Buying a Home For The First Time: What to Know
If you plan on buying a home for the first time and are feeling a little overwhelmed, you are not alone. Buying a home is the most significant financial decision many people have ever made.
It makes sense to cautiously approach the process and strive to learn as much as possible before you finally pull the trigger. Fortunately, there is a lot of good advice available to help you navigate the buying process.
Do your research, find tips that apply to your situation, and strive to make decisions based on what is best for your specific needs.
Below I’ll provide you with some general first-time home buyer tips to put you on the right track to having a successful purchase.
Arm yourself with as much financial and real estate knowledge as possible before you finally pull the trigger into homeownership. A significant percentage of first-time homebuyers make mistakes because they focus too much on looking at houses and not enough effort on other vital details.
Avoiding mistakes is easy when you know what you shouldn’t do! Let’s take a deep dive into all of the things to think about before buying a house for the first time.
1. Start Saving For Your Down Payment as Soon as Possible.
One of the essential things to do when buying a home for the first time is to plan your finances in advance! Putting a down payment on a home is a big undertaking. Considering the price of most homes today, it will probably take you some time to save enough money for a down payment of any significance.
Of course, you may not necessarily need a big down payment—some mortgage programs let you pay as little as 3% down. But keep in mind, the more you pay down, the better your financial situation will likely be.
You need to hit 20% down to eliminate private mortgage insurance, for example, which can be challenging to do. The sooner you start saving for the down payment, the better.
If you are not familiar with PMI, it is a fee you pay a lender when you don’t have a twenty percent down payment. You might think of PMI is insurance for the lender in the event you default on your loan. While PMI serves the purpose of getting buyers into homes before they have a larger down payment, it is a useless fee from a buyer’s standpoint.
Many first-time buyers do not realize you can get a down payment gift as well that can be used toward the purchase.
2. Research Mortgage Programs That Might be Available to You.
There are a lot of programs out there that help first-time buyers get a home. You could very likely be eligible for one or more of them. There are the standard conventional mortgages available to anyone with decent credit. Still, some programs cater to specific groups like veterans (VA Loan) and those buying in rural areas (USDA Loan).
These mortgage programs can make it much easier to buy your first home by giving you more favorable interest rates, lower down payment options, and more.
A reputable real estate agent will be able to help you find loan programs that you are eligible for. More than likely, they will put you in touch with a mortgage broker they have been doing business with for quite a while.
You can also do some research online to find programs that might match your financial needs. Just make sure you start looking sooner rather than later. The kind of mortgage program you choose can influence your home buying process, like determining how much house you can afford.
Here are some excellent first-time home buyer mortgage tips to follow.
3. Decide How Much You Want to Spend.
A significant step when buying a home for the first time is creating a budget. There are plenty of home buyers out there who got approved for big mortgages and maxed them out—then regretted their decisions for years to come.
Just because a lender is willing to give you the money does not mean you can actually afford to carry a big mortgage.
There are a lot of costs to owning a home that you need to consider. You also want to be sure that you can take care of other financial needs, like savings and retirement, while still paying your house payment.
Use a home affordability calculator to get an idea of how much home you actually can afford and go from there.
Don’t be pressured into spending more money on a house than you should. If it is a seller’s real estate market, you could easily find yourself in a bidding war and stretching beyond what you intended to pay for your first house.
We will discuss this a bit more a little bit later.
4. Check Your Credit Before Buying a House.
Your credit score can greatly affect the financing options and the interest rate you have when buying a home. It is important to note that the interest rate you receive can impact you financially for many years to come.
Before becoming a first-time home buyer, it makes sense to achieve a good credit score first. If you don’t have the best credit, it might make sense to hold off on buying. The significance of having an excellent credit score before purchasing your first home cannot be understated.
5. Improve Your Credit Score Before Buying a Home
Another significant first-time home buyer tip is to get your financial house in order before buying. If your credit score is not high right now, you might be better off taking some time to improve it before you get a loan. There may be errors on your report that need to be corrected, which can take months.
You can also make a plan for improving your credit and execute that plan—but only once you know where your credit actually stands. If you find that your scores are really not where they should be, I would suggest using a credit improvement company.
One of the best options out there for credit help is Credit Karma. Credit Karma is a company that offers a free service of helping you make credit decisions that will positively influence your credit score. You can get your scores increased to make buying your first house a reality quicker in short order.
6. Pay Off Your Debts
If you have significant debts such as student loans or other high-cost mortgages, it will make sense to get them paid down. It is advisable to have minimal debts when purchasing your first house. If you have high credit card bills, take care of them.
The home you are buying will be a big worry as it is.
7. Find a Top Shelf Mortgage Broker.
One of the more essential first-time homebuyer tips is finding people to work with that are trustworthy. Picking a lender to work with when buying a home is critical. You want someone who knows their stuff and will be able to provide you with sound financial counseling.
It is not always about getting the absolute best rate, which, of course, is essential. Having exceptional service is a critical factor when buying a home, including meeting deadlines and responding quickly to requests.
It will be vital to ask the lender lots of mortgage-related questions. Make sure you are comfortable with all the answers, as this will be a substantial financial undertaking.
One of the best things about working with a mortgage broker is they have access to far more mortgage programs than if you walked into a bank such a Bank of America. Mortgage brokers can seek out the best loan programs that match your needs from multiple lending institutions.
Using a mortgage broker will almost always ensure you get the best mortgage terms.
8. Get Mortgage Pre-approval Done Early.
One of the more vital things a first-time homebuyer should do is get pre-approved for a mortgage before looking at homes. Many buyers get confused by the difference between pre-qualification and pre-approval. Getting pre-qualified for a mortgage is a quick, relatively painless process requiring only a few essential information points.
Pre-qualification is easy to acquire but is practically useless when you really want to buy a home.
Sellers want pre-approval, not pre-qualification. Pre-approval requires going through most of the process of getting an actual mortgage. But going through all that effort gives you a letter that says you are very likely to get the mortgage as long as nothing significant changes with your credit or you lose your job. A pre-approval letter is a must when you are shopping in a competitive market.
Part of finding a lender you’re comfortable with will be asking for them to pre-approve you for a ballpark of the amount of money you plan on spending.
9. Put in The Time to Find an Excellent Real Estate Agent.
While finding an outstanding mortgage professional is essential, so is finding an exceptional buyer’s agent. There is no shortage of real estate agents out there ready to help you buy your first home. Unfortunately, not every agent is an ideal fit for your needs.
You want a buyer’s real estate agent who is skilled, knowledgeable, and motivated and someone who knows your local market inside and out. It can be tempting to hire your aunt, who got her license five years ago and has had two clients, but that would not be the best choice.
Buying a home is a big deal. You want someone you can depend on to deliver the best possible experience and ensure that you get what you want and need from the process. The article reference gives a detailed accounting of what a buyer’s agent does and why you should have one in your corner.
One of the more significant mistakes lots of buyers make is going directly to the listing agent when purchasing a home. Doing so is a big no-no. The listing agent represents the seller, NOT you.
A dual agent cannot offer you any of the services a buyer’s agent can. A dual agent becomes a neutral party, not able to counsel and advise. The last time I checked, this is why you want an agent!
10. Do Your Due Diligence.
One of the most critical and significant first-time home buyer tips is making sure you’ve done your due diligence. Looking at houses while first-time home buying can be fantastic.
It is exciting and lots of fun to be touring incredible homes. Thinking about being a homeowner for the first time can be tantalizing.
On the flip side, buying a home can quickly turn into a nightmare if you are not careful. There can be problems waiting around every corner if you choose the wrong property. Here are some tips for performing home buying due diligence. See the list of all the potential issues that can rear their ugly head. Are any of these problems lurking?
11. Think About The Neighborhood as Much as The House
One of the more common first-time homebuyer mistakes is putting too much emphasis on the house and not enough on the surroundings. The neighborhood in which you are buying should be considered as well.
Will you be happy in the place you have picked? Do you plan on having kids? If so, how are the schools? Is the home close to major routes for easy commuting? How about modern conveniences such as shopping, restaurants, and maybe your favorite coffee shop?
Don’t forget about the other things that could be important in your life. It is easier when you are renting a house or apartment, given the fact you are less tied down to the property. Remember, the purchase of a home is as much an investment as it is a place for shelter.
12. Hire a Professional Home Inspector.
Part of doing your home buying due diligence will be hiring a highly rated home inspector. The home inspector is going to be your second set of eyes. They are going to notice all of the problems that you don’t. The inspector might find something that gives you pause on buying the property. That is what they are there for.
Picking the right inspector will be necessary. Like any other industry, there are good and bad inspectors. You’ll want someone thorough and detail-oriented. The inspector should take the time to go over what issues are something to worry about and what isn’t. Asking the inspector lots of questions to get a comfort level with your purchase is certainly prudent.
The best inspectors understand that their delivery is just as important as identifying a problem. As a layman, you’re more than likely not going to know what’s a big deal and what isn’t. A home inspector should not make you feel like a minor problem is the end of the world.
Inspectors are human beings and make mistakes just like you, and I do. Don’t think everything they say is the gospel. Many a home sale has fallen apart because of a less than stellar inspector making mountains out of molehills at a home inspection. If a second opinion seems prudent, do it. Don’t lose out on the house because of a mistake.
13. Stay as Close to Your Budget as Possible.
Buying a home is an emotional experience for everyone, whether it’s their first time or fifth time. But as a first-time homebuyer, you will be prone to emotions that you might not be expecting. You will find a PERFECT home, and the feelings that come along can make it easy to make rash decisions—like going over budget to get the house. The thing is, you are almost always better off sticking to your budget and treating this as a business decision.
If someone outbids you and you don’t get the home, you will find another one that you like. The more willing you are to hold fast to your self-imposed rules and restrictions and keep pushing forward with your house hunting, the more likely you will find the right balance between your budget and available homes.
Remember, you are buying your first home. It usually takes buyers years and several properties before they can get their dream home. And that only happens when they are disciplined enough to protect their financial well-being over the long term—which means sticking to their budgets.
14. Watch Out For The Money Pit When Buying a First House
Speaking of budgets, you may have champagne taste but only have the funds for what real estate agents refer to as fixer-upper homes. There is nothing wrong with that; you just need to be extra careful.
The home inspection will reveal a lot of helpful information, but you need to remember homes have ongoing maintenance. Fixer-uppers tend to have a lot of things that tend to break down rather quickly. Make sure you have an allotment for the money needed to not only buy the home but all the necessary upgrades and improvements you’re planning.
At a moment’s notice, the 20-year-old heating system the home inspector said has another 5-10 years left could fail a month after closing.
15. Budget For All The Costs, Not Just Buying The Home.
You will need more money than that required for purchasing the home. You need to move, furnish the home, and possibly repair the house in the coming months. Many first-time buyers make the mistake of only having enough money to get a home and then having nothing left over when the dust settles. Here are some tips for creating a home buying budget.
Make sure you budget to take care of your expected expenses before you make your final purchase. Having enough money on hand will significantly reduce your stress as a first-time homebuyer. And make no mistake, there will be stress even after you finalize the purchase. It takes time to settle into the role of a homeowner.
16. Plan Your Move Ahead of Time.
One of the worst parts of buying a home for the first time is moving. In fact, many people dread the move more than anything else in the whole process. It is easy to understand why – it is a ton of work coupled with a lot of stress.
One of the more crucial things not to forget about and put at the top of your moving checklist is to get your address changed with the post office. It is easy to let something like this slip through the cracks. Doing so will cause you more anguish if you don’t receive vital mail in a timely fashion. Never underestimate the importance of getting your mail forwarded.
Unless you are doing it all yourself, moving can be costly as well. The prices you will get from movers can vary tremendously.
Make sure you get multiple bids from a handful of moving companies. Keep in mind it will also be critical to research the movers as well. The moving industry is riddled with scams and fly by night companies. You can use our review of movers to ensure you get a great one!
Some people like to do the move themselves and rent their own moving truck. Here is a review of the best moving truck rental companies if that is the route you decide to take.
Given the fact that buying a home for the first time can be so expensive, you’ll want to take a look at some helpful tips on how to save money when moving.
17. Listen to Your Real Estate Agent.
As long as you hire an agent you trust, you want to make sure to listen to his or her advice. Good agents can be invaluable in the home buying process.
Real Estate agents who have been in the business for a while are battle-tested. They have probably gone through numerous problems. With experience comes problem-solving skills.
When the going gets tough, lean on your buyer’s agent. That is one of their roles in the transaction.
FAQs When Buying a House For The First Time
Here are 11 common questions buyers ask before purchasing their first house, along with the answers.
1. How much money do you need to buy a home for the first time?
If you qualify, you can get a VA loan or USDA loan for no money down. If you don’t qualify for one of these types of mortgages, you can still get a conventional mortgage with only 3 percent down and an FHA loan with 3.5 percent down.
2. How easy is it to buy your first home?
As long as you follow sound advice like what’s been outlined here, purchasing a first home should go smoothly.
3. Is it a good time to buy my first house?
Getting into homeownership long-term has many advantages over renting. When interest rates are very low, which they are now, it is an even better time to purchase a property and start building equity.
4. What shouldn’t you do before buying your first home?
There are quite a few things you should avoid doing before buying your first house. Some of them include: missing payments on bills, opening new lines of credit, making large purchases, moving money around unnecessarily, and avoid changing jobs.
5. How long does it take to buy a home?
The average time it takes to buy a home is around 5 months when you figure in a few months to find a home. The typical closing time from making an offer to when you close is 45-60 days.
6. How long does it take to get a mortgage when buying your first house?
Depending on the mortgage program you choose, you can plan on the procurement of financing to take around 5 weeks. For government loans such as VA and FHA, you may be looking at a bit longer.
7. What is the best time of year to buy a home for the lowest price?
In most areas of the country that have cold weather climates, winter is the slowest time. There are fewer buyers in the market, leading home sellers to have fewer buyers for their homes. Spring through summer tends to have the highest demand, which can push home prices higher. The slowest months of the year for a home purchase are November through February.
8. What are the costs of buying a home beside the mortgage?
Some of the additional costs home buyers need to think about besides the mortgage are property taxes, HOA fees if there is a homeowners association, home insurance, and of course, closing costs.
9. Does your credit score go up after buying a home for the first time?
If you continue to follow good credit practices, it should. You will be paying a significant mortgage bill every month, which will help increase your credit score just like any other debt. The key is timely payment.
10. Can you buy a car the same day you close on a house?
Yes, and it is always prudent to make sure you wait until after you own a home to make any significant purchases. Making a large purchase such as a car before owning a home could cause the lender to revoke your approval.
11. What can I deduct from my taxes after buying my first house?
One of the many benefits of homeownership is the ability to get some home-buying tax deductions. Have a look at some of the things you can deduct after a house purchase.
Final Thoughts on Buying Your First House
Buying a home for the first time is a big deal. You will be joining the ranks of homeownership, further cementing yourself as an adult. With owning a home comes great financial responsibility. Make sure you are ready both mentally and financially before jump in with both feet first.
Follow the above tips for buying your first home, and you’ll be well on your way to a successful purchase. Best of luck!