A First-Time Homebuyer's Guide, Start To Finish - The Strategic First-Time Homebuyer Book - Introduction and Chapter 1 How Much Can I Afford?

April 28, 2026

r/NewbHomebuyer

Hey guys, I spent a lot of time writing this book, and I had this subreddit in mind as I was writing it, so I thought I would post it here for you for free. If you want the physical book you can always go on Amazon, but here's my gift to you 😄

I'll include links so you can jump between chapters easily.

I hope you find it helpful.

The Strategic First-Time Homebuyer

Start to finish, with strategies to get approved and save thousands in interest, costs, and the down payment.

Introduction 1

Chapter 1 How Much Can I Afford? 3

Chapter 2 How Much Cash Do I Need? 16

Chapter 3 How To Find The Down Payment 30

Chapter 4 Your Debt To Income Ratio 41

Chapter 5 Choose Your Lender 69

Chapter 6 You’ve Been Denied (Your Credit) 80

Chapter 7 Selecting a Real Estate Agent 90

Chapter 8 Shopping For a House 108

Chapter 9 Under Contract: Inspections and Appraisals 121

Chapter 10 Under Contract: Rate Lock and Underwriting 129

Chapter 11 How To Lower Your Rate 144

Chapter 12 Closing 163

Chapter 13 Post Closing 71

About the Author 190

Glossary 191

Introduction

In 2025, first-time homebuyers represented 21% of total homebuyers in the US. That’s down from 24% in 2024 and 33% in 2018.

The median age for first-time buyers is 40, compared to 38 in 2024 and 32 in 2018.

We can try to speculate why these stats are the way they are. We can scream at the sky, saying, “House prices are unaffordable!” and we’d be right. But that’s not what this book is about.

I’m not writing this to convince you that buying is better than renting. If you’re reading this, you’re already thinking about buying.

This book is about each step.

It’s meant to show you the entire process, from start to finish, but it isn’t a high-level book. I don’t gloss over details. I get into the weeds with you. I give you tactical steps to get you into the real estate game, despite the odds being stacked against you, despite the fact that first-time homebuyers are shrinking and getting pushed out of the market.

I’m a licensed real estate agent and a mortgage loan officer, and I’ve been in finance for 15 years. I’ve helped thousands of people get into their first home.

I’ve seen the mistakes, the traps, and the pitfalls, and I’m here to help point them out so you don’t fall in as well.

In this book, I’ll show you how to plan for your house payment, where to find down payment assistance, how to get approved for a mortgage, what negotiating with a seller will look like, and how much cash you’ll need to bring to closing.

I’ll share strategies on how to pick a good real estate agent and how to negotiate with your lender to save on your closing costs and interest rate.

Too many buyers get pushed around and end up getting charged more than necessary, and into a house they cannot afford.

When you walk into your new home, I want you to look back and think (to quote Frank Sinatra), “I did it my way.”

Chapter 1 How Much Can I Afford?

Here’s a common story:

A first-time homebuyer decides she wants to buy a house. She talks to a real estate agent.

That real estate agent refers her to a mortgage loan officer.

That loan officer says, “You’re approved for $600,000! Here’s your letter.”

She takes that approval letter to her real estate agent.

They check out homes around $600,000, and she falls in love with one.

They make an offer. The seller accepts the offer, and now she’s under contract.

Congratulations!

She’s excited and tells her friends and family that she’s buying the perfect home in the perfect spot.

But then she opens her email with the subject line “Initial Disclosures,” which asks for her signature.

Rather than blindly clicking through signatures, she decides she had better read through these documents.

That’s when she sees the monthly payment. Her stomach drops, and her mouth hangs open. “I can’t afford that,” she thinks.

She’s about to call her real estate agent to cancel the whole thing, but then she thinks about all of the commitments she’s made and how excited everyone was for her and this house. She thinks, “If the loan officer approved me for it, then maybe I can afford it. I could pick up a second job if I have to.”

So she sticks with it and buys the house three weeks later.

Congratulations! She is now what people call “house-poor.”

Don’t get me wrong, I’m all for making it work if you want it bad enough. But if you don’t plan it out, someone will plan it for you.

If you don’t plan your money, someone will help you waste it.

Before you talk to a real estate agent, and before you talk to a loan officer, you will want to take some time to consider how much of a house payment you can actually afford.

So what is that number? Is there a magic formula?

The most common answers rely on percentages, like “use 30% of your gross income” or “only 25% of your net income.” But here’s where rules like that fail.

A lender will tell you your maximum approval based on a percentage of your gross income.

Gross income is the money before it’s taxed.

Lenders use a high percentage to approve you. And they’re basing it on money you’re not actually taking home.

The lender’s stamp of approval does not mean you can afford it.

Others are a little more reasonable and suggest you take a percentage of your net income, which is the money you get after you’ve been taxed.

Where that rule falls short is in residual income and lifestyle.

Here’s what I mean.

Let’s compare two people who make different incomes.

The first person has a net income of about five thousand dollars per month. The second person has a net income of six thousand dollars per month.

The first person bought his car in cash, and the second person has a car with a loan on it.

The first person spends $100 per month at restaurants and $300 per month on groceries. The second person spends $1,000 a month at restaurants and maybe $100 per month on groceries.

I could play this out further, but if someone were to tell me that the first person can afford less of a house than the second person, then they’d be wrong.

But that’s what lenders do, and that’s what these percentage rules miss.

Everyone’s expenses and lifestyles are different, so you can’t expect everyone to treat the house payment with the same rules.

No one is actually pulling up the budget.

It would be unreasonable for a lender to ask for a homebuyer’s budget, so you’re going to have to do it for yourself.

Here’s a flexible formula for you to use:

Net income - savings, lifestyle, and survival costs = affordable housing payment

Let’s break down each part of this.

Net Income

Again, this is what comes to you after you've been taxed, not before. You may also have a 401(k) contribution applied.

This is what lands in your bank account.

Savings

Here are some questions for you to ask yourself:

● Are you saving for retirement? How much will you set aside each month for retirement?

● Do you have an emergency savings account? How much can you set aside each month for this?

● Do you have a certain number of months saved up for job loss? Should you be putting money aside each month for this?

As a homeowner, you may want to consider saving for home repairs and maintenance.

If you don't know what to save, I'm going to be hypocritical and say you should aim for 1% of the home's purchase price per year.

Figuring out your savings goals is a crucial step that you should take before buying a home.

Lifestyle

Let's take a look at all of those subscriptions you have… And these receipts to... Pickleball USA?

If you want to keep your current lifestyle and buy a house, you must include all of these subscriptions.

And don't lie to yourself. You know you won't stop pickleballing.

Survival Costs

These are costs that aren't ‘wants.’ They're ‘needs,’ like food and water, heating and cooling, gas for cars, medical expenses, insurance, groceries, etc. The list is long here.

Don’t forget that these include costs that you haven’t needed to pay as a renter, such as:

● Water

● Sewer

● Trash

● Gas

● Electricity

● Yard upkeep

Throw in any loan payments you have here too. If you want your credit to survive, you have to make these payments on time.

Housing Costs

Now that you have your savings, necessities, and lifestyle expenses out of the way, see what's left over.

That's what you can spend on a housing payment.

We need to dissect what's included in a housing payment, too.

Your housing payment is your mortgage payment plus HOA fees.

Here's what goes into your mortgage payment:

● Principal and interest

● Homeowners insurance

● Property taxes

● Mortgage insurance

Don’t worry, I’ll explain what these mean.

Principal and interest is your loan payment.

Homeowners insurance covers hazards like wind, fire, and earthquakes. Another name for this is “hazard insurance.”

Property taxes pay for local programs like schools, libraries, and the fire department.

Mortgage insurance is a monthly charge if your down payment is less than 20%. This insurance protects the lender and not you.

Those four items make up your mortgage payment. Lenders want to make sure you’re paying your insurance and property taxes, so they collect that for you, bundled into your total payment.

HOA fees are collected separately, but you’ll want to include them in your budget. If you’re set on buying a home without an HOA, then there is no need to include this.

Reverse Search

Now that you’ve gone through the sweat and tears of tracking down every single dollar you regularly spend, it’s time to take that remaining total and do a reverse search.

This is where you see what kind of purchase price you can afford based on that affordable housing payment you’ve calculated.

I’ve created a handy calculator that lets you plug in a few numbers: how much you have saved for a down payment, what state you’re buying in, and how much you can afford for a monthly payment.

Once you plug those numbers in, it will give you a number.

That number is not the end-all number, but it will give you a starting point.

To use it, go to tools.newbhomebuyer.com/affordability.

This doesn’t handle the budgeting aspect for you. It isn’t a budgeting tool. It’s a calculator to estimate a purchase price based on your desired monthly payment.

Check Your Math

My son is in fifth grade now, and we’re at the point where I need to tell him to check his math. Meaning, he needs to take his answer, then work in reverse to make sure it matches.

And that’s what we’re going to do now.

Once you’ve figured out a purchase price number, you’re going to look for homes with a price tag around that amount.

Then we’re going to manually figure out how much that payment is going to be.

There are plenty of platforms that allow you to see homes for sale: Zillow, Realtor, Redfin, Trulia, etc. Any of those will work.

Once you find a home, you can run a hypothetical payment and make sure it lands near your budgeted affordable housing payment.

We’ll do this by adding the principal and interest, property taxes, homeowners insurance, and mortgage insurance portions of the payment one at a time.

Principal and Interest

Take that purchase price, subtract your down payment, and that’s your loan amount. (If you don’t know how much you’re required to pay toward your down payment, don’t worry, we’ll cover it.)

Once you have that loan amount, plug it into a principal and interest calculator.

You can find one at tools.newbhomebuyer.com/payment.

This will have you select a term, or how many years you’ll pay. The most common is 30 years.

It will also have you enter an interest rate. At this point, you haven’t spoken with a lender yet, so you might not know what rates are. I’d recommend visiting mortgagenewsdaily.com to see where average rates are. I have no affiliation with them but have observed that they are the closest.

Those three things (loan amount, interest rate, and loan term) will give you a principal and interest payment.

Jot that down.

Property Taxes

We can do this the easy way or the hard way.

Here’s the easy way.

Find the property tax bill on Zillow or whatever MLS service you’re using, divide that number by twelve, and voila. There’s your property tax payment.

Here’s the hard way if Zillow is inaccurate.

Pull up that address on the county assessor’s website. Enter the address and find the tax bill.

The reason this is the “hard way” is because the county’s website might look like it came from 1995.

Searching for an address might require a bit of finesse, because they haven’t integrated with Google’s Places API (you know, the one that conveniently auto-fills any address).

If you’re having trouble finding it, try entering just the house number. Less is better with these search engines.

Once you’ve found it, you may not see the full tax bill but might see a “taxable value” and a “tax rate.”

Multiply the taxable value by the tax rate, then take that total and divide by twelve, and there you go.

Or… maybe just go back to Zillow and try a different house.

Homeowners Insurance

There’s only the easy way here.

AI chat and Google Gemini search both give an average estimate of what your homeowners insurance policy might cost.

Take that number and divide it by twelve.

Until you get an actual quote on a specific property, averages and percentages are the best we have to work with.

Mortgage Insurance

If you have an FHA loan and are providing the minimum 3.5% down payment, then your mortgage insurance rate is fixed at 0.55%.

Take your loan amount and multiply it by 0.0055, then divide that by twelve.

If you’re using a conventional mortgage, the mortgage insurance varies quite a bit, depending on down payment size, credit score, and your debt-to-income ratio.

For now, let’s use 0.25%.

Take your loan amount and multiply it by 0.0025, then divide that by twelve.

VA loans do not have mortgage insurance.

USDA loans have it at 0.35%.

HOA

On the listing, you’ll find whether there’s an HOA and how much it is. This isn’t included in the mortgage payment, but it’s important to know that amount.

Down Payment Assistance

If you need help with the down payment, there are programs that can help. Sometimes these programs come in the form of a second loan. If that’s the case, you’ll need to take a calculator and plug in the rate, the loan amount, and the term to figure out what that down payment assistance loan would be.

Another Calculator

Now that you’ve done that all by hand, here’s a calculator to give you estimates if you don’t know where to find them.

Go to tools.newbhomebuyer.com/payment to calculate your estimated mortgage payment.

We just pushed through the mechanics of a mortgage payment. We might have discovered that buying a house is way more expensive than we initially thought. Or we may have come to realize that the payment we can afford can only get us half the home we expected.

If that’s the case, it’s time to recalibrate.

Ask yourself:

● Are there homes outside of your preferred area that fit your budget better?

● Or is a smaller home than you expected worth staying in your preferred area?

● Would you be willing to commute more if it meant getting a bigger home?

● Looking back at the budget, are there any lifestyle items that you’d be willing to sacrifice to get a bigger house?

● Are there any loans attached to your assets (e.g., car loans) that you can sell to improve your cash flow?

● Should you consolidate your debts for better cash flow?

Later on in this book, I will cover strategies someone can take if they’re getting denied for a mortgage based on their debt-to-income ratio. Those strategies may help if you’re looking for ways to better qualify within your budget. Feel free to sneak a peek at that chapter if you’re coming up empty.

Give yourself a pat on the back for finishing this chapter. Or go cry into a pillow. Whatever you need to do to recover. The next one is about how much cash you’ll need to come up with.