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23 Tips for First-Time Home Buyers

Buying a home for the first time is nothing short of an emotional roller coaster. One minute you’re elated, thinking about how you’ll decorate the kitchen and how much fun it’ll be to play with your kids in your new backyard. The next minute you’re on the verge of a panic attack at the thought of locking yourself into a mortgage payment for the next 30 years.

Trust me, everyone who has bought a home has ridden that very roller coaster and made it out on the other side. The good news is that by following the advice of others who have come before you, you can take some of the stress and surprise out of the home buying process. We gathered 23 of the best tips for first-time home buyers. Trust me, you’ll be glad you have them.

1. Slow Down

There will always be great houses, with great yards, in great neighborhoods on the market. And there will always be good deals. Abandon the scarcity mentality. Wait not just for a good opportunity, but for the right opportunity.

2. Start Saving Early

As soon as you decide you want to take the leap into homeownership, it’s time to start saving. When you buy a house, you’ll have to come up with a down payment, which is typically anywhere from 3%-20% of the purchase price of the home. While you’re saving for a down payment, don’t forget to set aside money for any other expenses associated with your new home, including moving expenses and new furniture.

You can treat your house fund just like any other Savings Target in your budget. Identify how much you’d like to save and when you’d like to save it by. Then you can create a Savings Target to help figure out exactly how much you need to save each month to hit that Target on time.

3. Don’t Fall For The “Rent Is Throwing Away Your Money” Myth

Renting is not throwing away your money—it is exchanging your money for a roof over your head. Depending on your circumstance, the flexibility that comes with renting can be extremely valuable. Also, remember that much of the money that is lumped into the term “mortgage payment” is essentially rent—and the bank is your landlord.  

Consider how much goes to taxes, interest, and insurance, and you’ll realize that there is, in fact, just a small portion of what you send away each month that translates into actual equity. It’s a little depressing.

Let’s say you rent an apartment for a year, and your monthly rent is $1,200. Over the course of one year, you’d spend $14,400 on rent. Some might say you’ve thrown away that money. But let’s consider how much you’d spend in that same year as a homeowner.

Suppose that you’ve got a monthly mortgage payment of $1,600. If you’re in the early years of that mortgage, most of that money isn’t going toward your principal loan balance. Of the $19,200 you spent, you could’ve “thrown away” $12,000 paying for the interest!

But we’re not done yet. When you rent an apartment, the landlord usually covers the cost of any repairs and maintenance. But when you own your own home, you’re picking up the tab. If you spend $3,000 on home repairs and maintenance, which isn’t outside the realm of possibility, you’ve now “thrown away” just as much on homeownership as you would have to rent.

4. Decide How Much House You Can Afford

Before you start shopping, and even before you talk to a lender, decide how much you feel comfortable spending on a mortgage. Don’t just consider the maximum you can afford to spend—think about what you would actually feel comfortable spending, and what would leave some wiggle room in your budget. It’s wise to do this before talking to a lender because the amount a bank will pre-approve you for is often an amount far higher than what you actually could or should spend.

Use this sneaky budget trick to know what you can afford.

5. Build An Emergency Fund

Having a robust emergency fund is a good idea for anyone, but it’s more important than ever once you own a home. Unexpected costs come up all the time, from a burst pipe that you have to fix right away to a new roof you’ll have to buy a few years down the road. The time to start building your emergency fund isn’t once you’ve already bought the home—it’s now.

Trouble saving? See how an emergency fund is the trick to saving money.

6. Check Your Credit Beforehand

You don’t want any surprises when you go to apply for a mortgage. Once you decide to start saving for a home, pull your credit report. This will tell you whether your credit score is high enough to qualify for a mortgage. If it’s not, you can work on increasing it before you talk to a lender.

Checking your credit beforehand allows you to make sure there’s nothing on there that shouldn’t be. If any bills went to collections without you knowing or if an error showed up that’s hurting your score, you have time to deal with them.

7. Stop Any New Credit Activity

If you’re going to be applying for a mortgage in the near future, try not to add anything else to your credit report until after you close. Applying for new credit can temporarily reduce your credit score, and the last thing you want is your score dropping just before you try to get approved for a mortgage.

8. Shop Around For the Best Rates

Don’t just apply for a mortgage from your regular bank and call it a day. Interest rates can vary significantly from one lender to the next, and you want to make sure you’re getting the best deal. You are trying to find the lending establishment that will get you the most affordable money (i.e. money with the lowest interest rate and closing costs).

Start by requesting loan estimates from five different lenders. Go back to the three most competitive and ask for a “good faith estimate” based on your credit score and down payment capacity. It’s generally poor policy to come in much over a good-faith estimate, so these figures should give you a fairly accurate idea about rates and closing costs on a mortgage.

From there, you can take the best of the three estimates, and see if the other two will come down from their original quote. Let the mortgage lenders bid each other down to get the lowest rate.

9. Research Your Different Mortgage Options

While the conventional 30-year mortgage might be the most popular option, there’s nothing saying you have to go that route. Many people don’t even consider 15 or 20-year mortgages. But it’s worth noting that these options often come with lower interest rates, and can help you be mortgage-free 10-15 years earlier. These shorter mortgages come with significantly larger payments, so it’s important to know how much room you have in your budget.

Which is better? Read this if you’re debating a 15- vs. 30-year mortgage.

10. Avoid Interest-Only and Adjustable-Rate Mortgages

Beware of pre-payment penalties and other fine print that often accompanies subprime loans. It is generally best to wait until you can afford a fixed rate, traditional mortgage. No one can predict what will happen to interest rates. While adjustable-rate mortgages might seem like a good idea while rates are low, they can quickly become unaffordable if rates shoot up.

11. Look Into First-Time Homebuyer Programs

There are a plethora of state and federal programs out there to make homeownership more attainable for first-time homebuyers. Some of the most popular programs are:

  • FHA loans: A federal program that helps individuals buy their first home with a low down payment, even without an ideal credit score.
  • USDA loans: A federal program intended for first-time rural homebuyers, and allow for no down payment.
  • VA loans: A federal program for military veterans to buy homes with no down payment
  • Fannie Mae or Freddie Mac loan program: Conventional loans for first-time homebuyers to buy with only 3% down.

12. Find the Right Real Estate Agent

Having the right real estate agent can make or break your home buying process. A good agent can not only help you find the best houses on the market—preferably before everyone else finds them—but they can also help make the process as seamless as possible. As a first-time buyer, a good agent can help show you the ropes and talk you through each step. A good place to start is to ask friends and family who recently bought homes and see if anyone had an agent they’d highly recommend.

13. Get Pre-Approved Before You Start Shopping

This is a lesson you don’t want to learn the hard way. Don’t start shopping for your next home until you’ve got that pre-approval letter in hand.

Starting to shop too early can go wrong in a couple of different ways. First, sellers are going to take you more seriously if you’ve already been pre-approved by a lender. You’d hate to find your dream house before you’ve talked to a lender, only to have the seller pass you up for someone who is further along in the process than you are. Save yourself the emotional heart wrench.

You’ll also want to get pre-approved first so you don’t shop outside your budget. The last thing you want is to shop for homes in the $250,000 price range, only to find out your lender will only approve you for $200,000.

14. Make Your Must-Have List

Before you start shopping, decide what you absolutely need in a home. Consider the different types of homes (single-family vs condo), and decide if there’s one you absolutely have to have. Then think about other things you need your next home to have. Maybe you need an extra bedroom for a baby on the way, or a home office if you work from home. Having a concrete list upfront will help you avoid falling in love with houses that don’t check all your boxes.

Once you’ve made your must-have list, you can put together a nice-to-have list. These are all the features that would be great to have in a home, but that aren’t necessary.

15. Decide Which Neighborhood Is Right For You

Don’t get so excited about finding your dream home that you fail to take the neighborhood into account. The last thing you want is to fall in love with a house, and then realize it’s in an entirely different school district or is an hour from your job.

Think ahead of time about what neighborhoods are a good fit for you. Do you have kids who you’d like to stay in their current school? Would you prefer a house within walking distance of restaurants and shops? How far are you willing to drive to work? These are all factors to consider before finding your next home.

16. Don’t Get Emotionally Attached

I know. Easier said than done, right? But if there is one thing that will help you make a better financial decision with regards to the purchase of your home, it is this principle. Be willing to walk away from a seller who won’t negotiate into your price range. Understand your “best alternative to no agreement,” (that you will be able to find another home,) and be willing to walk away from a deal that is not right.

Don’t make emotional concessions (i.e. I love this house SO much that I’d be willing to spend a little less on food every month and buy less clothing to be able to live here) that will stretch you beyond your predetermined price range. A house will not sate your desires and fill your happiness quotient like you might imagine. The granite and stainless steel will lose their luster remarkably quickly if you’re stretched to (or beyond) your financial limits month after month to afford them.

17. Avoid Buying at The Top End Of Your Budget

Let’s say you’ve decided you can afford $1,200 per month for a mortgage payment. This doesn’t mean you should buy a house where your loan payment will be $1,200. If you do that, you’ll actually end up paying more than you planned when you account for the other added costs.

The real number you should be thinking about when planning your monthly payment is PITI: principal, interest, taxes, and insurance. These are the four components that will make up your monthly mortgage payment.

18. Negotiate With The Seller

Negotiating is a part of the home buying process, and it can come in many different forms. Depending on the current housing market in your area, you might offer slightly under asking price, hoping the seller will be willing to compromise.

There are other ways to negotiate without bringing the price down. You could ask the seller to cover any necessary repairs or pick up the tab on some of your closing costs. Keep in mind that the more of a seller’s market you’re in, the harder it will be to negotiate. You don’t want to lowball the seller when there are plenty of other people willing to offer asking price or more.

19. Practice Budgeting With Your New Monthly Expenses

Your budget is going to look quite different after you buy a house. Not only will you have a mortgage payment to account for, which will include the cost of insurance and property taxes, but you’ll have other new expenses as well. It’s likely that your utility costs will change, especially if you’re moving from an apartment to a house. You also may have other costs such as HOA fees.

Before you officially close on your home, start practicing with assigning funds for those items in your budget. Create an expense for each one in YNAB, and start assigning money toward them each month. This will give you an idea of just how big of an adjustment your new expenses will be.

20. Have A Home Inspection

A home inspection is another out-of-pocket cost you’ll have to take on as the homebuyer. But trust me—it’s well worth it.

The inspection is when a professional will come to the home and look the whole thing over. The inspector will check everything from the house’s foundation to the electrical system. At the end of it all, the inspector will put together a thorough list of everything that needs immediate attention, or anything that may need fixing in the next few years.

The buyer typically attends the inspection, and it can actually be a great learning experience! When I bought my first house, I knew next to nothing about home maintenance. The inspector took the extra time to talk me through some of the basics, and even made a list of maintenance tasks I’d need to do on a monthly, quarterly, and annual basis.

21. Budget For Closing Costs

The downpayment isn’t the only expense you’ll need to budget for when it comes to buying a house. The buyer also typically has to pay closing costs—these are all of the fees that come with taking out and closing on the mortgage. Typically closing costs amount to 2%-5% of the purchase price. So if you’re buying a house for $200,000, you can expect to pay between $4,000 and $10,000 in closing costs.

22. Stop Shopping Once You Find Your Home

After months of hopping on Zillow every day to scope out the new houses on the market, it’s pretty much second nature. Trust me when I say this is a habit you’re going to want to break once you find your new home.

The last thing you want is to check out the new houses on the market and find your dream home at a great price. Then instead of celebrating your new home purchase, you’re stuck with buyer’s remorse over what could have been.

23. Budget For Home Maintenance

So you’ve found your dream house, signed the closing papers, and moved your belongings in. Your work isn’t over yet. In fact, it’ll never really be over as long as you’re a homeowner.

You can treat your maintenance budget just like any other true expense in your YNAB budget. Add it as one of your expenses, and set aside some money every month. Then, when one of the appliances breaks down, you’ve got the money in the budget to replace it.

The Bottom Line

Buying a home for the first time is stressful enough—don’t feel like you have to go it alone. By taking the advice of the many people who have done this before you, you can save yourself some of the headache and heartache that many have experienced.

Want to buy a house but saving a down payment has you like 😬? Jacob shares his secrets of how he saved $30,000 in a single year for a house down payment.

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23 Tips for First-Time Home Buyers