Tips for First-Time Home Buyers

Tips for First-Time Home Buyers

Table of contents

Buying a home can be nerve-racking, especially if you’re a first-time home buyer.
These tips will help you navigate the process, save money and avoid common mistakes. We organized them into four categories:

Key takeaways

  • Save early for a down payment, use a calculator, set up automatic savings, and research mortgage options.
  • Research state and local assistance programs.
  • Find out how much house you can afford using an affordability calculator, check your credit, and compare mortgage rates from at least three lenders.
  • Get a pre-approval letter and hire the right buyer’s agent.
  • Pick the right type of house and neighborhood, and research nearby schools.

Mortgage down payment tips

1. Start saving early for a down payment

Putting down 20% is common, but many lenders now allow much less, and home buyer programs first-timers require as little as 3% down. But putting down less than 20% can mean higher premiums and mortgage  insurance rates, and even a small down payment can still be large. For instance, $10,000 is a 5% down payment on a $200,000 home.

Use this down payment calculator to play around 
and help you land on target number. Setting aside tax refunds and job incentives, setting up an automatic savings plan and using 
an app to track your progress are several tips for saving for down payment.


2. Know your mortgage and down payment options

There are plenty of mortgage options out there, each with its own mix of benefits and disadvantages. When you’re having hard time securing down payment, check out these loans:
Having an increased down payment means making smaller monthly mortgage payment.

Whether you want the lowest possible mortgage payment, look for a 30-year fixed mortgage. However if you can handle higher mortgage payments, a 20-year or 15-year fixed loan will get you a lower interest rate.Using our calculator to decide whether a fixed mortgage of 15 years or 30 years is a better match for you. Perhaps you could choose an adjustable mortgage, which is more risky but promises a low interest rate over your mortgage’s first few years.

3. Research state and local assistance programs

In addition to federal services, several states provide first-time home buyer assistance programs with incentives such as down payment aid, closing cost aid, tax credits and reduced interest rates. Your county or municipality could even have home buyer services for the very first time.

Mortgage application tips

4. Find out how much house you can afford

You need to know what actually lies within your price range before you start looking for your dream home. Determine how much you can safely afford to spend using this home affordability calculator.

5. Check your credit and stop any new activity

Your credit will be one of the main factors on whether you are accepted when applying for a mortgage loan, and it will help decide the interest rate, and probably the terms of the loan.

So check your credit before the homebuying process begins. Discuss any mistakes that could pull your credit score down, and try ways to boost your record, such as making a dent in any outstanding debts.

To prevent dipping your score after applying for a mortgage, stop opening any new credit accounts, such as a credit card or auto loan, until your home loan closes.


6. Compare mortgage rates

A lot of home buyers get a quote from only one lender, but that also leaves money on the table. According to the Consumer Financial Protection Bureau, a comparison of mortgage rates from at least three lenders will save you more than $3,500 in the first five years of your loan. Get three quotes at least, and compare prices and fees.

When you compare quotes, ask if any of the lenders will encourage you to purchase discount points, which means you’d be paying interest in advance to get a lower interest rate on your loan. The amount of time you expect to live at home and whether you have money on hand to purchase the points are two main factors in deciding whether purchasing points is smart. You may use the calculator to assess whether purchasing points makes sense.

7. Get a pre-approval letter

You may get pre-qualified for a mortgage, which will basically give you an estimation of how much a lender would be able to lend based on your income and debts. So once you get closer to buying a home, it is smart to get a pre-approval, where the lender scrutinizes your finances carefully and explains in writing how much and on what conditions it is able to lend you. Getting a letter of pre-approval in hand makes you look a lot more promising for a seller and may give you an upper hand over buyers who have not taken this move.

Tips for house shopping

8. Hire the right buyer’s agent

You’re going to be working closely with your real estate agent, so having someone you’re getting along with well is important. The agent of the right buyer should be highly qualified, driven and knowledgeable about the region.

9. Pick the right type of house and neighborhood

You might expect to buy single-family house, and that could 
be perfect if you want big yard or lots of space. 
But if you’re willing to compromise space for less upkeep and more facilities, and don’t 
mind charging homeowners association charge, condo or townhouse may be better match.

Yet even though the home is perfect, it may be all wrong for the community. So make sure:

10. Stick to your budget

Look at properties which cost less than the sum for which you were approved. While you can potentially afford your pre-approval cost, it’s the ceiling — and it doesn’t compensate for any other monthly expenses or issues like a broken dishwasher that occur during home ownership, particularly right after you purchase. This will also support shopping with a firm budget in mind when it comes to making an bid.

In a competitive real estate market with restricted inventory, you’ll typically be bidding on houses that attract several offers. If you find a house that you love, making a high-priced bid that is guaranteed to attract is enticing. But don’t make important decisions based on emotions. Shopping under your pre-approval number provides some wiggle bidding space. Stick to your budget and you can’t make a mortgage payment.

11. Make the most of open houses

At open houses, when you’re visiting homes, pay careful attention to the general state of the home and be mindful of any smells, stains or things that may be in disrepair. Ask several questions about the house, such as when it was built, when the last things were replaced and how old main systems such as air conditioning and heating are.

If you see the home at the same time as other potential buyers, do not hesitate to plan a second or third visit to look closer and ask private questions.

First-time home buyer mistakes to avoid

This is unsurprising, with so much to think about, that some first-time home buyers make mistakes they later regret. Below are some of the most popular pitfalls, as well as tips to help prevent a similar fate.

12. Not budgeting for closing costs

You’ll need to prepare for the money required to close your mortgage, which can be important, in addition to saving for a down payment. Closing costs normally vary from 2% to 5% of your loan amount. For other closing costs, such as homeowners insurance, home repairs and title checks, you can shop around and compare the rates. You may also defray expenses by asking the seller to pay for a part of your closing costs, or by arranging the commission of your real estate agent. To help you set your budget measure your planned closing costs.

13. Not saving enough for after move-in expenses

You can also set aside a fund to pay for what is going to go into the house after you’ve saved for your down payment and budgeted for closing costs. This includes furnishings, furniture, rugs, upgraded fixtures, new paint and any changes that you might want to make after you move in.

14. Buying a house for today, rather than tomorrow

The assets that suit the current needs are easy to look at. So if you’re planning to start or expand your family, buying a bigger home now that you can grow your family with might be preferable. Consider your potential needs and wishes, and how they would be suited to the home you are considering.

15. Passing up the chance to negotiate

In the homebuying cycle a lot can be up for discussion, which can result in substantial savings. Can you get the seller to cover any big repairs, either by managing them in full or by giving you a credit change at closing? Is the seller ready to pay all of the closing costs? If you are in the search of a buyer, you may find that the seller is going to negotiate with you to get the house off the search.

16. Not knowing a home inspection’s limits

You’ll pay for a home inspection after your offer is accepted to assess the condition of the property inside and outside, but the findings will only tell you so much.

17. Not buying adequate homeowners insurance

Your lender will ask you for a homeowners insurance before you can close on your new house. Find the best insurance rates by shopping around. Look Carefully at what’s covered in the policies, less expensive policies usually means fewer protections and benefits. It can also mean more out-of-pocket expenses after filing a claim. Please note that flood damage is not covered by a homeowners insurance so you might need to buy a separate flood insurance especially if your new home is in a flood-prone location.

Picture of Jacquelyn Sublett
Jacquelyn Sublett

I love teaching and writing on real estate, finance and mortgage topics. I find it fulfilling hearing stories of first time home buyers who we have helped with the home buying process. Writer for the Hero Homebuyer Programs™

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