8 Essential First-Time Home Buyer Tips

Buying your first house is exciting, stressful, and challenging. Understanding the process will help you navigate it better, especially in a competitive housing market. You may be tempted to comb real estate apps and listings when thinking about a home. But before you head out to your first open house, do your homework and take time to invest in logistical groundwork. This post provides some first-time home buyer tips.

Considerations Before Buying a Home    

First-time home buyers have a learning curve, from understanding affordability and how to qualify for a mortgage to managing cash flow. There’s a lot to learn before moving in.

Start your home-buying process by:

  • Setting a Budget. Having a budget will make it easier to focus on homes you can afford when you start your search. Before setting out for the weekend open houses and shopping with a realtor, determine how much house you can comfortably afford. One rule of thumb is to spend at most 28% of your monthly income on housing. You’ll want to consider mortgage payments and expenses such as insurance, property taxes, utility payments, and maintenance. 
  • Exploring Mortgage Options. There are many loan options, including specialized loans for first-time homebuyers. These often come with lower interest rates or reduced payment requirements. Be sure you’ve thoroughly investigated all your options before you dive in with any one type of mortgage. An experienced loan officer who asks the right questions can target the best loan for your situation.
  • Getting Pre-approved. Consider applying for a home loan pre-approval. While you’ll need to go through the formal approval process, a pre-approval provides a ballpark figure to work with when you choose a home. Getting pre-approved means the lender has reviewed your financial paperwork and is ready to give you a loan even before you find a home. It also may be necessary before a real estate agent is willing to show you properties.
  • Knowing Your Needs. It can be challenging to separate want from need during the home-buying process. Evaluate your current living situation. What’s working? What needs to change? Factor structural elements such as bedrooms, bathrooms, and living space. Weigh your current and long-term plans. Consider your commute, schools, and amenities. Are you planning on changing jobs? Does your future include marriage plans or children? A documented list of must-haves and want-to-have features will help you avoid making an emotional buying decision. Keep your list nearby throughout your search, and plan on making compromises. 

8 First-Time Home Buyer Tips

Getting your financial and mental houses in order will help you feel more confident as you search for your first home. Here are some first-time home buyer tips to guide you through the process and provide support after you move in. 

1. Don’t Skip a Pre-Approval

A pre-approval can save you time, money, and heartbreak. You’ll know exactly how much home you can afford, allowing you to shop within your budget and avoid falling in love with a house you later find out you can’t afford. A pre-approval will enable you to make a stronger offer. Sellers know you can afford their home, and they look at your offer closer than a potential buyer without pre-approval. 

2. Maintain Your Credit

Your credit score plays a role in getting a mortgage. Lenders want borrowers with consistent and reliable behavior patterns. An important first-time home buyer tip is to keep your credit score in mind. Now isn’t the time to open a new credit card or personal loan. When you apply for pre-approval, lenders will pull your credit report. They’ll pull it again before you close on the house.

If you’ve taken out another loan or line of credit or made late payments, it could risk your final approval. Find ways to improve your score, such as paying off or down credit cards. Everyone has room for improvement.  

3. Plan for Closing Costs

Closing costs are upfront expenses going to your lender in exchange for arranging certain loan services. Typical closing costs are attorney fees, pest inspection, appraisal, and escrow fees. Expect to pay 2-5% of your total loan in closing costs for a conventional loan. First-time buyers may qualify for government-backed grants or loans to assist with closing costs. As a buyer, you can negotiate with the seller to help cover some closing costs. 

4. Work with a Real Estate Agent

A good real estate professional can guide you through the home-buying process and make the experience easier. Once an agent understands what you’re looking for in a home, they can weed out anything not matching your criteria. And they assist in all aspects of the process, including making an offer and completing paperwork. Only realtors have access to the Multiple Listing Service (MLS), which is one of the most effective home-buying and selling tools.  

5. Look for First-Time Homebuyer Assistance 

There’s lots of help out there to get you into your first home. First-time homebuyer programs can provide down payment assistance or vouchers to purchase a home. These can save you tens of thousands of dollars, so you’d be remiss not to search them out. 

6. Check Your Emotions 

Once you decide to buy, you’ll need to prepare yourself emotionally. The reality is you may not get the first home you want. There can be multiple offers, sometimes sellers change their minds and take their homes off the market, an inspection could find unaddressed issues, and other times your dream home is out of your price range. Remember, at the core, buying a home is a business transaction. Keeping your emotions in check helps make the most rational decision possible. 

7. Get a Home Inspection

A home inspection is a professional assessment of your potential home. A home inspection is meant to uncover problems with the structure, plumbing, HVAC system, roof, and other parts of the home. The inspector will provide a report detailing the condition of the property. It’s helpful to attend any inspections because it gives a better understanding of the home and allows you to ask questions. A home inspection likely is required by your mortgage lender.

8. Prepare for Ongoing Repairs and Maintenance 

Homeownership requires regular maintenance and care. Staying on top of these tasks ensures your home is safe and healthy, reduces risk, keeps your energy bills low, improves curb appeal, and preserves or increases your home value. Budget 1-2% of the purchase price per year for improvements to newer homes. Older homes need additional upkeep, and you’ll want to budget more. Plan for improvements such as new carpets, kitchen counters, or windows, and start an emergency fund for unexpected expenses. 

Frequently Asked Questions

Here are some common questions first-time home buyers ask and answers to help you navigate the home-buying process. 

How Do I Save Money to Buy a House?

A down payment is often the biggest obstacle first-time home buyers face. Depending on the loan amount, it will range from 3-20% of the purchase price. A good way to tackle your down payment is by breaking the process into smaller, actionable plans. Determine how much you can save each month and calculate how long it will take you to save for your down payment. Ideally, you’ll cut expenses and increase your income. 

How Long Does It Take to Buy a House?

Timelines vary widely based on factors like the time of year, your financing needs, and the type of home you’re looking for in your area. On average first-time buyers spend four months on the process. Adequate preparation can help save you time.      

Is My Credit Good Enough to Buy a Home?

Lenders consider multiple factors when determining if you qualify for a mortgage. There is no minimum credit score. Each loan type has different requirements. Generally, a score over 670 will provide access to the most favorable interest rates. Scores below 620 are considered subprime and come with higher interest rates and more restrictions. You can be approved with a lower score if you have a solid down payment or your debt load is low.  

How Do I Find a Lender?

Start with who you know. If you have a relationship with a current bank or credit union, that’s a great place to start. Talk to friends and family who have recently bought a home. Tap into their experience to find out what did or didn’t work well for them. 

What Will My Mortgage Cover?

Mortgage payments typically consist of four components: principal, interest, taxes, and insurance. 

The principal is the amount used to pay down your outstanding loan amount. 

Interest is the cost of borrowing money. It’s calculated based on your loan balance and interest rate. 

Taxes are the property assessments your local government collects to fund services like schools, streets, and public services. A portion is typically collected in every mortgage and held until they are due. 

Private mortgage insurance protects the lender if the borrower defaults on the loan.  

What Will Happen at Closing?

On closing day, the ownership of the house is transferred to you, the buyer. This day consists of transferring funds from escrow, providing mortgage and title fees, and updating the house’s deed to your name. The closing typically happens four to six weeks after you sign the purchase contract, though it may take longer. 

Focus Provides First-Time Mortgage Options 

Buying a home is a major milestone. The essential first-time home buyer tip is to take the time to familiarize yourself with the process. Understanding the process allows you to avoid mistakes and setbacks. Learn more today about your mortgage options and get pre-approved as a first-time home buyer through Focus Federal Credit Union.