 This is Gabby. Name? Gabby? Gabby is looking to purchase her first home, but she doesn't know where to begin. Step one. Step one. So she decides to call her best friend Sam. I'll call Sam. Since Sam happens to be a licensed real estate agent herself. Gabby! Sam! So I've been thinking about it a lot, and I finally decided I'm going to buy a house. Yes! Amazing! Say no more. Okay, first things first, you need to figure out your budget and down payment. A lot of people think you have to have a 20% down payment saved in order to buy a home, but actually you don't. Here's the thing. If you put down less than 20%, the bank will consider you a higher risk, which means you'll probably be required to buy private mortgage insurance, or PMI. Private mortgage insurance. I've heard of that. Exactly. Yes. But anyway, how big of a down payment are you planning to make? There is no right or wrong answer. The median down payment for first-time home buyers in the U.S. is actually 6%. Gabby just needs to remember that if she makes less than a 20% down payment, she will need to buy private mortgage insurance, PMI. This was so helpful. Thank you. Of course. Bye. And so, Gabby has officially embarked on her home buying journey. A few days later, she's already set up an intro meeting with her banker and mortgage specialist, John. Hi, John. Hey, Gabby. Are you ready to talk mortgages or what? John jumps into his mortgage 101 speech. In order to calculate your potential mortgage, we need to figure out what your debt to income ratio, or DTI, is. DTI. Yeah, got it. Right. Now, your DTI tells a lender how much money you pay towards debts each month versus how much money you make. We can calculate it by taking your potential future housing payments, so that's mortgage, property taxes, homeowners insurance, PMI, plus all your other current debts, credit card payments, auto loans, student loans, whatever else, and dividing it by your gross monthly income. Okay. And that's my DTI. Typically, a DTI 43% is the highest ratio you can have and still qualify for a mortgage, though you probably want to be even lower, just for peace of mind. Come to think of it, about how much debt do you have, roughly speaking? If Gabby has debt, as 80% of all Americans, her total debt will be factored into the size of her mortgage. If Gabby is debt free, she will just need to calculate her housing costs. And so, John finishes talking Gabby through his mortgage 101 speech and leaves Gabby with clear next steps. So just finish filling out those forms and we'll get the ball rolling, okay? And so, Gabby soon submits all the necessary documents to the bank. And in just a few days, Gabby finds out she's been pre-approved for her mortgage. Yes. That means she's ready to put in her offer on the house she's already picked out. And if it gets accepted, it'll be on to the closing process. But wait. Wait. The closing process. Gabby hasn't done any research about this. So naturally, she decides. I've got to call Sam. Gabby. Sam. I've just been peeking at some beautiful homes about to come on the market. Speaking of which, how are things going with you? That's exactly why I'm calling. I need your brain. What can you tell me about the closing process? Okay. Are you ready? I think so. So the closing process is made up of a series of steps that usually take weeks to go through. Inspection, appraisal, closing costs. Did you have a specific question? There are a few steps Gabby can take before finalizing her purchase. She can schedule a home inspection, which might uncover pre-existing issues with the home and its proper functioning. She can also ask for a professional valuation of the home to determine if the contract price is appropriate. You are an endless source of wisdom. Oh, and by the way, don't forget that you'll want to factor in homeowners insurance to your budget as well. Ooh. Good call. Thank you. Of course. Let's talk soon. And so Gabby is well on her way to buying her first home. With Sam's help, she will put in an offer on her favorite house and it will get accepted. And that's exactly where Gabby will live, happily ever after, or at least for eight years, which is the average amount of time Americans live in a home before moving.