8 Must-Know Tips for First-Time Home Buyers

Lauren Wellbank
Written by Lauren Wellbank
Updated April 25, 2022
A real estate agent showing apartment to a couple
Photo: Mindful Media / E+ / Getty Images

Feel more prepared to buy your first home after reading these go-to tips

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Picture this: After years of renting, you’re ready to buy your first home and become your own landlord. But between the confusing real estate lingo and the ever-changing housing market, it’s difficult to know where to start.

Don’t worry; we’ve got you covered. If you’re ready to buy your first home, follow these tips to make your home-buying process less stressful. 

1. Find a Real Estate Agent Who Fits Your Needs

If you’ve decided to take the plunge and buy your first home, the first step is to find and hire an experienced local real estate agent. Not only can they help you navigate the world of financing—most agents can connect you with a mortgage lender—but they can help you set your housing expectations and find a home that checks the boxes on your wishlist. 

To find a real estate agent who suits your buying needs, ask your friends, family, and colleagues for recommendations of trusted agents in the area. You can also research local agents online and read their reviews to vet their credentials.

2. Strengthen Your Credit Score

You’ll likely hear the word FICO thrown around a lot when you start applying for a mortgage. No, it’s not the distant cousin of the Ficus tree, but instead a calculation of your creditworthiness that the Fair Isaac Corporation conducts. This number will determine your loan approval and your interest rate.

In order to qualify for a mortgage and obtain the most favorable interest rate possible, it’s important to strengthen your credit score before submitting your loan application. You can improve your credit score by paying bills on time, keeping your credit balances low, and paying off as much debt as possible.  

3. Determine How Much Home You Can Afford

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It’s essential to know your spending budget before jumping into house hunting. Loan lenders will review your income, assets, and credit during the preapproval process and let you know how much money you can reasonably afford to spend on a mortgage. Keep in mind that most lenders will use your pre-tax earnings to qualify you for a loan and won’t consider high-cost items like utilities or monthly food or transportation costs. 

Your best bet is to look at your personal budget and determine how much money you can afford to spend on housing after you’ve paid for all of your other loans and expenses each month. You can also use an online home affordability calculator to confirm your spending budget.

4. Choose the Right Type of Home Loan

There are several different mortgage products on the market. Not every loan type will be the right option for your first home purchase, and you should talk with your lender before making a final decision. Here are the primary types of loans available:

  • USDA loans: These loans are backed by the United States Department of Agriculture, and they’re only available in rural areas. USDA loans require as little as $0 down payment.

  • FHA loans: This government-backed loan is typically ideal for first-time homebuyers with lower FICO scores. You can qualify for an FHA loan with as little as 3.5 percent down.

  • Conventional mortgages: This type of loan is available through a private lender and meets the requirements of Freddie Mac and Fannie Mae entities.

  • VA loans: You qualify for a VA loan if you’re a current or veteran service military service member. This loan type doesn't require a down payment.

5. Save for a Down Payment

One of the major hurdles for first-time homebuyers is saving enough money to put down a down payment. The exact amount of your down payment depends on your loan type, loan lender, credit score, and the cost of your potential new home. Some loans only require a low down payment of 3%, but the average down payment is about 6% of the borrower’s loan value. With that in mind, start saving early for your down payment so you can feel confident on closing day.

6. Opt for the Home Inspection

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Photo: The Good Brigade / DigitalVision / Getty Images

Once the seller accepts your offer on their home, you’ll have the chance to hire a professional to conduct a home inspection. Home inspectors will check every interior and exterior area for potential issues. 

When the real estate market in your area is very competitive, some people opt to skip the inspection or waive the home inspection contingency, creating the potential for expensive issues down the line. Home inspectors can spot issues and areas of concern, alerting you to the possibility of added expenses that will need to be tacked onto the cost of your new home.

7. Avoid Making Other Major Purchases

After you submit your mortgage application, whether it’s for preapproval or when you’re ready to buy, avoid making other large purchases. Any loans or charges that occur before closing will factor into your debt-to-income ratio, potentially lowering the amount of money you’re approved to borrow. So if you’re in the market for a new car and a new house, wait to make your future car purchase until after signing the closing documents.

8. Be Prepared to Walk Away

If something doesn’t sit well with you during any point of the home-buying process, you should feel empowered to say something. Buying a home, especially your first home, can be an exciting yet overwhelming time. If you have questions, you should ask them. 

And if you’re unsure about investing in that home, remember that you can walk away from the purchase anytime before closing. That’s why it’s important to protect yourself in real estate by keeping contingencies in your offer. 

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