you’ll need to manage those payments yourself.
• Maintenance and repairs: Even if your home is in great shape, things break. Setting aside money in an emergency fund can help you avoid scrambling later.
• Utilities: Heating, cooling, water, trash, internet and other utilities add up, and you can often expect to pay more than you did while renting.
• New subscriptions: Consider whether you’ll want any new services once you’re in a home, such as a cleaning service, landscaping or security system.
• Homeowners association (HOA) dues: You may have to pay monthly HOA fees if you buy a condo or home with an HOA.

As a general rule, some financial experts and lenders suggest keeping your monthly housing expenses under 28% of your gross income and your total debt (including housing, car loans, credit cards, etc.) under 36%.

Suggested next steps

• Add estimated property taxes, utilities, HOA fees and homeowners insurance to your future monthly budget. Can you realistically make it all work?
• Include a line in your future budget for maintenance and repairs.
• Use the 28/36 rule to test affordability: Keep housing costs under 28% of your gross income, and total debt payments under 36%.

Step 5: Explore a Fixed vs. Variable Rate Mortgage

As a first-time buyer, you don’t need to have all the answers, but it helps to know the landscape. Most loans fall into two categories:

• Adjustable-rate mortgages (ARMs): The rate is fixed for a few years, then adjusts periodically based on the market. ARMs can start with a lower rate, but your payment could increase later. For example, with a 7/6 ARM, the interest rate is fixed for seven years and then adjusts every six months.
• Fixed-rate mortgages: Your interest rate stays the same for the life of the loan, which can be up to 30 years. It’s predictable, stable and great if you plan to stay put. However, many people move or refinance their mortgage (replace their mortgage with a new one) during those 30 years.

In general, an ARM might offer a lower rate than a comparable fixed-rate loan. However, a fixed-rate loan could be less risky if you’re unsure of your plans.

Many types of loans are available as ARMs or fixed-rate loans, including most conventional loans and government-backed options. But you don’t need to decide what type of mortgage you want to get at the start. Working with a loan officer or loan broker can help you determine which one could make sense based on your circumstances.

Suggested next steps

• Decide if you prefer the stability of a fixed-rate loan or the flexibility of an ARM.
• Research common types of mortgage loans.
• Make a note of any local or state first-time homebuyer programs you might qualify for.

READ MORE: Fixed vs. Variable Interest Rates: What’s the Difference?

Step 6: Compare Mortgage Lenders

When you’re shopping for a mortgage, you’ll typically work with one of two professionals:

• Loan officers work for a specific bank, credit union or lender. They can walk you through that institution’s products and may have inside knowledge on underwriting or in-house programs.
• Loan brokers don’t work for a specific lender. Instead, they collect your info and shop around with multiple lenders to help you find the best deal.

Both types of professionals can help you compare different offers and types of mortgage loans, and there are pros and cons to working with loan officers and brokers.

For example, loan brokers can sometimes save you time by taking all your information and comparison shopping. But a loan officer might be in a better position to tell you about the lender’s down payment assistance programs or work with you to get through the lender’s underwriting process quickly.

At this point, you don’t have to narrow it down to a single choice. Compare offers from multiple loan officers and brokers to see who can get you the best deal, and whom you enjoy working with most.

Suggested next steps

• Prepare questions to ask a loan officer or mortgage broker: What loan types do you qualify for? Do any come with down payment assistance? Does the lender charge a prepayment penalty? Make a list of questions related to your specific situation.
• Reach out to at least three lenders or brokers to compare interest rates, fees and customer experience.

Step 7: Get Preapproved or Prequalified for a Mortgage

Getting preapproved or prequalified for a mortgage can help you compare mortgage offers. Mortgage lenders sometimes use the terms differently, but prequalification is typically a quick estimate based on unverified information. In contrast, preapproval involves a thorough credit check and document review to provide a more accurate loan amount and interest rate.

Preapproval takes more effort up front, but it gives you a clearer sense of how much you can borrow and what your monthly payments might look like. Doing this early on can also give you time to improve your credit or financial situation to help you qualify for a better offer later.

A heads up: You may need to agree to a credit check, and the resulting hard inquiries could temporarily impact your credit scores. However, multiple hard inquiries for mortgage applications get treated as a single hard inquiry if they happen in a short period, such as 14 days. So try to group your applications within that time frame to minimize impact.

Suggested next steps

• Decide whether to start with prequalification or go straight to preapproval.
• Collect your ID, income documents, bank statements and debt info in advance.
• Apply with multiple lenders or brokers within a 14-day window to compare offers and minimize credit score impact.
• Ask each lender what their process involves and how long your preapproval will be valid.

Step 8: Decode the Numbers: Rates, Points and Credits

As you compare offers, pay close attention to whether the offer includes points or credits. Points are up-front fees you pay to a mortgage lender to lower your interest rate.

Conversely, credits are incentives from the lender that you can put toward your closing costs in exchange for accepting a higher interest rate. In either scenario, you can estimate the immediate and long-term costs to calculate your break-even point.

Suggested next steps

• Ask each lender if their quoted rate includes points or credits.
• Use a mortgage calculator to estimate your monthly payment and total cost over time at different rate scenarios.
• Calculate your break-even point, which is how long you need to stay in the home for points or credits to make financial sense.
• Don’t just chase the lowest rate without comparing the full offer, including fees and up-front costs.

Step 9: Find a Home That Fits Your Budget, Not Just Your Dreams

It’s time to start house hunting! Work with a real estate agent or look online for homes that fit your budget. If you look at sites like Zillow or Redfin, search for recently sold homes to see the actual purchase price instead of the listing price.

A real estate agent can also help you understand how things work in your local market. For example, in some areas, the buyers may have to waive contingencies and be preapproved to make a competitive offer. In others, sellers may be willing to offer concessions, such as covering some of your closing costs.

It’s easy to fall in love with a home that stretches your budget. Stay focused on what you can comfortably afford, not just what you can technically qualify for.

Suggested next steps

• Use your preapproval amount as a ceiling, not a goal. Leave room in your budget for home repairs, maintenance and unexpected costs.
• Search for recently sold homes in your target neighborhoods to get realistic pricing.
• Interview and hire a real estate agent who has experience with first-time buyers.
• Prioritize your needs versus wants so you can move quickly when the right home comes up.

Step 10: Submit a Mortgage Application

Once you find a home you like, it’s time to submit your offer. If the seller accepts, be prepared to move quickly. In addition to working through a checklist of to-dos with your real estate agent, you’ll work with your loan officer or broker to complete the loan underwriting process, which may include the following:

• If you were preapproved and some time has passed, you may need to update your financial documents or resubmit identification, income or asset information.
• The lender may have additional requests, such as a gift letter if a friend or family member is helping you with the down payment.
• You may be able to lock in your mortgage rate at this time, guaranteeing the rate won’t increase during the close.
• The lender will usually hire an appraiser to make sure the home’s value aligns with your offer. If the appraisal comes back low, you could ask the seller to lower the price or cancel the purchase (if you didn’t waive the appraisal contingency), or you may need to put up more cash for your down payment.

Technically, you can change lenders at any time before closing, which can be tempting if someone else offers you a better rate. However, underwriting may take several weeks, and you want to make sure you can close by the agreed-upon date.

Suggested next steps

• Make sure your financial documents are up to date in case the lender asks for refreshed copies.
• Avoid taking on new debt (e.g., car loans, big credit card purchases) during this time.
• Understand the contingencies and what could affect the deal.
• Stay in close communication with your real estate agent, loan officer or broker to keep things moving toward closing.

Step 11: Finalize the Deal

Once your offer is accepted, the countdown to closing begins. This is where everything comes together, and where attention to detail matters.

During the closing, you can hire an inspector to look over the home and assess its condition. If the inspector finds undisclosed repairs or maintenance issues and you didn’t waive the inspection contingency, you’ll have to decide whether you want to go forward with buying the home.

Sometimes, this can give you leverage in negotiations, and you may be able to ask the seller to pay for the repairs or help you cover other costs. Similarly, you can do a final walk-through before closing and point out any changes or damage that occurred since you first made the offer.

If you want to back out of the deal and there aren’t any contingent conditions, you may have to forfeit your earnest money—a deposit you give the seller to show you’re serious about the purchase.

You can also try to negotiate some of your closing costs with your lender and the title company during closing, such as the cost for a credit report or appraisal. But you generally can’t negotiate pass-through costs, like local taxes or recording fees.

If everything goes according to plan, you’ll make the final payments and become the official owner of the home on the closing day.

Suggested next steps

• Schedule a home inspection and review the report carefully with your agent. Use the results to negotiate repairs or credits, if applicable.
• Complete your final walk-through to ensure the home is in the agreed-upon condition.
• Review your closing disclosure and ask your lender about any negotiable fees.
• Get ready to bring your certified funds (or wire the amount) for closing day. Don’t forget your ID if you’re closing in person.

Tips for First-Time Homebuyers

There’s a lot to learn when you’re shopping for your first mortgage and home, and everything can feel complicated. But here are a few major tips to take away:

• Prepare by saving up for a large down payment and improving your credit scores.
• Find a real estate agent who has worked with first-time buyers and whom you trust.
• Reach out to multiple loan officers and brokers to compare options, opinions and working styles.
• Get preapproved early to compare offers and options.
• Review how mortgage points or credits impact your up-front and long-term costs.
• Don’t forget the additional up-front costs that come with buying a home.
• Create a budget that includes the extra costs of homeownership.
• Don’t make major purchases or open new credit cards or loans while you’re closing.
• Ask questions to your lender, real estate agent or any other professionals you’re working with along the way.
• Set realistic expectations and try to be patient.

Homeownership Is Closer Than You Think

Buying your first home and getting your first mortgage can feel overwhelming at times, but you don’t have to figure it all out at once. Each step you take brings you closer to getting keys in hand.

Keep researching the details that are most relevant to your situation and know that it’s often a long process for first-time buyers. But with the right planning and support, you can set yourself up for success and become a confident homeowner.

You’ve got this! And when in doubt, just remember: One step at a time is all it takes.

READ MORE: First-Time Buyers in a New Kind of Housing Market