Smart and Simple First-Time Home Buyer Tips

Buying your first home is an exciting milestone, but it’s also a complex process that can feel overwhelming without the right guidance. Fortunately, some preparation can go a long way. 

If you are a first-time homebuyer, here are a few tips to avoid costly mistakes. Read on to learn how to buy a home with less stress and more confidence. 

Finances First: Get Your Budget and Credit in Order 

Before you begin house hunting or dreaming about the perfect kitchen, it’s a good idea to have a clear financial plan. 

1. Understand How Much You Can Afford. Experts suggest spending less than 28% of your monthly paycheck on a mortgage. This amount includes taxes and insurance as well. 

Use an online calculator to estimate your monthly mortgage payment. Make sure to factor in the home’s purchase price, along with property taxes, homeowners’ insurance, and homeowner association (HOA) fees, if they apply. 

2. Speak to Mortgage Lenders. Different types of mortgages have different benefits. You may not qualify for certain loans. Chat with a few mortgage lenders to understand your options. 

Some common types of loans include: 

• Conventional loans (fixed or adjustable rate) typically require higher credit scores and larger down payments but offer competitive terms. 

• FHA loans are great for buyers with lower credit scores or smaller down payments. 

• VA loans are available to veterans and often require no down payment. 

• USDA loans support home buyers in eligible rural areas and may also offer zero-down options. 

3. Monitor Your Credit Score. Lenders don’t just use your credit to determine if you’re eligible for a mortgage loan. 

They also use it to determine the interest rate. Your credit may affect your homeowners’ insurance score, too. So, it’s important to know your credit score and review your credit report for errors. 

Equifax, Experian, and TransUnion are the three major credit reporting agencies. They each allow a free copy of your credit report every year. Before applying for pre-approval, request your credit report from all three agencies to review and fix any errors. 

4. Anticipate Extra Costs. Many first-time buyers save for a down payment, but are often surprised by extra costs such as: 

• Closing costs (usually 2%—5% of the home price) 

• Property taxes 

• Homeowners insurance (required for most loans) 

• Prepaid expenses like interest and escrow setup 

Buyers should aim for 20% of the home’s purchase price for a down payment, plus an extra 10% for other expenses. 

5. Look into First-Time Home Buyer Programs. Many state and federal programs offer assistance for new buyers, including: 

• Down payment and closing cost assistance 

• Lower interest rates 

• Tax credits or forgiveness programs 

• Educational resources and counseling 

Your state’s housing authority or local government may offer these programs. The US Department of Housing and Urban Development’s home buyer directory is a great place if you think you don’t qualify, it’s worth checking since many programs are more flexible than you’d expect. 

Understand the Process: From Offer to Ownership

Once your finances are in shape, the fun begins. Now it’s time to navigate the homebuying process. Here’s what you can expect at each step. 

Step 1: Get Pre-Approved 

A mortgage pre-approval is when a lender checks your financial background and agrees to lend you a certain amount for a home. Getting pre-approved gives you a clear price range and also shows sellers that you are serious. 

But remember that the pre-approved amount is just an estimate. The loan amount and approval will depend on the home’s value and your finances when it’s time to buy. 

Step 2: Work with a Real Estate Agent 

Real estate agents can help you find a home within your budget and in your desired location. They have access to the Multiple Listing Service (MLS) database, which shows all available properties for sale. Without the MLS, your options to find homes on the market are limited. 

A local real estate agent also knows the housing market in your area. They can identify when a home is priced too high, so you won’t overpay. They also can help you make a strong offer and provide guidance on schools and resale value. 

Step 3: Find a Home and Make an Offer 

Once you find a home you love, your next step is to make an offer to the seller. By helping you compare similar homes in the neighborhood, your real estate agent will assist you in negotiating the best price. Be prepared for a counteroffer, as buyers rarely accept an initial offer. 

You may also want to include contingencies as part of the offer. One of the most common conditions of purchase is a home inspection. This inspection helps you as a buyer. It lets you back out of the purchase if there are issues with the property’s condition that are too costly to fix. 

Step 4: Schedule a Home Inspection 

Once the seller accepts your offer, it’s time to call a home inspector. Keep in mind that this inspection differs from an insurance inspection. During an insurance inspection, the insurer evaluates how well the homeowner maintains the home and any potential risks of insuring it. 

Some useful home inspection tips are to be present for the inspection, and to ask questions as it is happening. Although you will get a report outlining any issues, it’s helpful to see the concerns in real-time. Work with your real estate agent to decide what you want the seller to fix, or to change your offer based on the results. 

Step 5: Purchase Homeowners Insurance 

Lenders will require home insurance as a condition of your mortgage. Consider working with an insurance agent to help you find the right coverage. They can also provide you with an insurance binder that you will need for closing. 

Step 7: Close the Deal 

At the closing, you’ll sign paperwork, transfer funds, and finally get the keys to your new home. 

Welcome Home! Now What? 

Congrats, you are now officially a homeowner! After you settle in, here are a few final tips to make you an expert homeowner: 

• Follow this home maintenance checklist to keep your home in great shape and protect your investment. 

• Tell your insurance company about any changes you make to your home, like renovations or installing a security system. 

Buying your first home comes with a learning curve, but it’s also an opportunity to set yourself up for long-term success. With a little planning and the right information, your first home purchase doesn’t have to be overwhelming. The home-buying journey comes with its ups and downs, but staying informed, asking questions, and taking it step by step will keep you on track. Be proud of the path you’re on—you’ve taken the right steps toward an exciting new chapter!