Isn't That Rich Podcast

Buying a home is one of the biggest financial decisions you'll ever make, yet many people spend more time researching their next vacation than they do learning how a mortgage actually works.

If you're thinking about buying your first home, you're probably asking questions like:

• How much house can I afford?

• Do I need 20% down?

• What credit score do I need?

• How long does the process take?

First Things First: Are You Actually Ready to Buy?

There isn't a perfect age to buy a home.

Instead, lenders look for signs that you're financially prepared for homeownership. Some of the things they'll consider include:

• Stable employment history

• Consistent income

• Strong address history

• Available savings for closing costs and down payment

• Credit history

For self-employed borrowers, lenders will also need to review tax returns and other documentation to verify income.

The goal isn't perfection. It's demonstrating that you're financially ready to take on a mortgage responsibly.

The Biggest Myth in Homebuying: You Need 20% Down

Many buyers believe they need to save 20% of a home's purchase price before they can even think about buying. That's simply not true. Depending on the loan program, many borrowers can qualify with much less:

• Conventional loans may require as little as 5% down

• FHA loans may require as little as 3.5% down

While putting more money down can have benefits, waiting years to save 20% isn't always necessary.

The best thing you can do is talk with a lender early and find out what options are available for your situation.

A House Costs More Than the Price on Zillow

This is where many first-time buyers get caught off guard.

If you find a home listed for $200,000, the actual amount you'll need to bring to closing will likely be higher than you expect.

In addition to your down payment, you'll need to account for:

• Closing costs

• Homeowners insurance

• Property taxes

• Escrow reserves

• Title work

• Appraisal fees

This total amount is often referred to as your "cash to close."

Many buyers focus solely on the purchase price and don't realize there are several additional expenses involved in completing the transaction.

Property Taxes Can Change

One of the biggest surprises for new homeowners is that property taxes can increase after a purchase.

When a property is reassessed, taxes may be adjusted based on the new purchase price and local assessments.

That means the tax bill the previous owner paid may not be the same tax bill you'll pay.

When you're budgeting for a home, it's important to consider what future tax increases could look like and not just what the current bill shows.

Never Skip the Home Inspection

A home may look perfect on the surface.

The inspection tells you what you can't see.

A professional inspection can uncover issues with:

• Plumbing

• Electrical systems

• Roofing

• Foundation concerns

• HVAC systems

Sometimes inspections reveal minor repairs.

Other times they uncover major issues that can change the entire transaction.

In many cases, buyers can negotiate repairs or seller credits based on inspection findings.

Credit Scores Matter — But They Don't Have to Be Perfect

You don't need an 800 credit score to buy a house.

While stronger credit can help you qualify for better interest rates, there are loan programs available for borrowers with less-than-perfect credit.

Generally speaking:

• 680+ is considered strong

• 640–680 may still qualify for many programs

• FHA loans may allow scores as low as 580

The bigger concern is payment history.

Late payments, collection accounts, and excessive debt can create challenges during the approval process.

If you're planning to buy a home in the future, focus on:

• Paying bills on time

• Keeping credit card balances low

• Avoiding unnecessary debt

• Monitoring your credit report regularly

What NOT to Do During the Mortgage Process

Once you begin shopping for a home, there are several mistakes that can create problems.

Avoid:

• Opening new credit cards

• Financing furniture

• Buying a vehicle

• Changing jobs

• Making large unexplained deposits

• Closing existing credit accounts

Even small changes can impact your debt-to-income ratio or create additional documentation requirements.

If you're ever unsure whether a financial decision could affect your mortgage application, ask your lender first.

What's the Difference Between a Pre-Qualification and a Pre-Approval?

People often use these terms interchangeably, but they aren't exactly the same.

A pre-qualification is based largely on information you provide about your income, assets, and debts.

A pre-approval involves verifying that information through documentation such as pay stubs, tax returns, and bank statements.

Getting pre-qualified or pre-approved before house hunting can save time, help you understand your budget, and strengthen your position when making an offer.

Many real estate agents won't even begin showing homes until this step is complete.

Build the Right Team

Buying a home isn't a solo project.

The process works best when you have experienced professionals helping guide you along the way.

Your team may include:

• A lender

• A real estate agent

• An insurance agent

• A home inspector

• A title company

Having the right people in your corner can help you avoid costly mistakes and make the process much less stressful.

Be Aware of Mortgage Scams

Unfortunately, scammers know when people are buying homes.

Because real estate transactions become public record, it's common for buyers to receive suspicious mail, phone calls, and solicitations after closing.

Always verify communications before responding and contact your lender directly if something seems suspicious.

When it comes to wiring instructions or requests for money, never assume an email is legitimate without confirming it through a trusted phone call.

Final Thoughts

Buying a home can feel overwhelming. There are countless forms, numbers, deadlines, and decisions involved along the way. But the good news is that you don't have to figure it all out by yourself. The earlier you start the conversation with a lender, the more prepared you'll be when the right house comes along. Ask questions. Get pre-qualified. Build a strong team around you.

And remember: just because you're approved for a certain amount doesn't mean you have to spend it. The goal isn't simply buying a house, It's buying a home that fits your life, your goals, and your budget.