How to buy a house

Your credit score is the largest single lever on what a mortgage costs you. The difference between a good score and an excellent one, over thirty years, is a very large sum of money.

Pull all three reports free and read them properly. Errors on credit reports are common enough that checking is genuinely worthwhile, and disputing them is free — but it takes time, which is why this belongs months before an application rather than during one.

Do not open new credit or make large purchases while you are preparing. New accounts, hard inquiries and increased balances all move your score at exactly the wrong moment. Lenders re-check your credit shortly before closing, and buyers have lost approvals by financing furniture before they had keys.

Keep your existing accounts open and your utilisation low. Closing an old card shortens your history and raises utilisation, both of which hurt.

Lenders also look at debt-to-income ratio — what proportion of your gross monthly income goes to debt payments. Paying down a car loan or a card balance can matter as much as the score itself.

Rate shopping does not damage your score the way people fear. Multiple mortgage inquiries within a short window are treated as a single event, so comparing several lenders costs you nothing.

Pre-qualification is an estimate based on what you tell a lender. Nothing is verified. It is close to worthless in a competitive market and sellers know it.

Pre-approval means the lender has examined pay stubs, tax returns, bank statements and your credit, and has committed conditionally to a specific amount. That is what makes an offer credible.

Get pre-approved before you start viewing seriously. In markets where properties move quickly, an offer without pre-approval is often not considered at all.

Compare at least three lenders. Rates and fees differ meaningfully between them, and the loan estimate each provides uses a standardised format specifically so you can compare like with like.

Read the loan estimate line by line. Some fees are fixed, some are the lender's own charges, and some are third-party services where you may choose your own provider. The ones you can shop for are identified as such.

Borrow less than you are approved for. Approval reflects what a lender is willing to risk, not what leaves you able to absorb a boiler failure or a lost job.

Conventional loans are the standard product and generally require the strongest credit. Putting down less than 20 percent means private mortgage insurance, an extra monthly cost that protects the lender, not you — but which can usually be removed once you hold enough equity.

FHA loans, insured by the Federal Housing Administration, accept lower credit scores and smaller deposits. The trade-off is mortgage insurance that in many cases lasts the life of the loan rather than falling away with equity.

VA loans, for eligible service members and veterans, frequently require no deposit at all and no monthly mortgage insurance. If you qualify, this is usually the strongest product available.

USDA loans support buyers in eligible rural areas, often with no deposit required. The eligibility maps cover more territory than the word 'rural' suggests.

State and local first-time buyer programmes add another layer — grants, forgivable second loans and deposit assistance that many buyers never discover because they are administered locally rather than federally.

Ask a lender which of these you qualify for rather than assuming. The definition of 'first-time buyer' is often looser than expected, commonly meaning anyone who has not owned a home in the last three years.

Closing costs typically run around 2 to 5 percent of the purchase price and are separate from your deposit. This is the single most common budgeting failure among first-time buyers.

They cover origination and underwriting, appraisal, title search and title insurance, recording fees, prepaid property taxes and insurance, and any points you choose to buy.

Some are negotiable and some are not. Lender fees have room in them; government recording fees do not. In slower markets sellers sometimes contribute towards closing costs, which is worth asking about in the offer.

Get a home inspection even when the market is competitive and you are tempted to waive it. An inspection is a few hundred dollars against structural, roof, electrical or plumbing problems that run to five figures.

The appraisal is separate and serves the lender, not you. If a property appraises below the agreed price, the lender will not lend against the gap and you must renegotiate or make up the difference.

Budget beyond closing too. Moving, immediate repairs, and the reality that a homeowner pays for everything a landlord used to — a maintenance reserve is not optional.

Then there is the monthly cost beyond the mortgage itself. Most lenders collect property taxes and homeowner's insurance alongside the loan payment, holding them in an escrow account and paying the bills on your behalf. That means your monthly outgoing is meaningfully higher than the loan payment alone, and it moves — when the tax assessment or the insurance premium rises, the escrow payment rises with it.

Property taxes are set locally and vary enormously between states and even between neighbouring towns. Two identical houses an hour apart can carry very different annual tax bills, and that difference persists for as long as you own the property. Check the actual figure for the specific address rather than a state average before deciding what you can afford.

Housing discrimination is illegal. Refusing to sell or rent, or treating buyers differently, on the basis of race, colour, religion, sex, national origin, disability or family status violates federal fair housing law, and that includes lending decisions and appraisals.

HUD approves housing counselling agencies that provide free or low-cost advice to buyers. They are independent of any lender or agent, and it is one of the most underused resources in the entire process.

Understand who represents whom. An agent showing you houses may legally represent the seller unless you have a buyer's agency agreement. Ask directly and get the answer in writing.

Check flood risk before you commit. Standard homeowner policies do not cover flood damage, flood insurance is a separate product, and a property outside a mapped high-risk zone can still flood.

Beware wire fraud at closing. Criminals impersonate title companies by email and redirect deposits, and the money is usually unrecoverable. Always confirm wire instructions by phone using a number you obtained independently — never one from the email itself.

The mistakes that cost most: skipping the inspection, spending the closing-cost budget on the deposit, opening new credit before closing, taking the first mortgage offered, and buying at the top of your approval rather than the top of your comfort.