The BIPOC and LGBTQIA+ First-Time Homebuyer’s Guide
Steps in Buying a House for the First Time: A Guide for First-Time Homebuyers
Maybe you’ve been diligently checking off life’s milestones, or perhaps you’re just starting to dream about homeownership. Either way, you’ve finally asked yourself, “How do I buy a house?” and maybe even “Why is buying a house so hard?”
Buying a home is a major step—especially if it’s your first time. For many first-time homebuyers, particularly those in BIPOC and LGBTQIA+ communities, the process comes with extra hurdles. Between existing debt, credit challenges, and navigating a housing market shaped by historical redlining, how buying a house works can feel overwhelming. But with the right plan and resources, homeownership is possible.
At Equip, we understand these challenges and believe that everyone deserves the opportunity to build wealth through homeownership. This guide will walk you through each step in buying a house for the first time—from setting a budget to choosing the right mortgage—so you can confidently move toward owning your first home.
Step 1: Assess Your Financial Health and Budget
One of the first steps in buying a house for the first time is understanding what you can afford. This means evaluating your monthly income, expenses, and any outstanding debts.
Key Financial Considerations:
Calculate Your Monthly Budget – If you’re currently renting, compare your rent payments to potential homeownership costs, including mortgage payments, property taxes, insurance, HOA fees (if applicable), and maintenance (usually 2-5% of a home’s value each year).
Buy Below Your Maximum Budget – Instead of stretching your budget to the limit, purchasing a less expensive home gives you more financial flexibility and stability. Buying less house than you can afford also affords the possibility of owning your home outright sooner.
Account for the Down Payment and Closing Costs – Most first-time buyers put in a down payment between 3-20%, with closing costs adding another 2-5% of the home price. Having these funds ready helps prevent surprises later.
Helpful Tip:
Use Investopedia’s Home Affordability Calculator to see how your income, debts, and credit impact your home budget.
Step 2: Explore Mortgage Options and Avoid PMI
Finding the right mortgage is key to making your monthly payments manageable. First-time homebuyers have several loan options:
Government-Backed Loans:
FHA Loans – Require lower down payments (as low as 3.5%) and accept lower credit scores.
VA Loans – Available to veterans, often requiring no down payment.
USDA Loans – Designed for rural homebuyers with no down payment requirements.
Conventional Loans & PMI:
Conventional loans are what you think of when you see a bank ad offering mortgage rates. These are loans from private lenders offered at market rates.
If you put down less than 20% on a conventional loan, lenders typically require Private Mortgage Insurance (PMI)—an extra cost that doesn’t build home equity. Think of PMI like a tax on your mortgage because the bank interprets your smaller down payment as a higher risk of default on your loan.
To avoid PMI, look into down payment assistance programs or consider co-buying to meet the 20% threshold faster.
Explore local credit unions and financing associated with your alma mater, house of worship or associations you’re affiliated with to help you find favorable mortgage rates.
Helpful Tip:
Check out HUD’s Homebuying Programs by State to find assistance programs for first-time buyers.
Step 3: Manage Debt and Prepare for Pre-Approval
Many first-time homebuyers ask, “Why is buying a house so hard?” One major reason is the role of debt and credit. To increase your chances of mortgage approval, focus on these key areas:
Debt-to-Income Ratio (DTI): Lenders prefer a DTI under 43%. Paying down high-interest debt before applying can improve your approval odds.
Credit Score: Higher scores unlock better interest rates. Boost yours by making on-time payments, reducing credit utilization, and avoiding new debt.
Alternative Strategies: If you have high debt, consider applying with a co-borrower, or find lenders that cater to buyers with lower credit scores.
Helpful Tip:
Many nonprofit credit counseling agencies offer free services to help improve your credit before homebuying.
Step 4: Choose the Right Neighborhood and Agent
Where you buy is just as important as what you buy. How buying a house works includes selecting a location that fits your values, finances, and lifestyle. A home can be a very long-term commitment so considering racial and socioeconomic diversity, walkability, commercial activity and growth trajectory are all important factors that will impact your enjoyment of your home and the potential market value of your investment.
Choosing the Right Neighborhood:
Look for inclusivity and proximity to community resources.
Research property taxes and their impact on schools and infrastructure.
Consider affordability trends and how long folks tend to stay in their homes in that neighborhood.
Finding a Supportive Agent:
A real estate agent familiar with the desires of BIPOC and LGBTQIA+ buyers can help you navigate potential discrimination and find fair opportunities.
Helpful Tip:
Visit potential neighborhoods at different times of day to get a real feel for the area. Have a meal at a local restaurant and chat with the folks you meet in the area.
Step 5: Get Creative with Your Homebuying Strategy
Traditional individual-oriented homebuying isn’t the only option. If your values call you to take a community-forward approach or financial constraints make the process challenging, consider creative approaches:
Alternative Buying Strategies:
Buy a Fixer-Upper: Homes needing repairs often cost less, allowing you to build equity over time.
Co-Buy with Friends or Family: Pooling resources can help you afford a more aligned home while sharing financial responsibilities and strengthening community.
Explore Shared Equity Programs: Some nonprofits offer reduced home prices in exchange for shared future equity.
Helpful Tip:
Check out NerdWallet’s Down Payment Assistance Guide for financial support options.
Step 6: Finalizing Your Home Purchase
Once you’ve budgeted, secured financing, and found the right home, it’s time for the final steps:
Make an Offer: Your agent will help you negotiate a fair price.
Schedule a Home Inspection: Uncover any hidden issues before closing.
Close on Your Home: Sign the final paperwork and get your keys!
Things can move extremely quickly once your offer is accepted. Ask your realtor what you can expect and be prepared to move fast and be nimble as you move toward closing.
Conclusion: Your Path to Homeownership
Buying a house for the first time can be overwhelming, but by following these steps, you can move forward with confidence. Remember:
Start with a solid budget and explore mortgage options.
Improve your credit and reduce debt before applying for pre-approval.
Choose a neighborhood carefully to support your long-term goals.
Think outside the box with creative buying strategies.
Next Steps:
Now that you know the steps in buying a house for the first time, it’s time to take action! Review your finances, research mortgage options, and connect with professionals who can guide you through the process.
At Equip, we specialize in helping first-time homebuyers navigate their unique challenges. Whether you're tackling debt, preparing for pre-approval, or looking for expert guidance, we’re here to support you every step of the way. Reach out today and start your journey to homeownership!
