Buying your first home can be a daunting task, but once you break it down to the core steps, it's a lot more manageable. There's really only a few core steps you need to take–the rest of it is about figuring out what your preferences are.

Deciding to purchase your first home is a huge step. First, congratulations! Now that you've set your eyes on homeownership, you probably have countless questions about how to navigate the process for the most successful results. You also need to know what to look out for and what mistakes to avoid.

Here's everything you need to know about buying your first home.

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Consider your mortgage options

When it comes to choosing a mortgage, you must first consider how your current financial situation and future goals intersect. Some helpful questions to ask yourself include:

Where would you like to live?

What style of house are you looking for?

What is your credit-to-debt ratio?

What is your ideal repayment plan (short-term or long-term)?

Which type of loans do you intend to use (conventional, FHA, VA, etc.)?

What additional fees do you foresee (moving and/or closing costs)?

Once you have the answers to these questions, it's time to start saving money toward your down payment and building your credit to become a stronger loan candidate. 55% of buyers make some type of financial sacrifice to buy their home. Still, you should not feel forced into a financial situation you're uncomfortable with in order to achieve your goal quicker.

This part of the process can take as long as you desire, as you are the only one who determines whether you're ready to move on with the next steps. Remember that it’s not a race to be done first, but a race to be done right. Take your time.

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Tip: The more specific you are in your planning, the easier it will be to track your progress toward achieving your goals. Make a fun fill-in chart to see your impact and celebrate your hard work!

Search for your new home

If you've saved enough money, achieved your financial goals, and are ready to move forward with purchasing your new home, the next step is to find a real estate agent or realtor to help you select a house you would like to move forward with (as well as some backup options!).

If you know your budget, decide what your preferences are. If you're buying a home with your partner, talk with them and find a few houses you agree on as favorites. Buying a home is a huge investment, so be sure all parties are satisfied.

Financing your first home

If you've found a home you're set on, you need to figure out how you're going to pay for it. As a first-time homebuyer, you can get away with incredible low down payments. You can also take out $10,000 from your IRA or Roth IRA, but keep in mind, it is still taxable if you're drawing from a traditional IRA.

Your state may also offer programs to help first-time home buyers. Once you've figured out all of your options, search for lenders who will pre-approve a loan.

Comparing mortgage rates is an essential step toward picking the best financial option for you and your family, so be sure to explore at least 2-3 options before making your decision. Once you make a selection, it should take around 30 days to get pre-approved for a loan—and then the real fun begins.

Make an offer on your first home

With the funds secured, you’re just about ready to make an offer on your dream home! But before making that important decision, there are a few things you must do:

Attend an open house or do a walkthrough of your future home

Hire a professional to conduct a home inspection

Reread all paperwork and documents for any issues or discrepancies

Consider home insurance options

Once you've checked all the boxes on this list, you are ready to make an offer! Try to be as fair as possible when deciding how much money to put down and invest in your new home. Once they accept the offer, congratulations—you’re (almost) officially a new homeowner!

Close the sale

Closing the sale should take around 30-60 days, as determined by the details of your exact sale and situation, but once you sign the appropriate paperwork, you now officially own your first home—and that’s something to celebrate. Be sure to keep a record of the following documentation as it is imperative to your future financial success:

Settlement Statement

Deeds (home, trust, mortgage)

Promissory Note

While this checklist is certainly comprehensive, taking the process one step at a time will help you reduce stress, manage your expectations, and ensure you do your due diligence at every turn.

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FAQs

Are you ready to buy your first home?

Buying your first home is a scary process. The commitment and investment of taking out a mortgage can deter many, but it's totally normal. If you can get a good deal on a home and you have a good lender, you should feel comfortable and ready to buy your first home.

Can you use your 401k to buy your first home?

Yes, you can take out a loan from your 401k or withdraw money from your 401k to help pay for your home. Of the two options, the first is probably a wiser choice.

If you borrow the money from your 401k, you will have to pay yourself back with interest–however, you won't need to worry about an early withdrawal penalty, and you don't have to pay income tax on the amount you withdraw.

If you just withdraw money from your 401k, however, you will have to pay a 10% early withdrawal fee. You will also need to pay income tax on the amount you withdraw.

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