First-Time Home Buyers: What to Expect Financially, From Pre-Approval to Closing

Buying a home is an exciting milestone, but it is also a financial and contractual process that requires preparation, clarity, and the right professional guidance. Understanding the true costs, loan options, credit requirements, timelines, and buyer protections involved allows purchasers to move forward with confidence rather than urgency.

Even if this is not your first home purchase, many homeowners are surprised by how unfamiliar the process can feel. Today, homeowners often stay in their homes for a decade or longer, and lending guidelines, contract terms, and closing requirements frequently change during that time. It is common for buyers to forget how earnest money works, what inspections are customary, how closing costs are structured, or when to involve a lender. Reviewing the current buying process helps returning homeowners avoid missteps and move forward with clarity and confidence.

What Are All the Expenses When Buying a Home?

Buyers should plan for three primary categories of costs: up-front costs, the down payment, and closing costs.

Up-Front Costs (Before Closing)

Earnest Money Deposit
Earnest money is typically 1% of the purchase price in our market, though it can vary depending on the situation, price point, loan type, and contract structure. Earnest money demonstrates good faith to the seller, is held in escrow, and is applied toward closing if the transaction proceeds. When appropriate contingencies are in place, earnest money is protected.

Home Inspections
Buyers typically pay for inspections prior to closing. A general home inspection usually ranges from $400 to $700. Depending on the property, additional inspections may be recommended, including pest or termite inspections, radon testing, sewer scope inspections, or structural evaluations. Inspections allow buyers to assess the condition of the home and identify potential risks before moving forward.

Appraisal
An appraisal is required by the lender to confirm the property supports the agreed-upon purchase price. Appraisal fees typically range from $450 to $750 and are paid by the buyer.

How Much Should a Buyer Save for a Down Payment?

Down payment requirements vary by loan type and financial profile. Many buyers qualify for programs requiring as little as 0 to 3.5% down. Conventional loan options often allow 5 to 10% down, while a 20% down payment can eliminate private mortgage insurance (PMI). The right down payment strategy should always be reviewed alongside monthly payment goals, available reserves, and long-term financial plans.

What Are Closing Costs?

Buyers should budget approximately 2 to 4% of the purchase price for closing costs. These costs are separate from the down payment and may include lender fees, title insurance, escrow and settlement fees, recording fees, prepaid homeowners insurance, initial escrow funding for taxes and insurance, and HOA-related fees when applicable.

Property Taxes and Local Timing
In Butler County, Ohio, property taxes are paid in arrears, meaning taxes are paid after the period in which they are assessed. At closing, sellers typically provide a tax credit to the buyer for their portion of unpaid taxes. Buyers may see both a seller credit and initial escrow funding on the settlement statement, which can increase the cash needed at closing even though the buyer is being credited. Going forward, lenders typically collect property taxes through escrow as part of the monthly mortgage payment.

Some closing costs may be negotiated or offset depending on contract terms and market conditions.

What Types of Loans Are Available to Buyers?

Selecting the correct loan structure is one of the most important financial decisions in the home buying process.

Conventional Loans
Conventional loans may allow down payments as low as 3%. Private mortgage insurance is required when putting less than 20% down and is removed once sufficient equity is reached.

FHA Loans
FHA loans typically require 3.5% down and allow more flexible credit standards. Mortgage insurance generally remains for the life of the loan.

VA Loans (Eligible Buyers)
VA loans offer 0% down, no private mortgage insurance, and competitive interest rates for eligible buyers.

USDA Loans (Eligible Areas)
USDA loans offer 0% down but include income and geographic eligibility requirements.

Our role includes reviewing each buyer’s pre-approval and speaking directly with the lender to confirm loan type, down payment structure, mortgage insurance implications, and any tax-related income thresholds or program limitations that could impact approval.

What Credit Score Is Needed to Buy a Home?

Credit score requirements vary by loan program. FHA loans may start around a 580 credit score, while conventional loans typically require a minimum of 620. The most favorable interest rates are often available to buyers with scores in the 700 to 740 range or higher.

While loan programs publish minimum qualifying credit scores, it is important to understand how most buyers actually position themselves for success. The average credit score of recent homebuyers is generally in the mid-700s, with first-time buyers often averaging in the low 700s. Buyers with stronger credit profiles tend to have more loan options, better interest rates, and smoother underwriting approvals. Planning ahead to strengthen credit before purchasing often leads to better financial outcomes and fewer obstacles during the transaction.

Lenders also evaluate debt-to-income ratios, employment and income stability, asset reserves, and recent credit activity. Buyers should avoid opening new credit lines, making large financed purchases, or changing jobs without lender guidance before closing.

What Inspections, Appraisals, and Contingencies Protect Buyers?

Inspections allow buyers to identify material defects, safety concerns, or deferred maintenance and determine whether repairs, credits, or contract adjustments are appropriate. Appraisals protect both the buyer and the lender by confirming the property supports the agreed-upon purchase price.

Common buyer protections include inspection contingencies, appraisal contingencies, and financing contingencies. These provisions protect earnest money and provide contractual exit options if conditions are not met.

How Soon Should a Buyer Speak With a Lender?

Ideally, buyers should speak with a lender three to six months before purchasing. Early conversations allow time to review credit and income, identify loan options, address tax or income threshold concerns, structure a strong pre-approval, and avoid last-minute issues once under contract.

When to Contact Our Team and How We Assist

Buyers should contact our team as soon as they are considering homeownership, even if they are months away from purchasing.

We assist by reviewing pre-approval letters, coordinating directly with lenders on loan structure and requirements, identifying tax threshold or income limitations tied to loan programs, structuring offers with appropriate protections, managing inspections, appraisals, and deadlines, negotiating repairs or credits, and overseeing the transaction from contract through closing.

Final Takeaway

Whether this is a first purchase or a return to the market after many years, buyers benefit from understanding today’s process and working with experienced professionals who prioritize clarity and protection. Preparation and education create smoother transactions and stronger outcomes.

Buyers who plan ahead financially tend to experience smoother transactions and stronger negotiating positions.

• Loan programs, credit requirements, and eligibility are determined by individual lenders and may vary based on underwriting guidelines.