7 First Time Home Buyer Tips

Before you make the major investment of buying a home, learn as much as you possibly can to avoid future headaches. We’ve compiled a list of a few of our top tips for first-time home buyers to make the process go smoothly. You should have an easier time as a first-time home buyer purchasing a home if you follow them!

Don’t Waste Time Looking for Perfection

When you’re about to pay tens of thousands of dollars for a home, it can seem ridiculous to compromise on anything, big or small. But compromise when buying a house is inevitable. Unless you have an unlimited budget and the capacity to build a dream house yourself, no one will likely have all the features you want. Whether it’s the size of the kitchen, the lack of crown molding, or the unfinished basement, you won’t be able to get everything you want in with your first house purchase.

Remember that you can also change existing things if they’re cosmetic. So don’t immediately pass on a home just because you find its red kitchen appalling. If the layout works, the color can always be repainted. The same is true of most home decor choices you may not like: if the bones are good, you can redo the floors or install new sconces as your homebuying budget allows.

Start by separating what you can’t compromise from what you can. Things you can’t change much are square feet, bedrooms, bathrooms, and type of home like a single-family home, townhome, or condo. A swimming pool can be a “nice to have” but not a requirement. Look at what’s within your budget currently on the real estate market to set expectations for features and style.

Understand All the Costs Involved

Some first-time homebuyers plan for the down payment and the mortgage, and that’s it. You’re in for a big surprise if that’s all you’ve done! Buying a home is a major purchase with significant costs beyond the purchase price. The budget must factor in the closing costs, mortgage insurance, earnest money deposit, homeowner’s insurance, property taxes, utilities, and more! Some of these, like earnest money or property taxes, may need to be paid upfront!

Talk to your lender or real estate agent if you want a more accurate idea of what you should expect to pay. They can help estimate some of these costs based on the local market pricing and what’s standard. Additionally, regulations require mortgage lenders to give you a loan estimate that projects what you can expect to pay for closing costs.

Get Your Financial Life In Order

Buying a home is part of the American dream, but that dream can turn into a nightmare if you’re not prepared. Place yourself into a financially strong position so you have the best home-buying experience possible. Ask yourself:

• What monthly payment can I realistically afford?
• How much do we have for earnest money and closing costs?
• What is our debt-to-income ratio?
• Do we have a strong credit score?

The answers matter for first-time buyers. Making a monthly mortgage payment shouldn’t be a burden. Overextending yourself by taking on too much debt is how you risk losing the home. The rule of thumb is not have all debts–house payments, student loans, credit card, and auto payments–not exceed 42% of your annual income.

Additionally, mortgage lenders will pull your credit report to verify your credit score. They want to see a pattern of paying bills on time in your credit history. The better your credit score, the more mortgage options you’ll have. It also opens the door to getting the best mortgage rates possible based on current market trends.

Don’t Commit to the First Mortgage You Look Into

Don’t think that all mortgages are created equal. The market has many types of mortgages, each with their advantages and disadvantages. You’ll spend a large chunk of your homebuying process talking to loan officers, learning about, applying, and securing the home loan.

Why are there so many mortgage programs? They all have different interest rates, fees, and requirements catering to the varied needs of homebuyers. Some first-time home buyer programs allow for as little as 3.5% down, but then you’ll have to pay private mortgage insurance (PMI). Some will have what appears to be a lower interest rate, but the fine print shows you’ll need to pay discount points. Some charge origination fees or a mortgage application fee. Others don’t.

Conventional loans may be the most common type of loan, but first-time home buyers should also look into FHA loans and USDA loans. You may also qualify for a VA loan. Some homebuying payment assistance programs help low-income earners afford a down payment or closing costs. 

Additionally, mortgage loans range from fixed-rate mortgages or adjustable-rate, 15-year, 30-year, or another year spread. 

Dive deep into learning about the type of mortgages you could qualify for. Then shop around. Speak to multiple loan officers. Even if you decide a 15-year adjustable-rate mortgage is best for you, shop around the total cost of the loan can change. You’d be surprised how different lenders structure a 30-year fixed-rate conventional mortgage differently in their loan terms and interest rates. Even a small percentage difference in rates and terms adds up over time.

Be Patient

It’s easy to think the first is the best, and sometimes that is true. Don’t jump the gun even if you’re facing a current housing market where sellers are in control. Or, if you’ve been looking for a while, don’t settle because you’re tired of looking. Be patient in your house hunt. The average buyer looks for about 10 weeks before writing an offer on a home. An experienced real estate agent knows that finding the right home takes him, and in competitive markets, it may take longer. Stick to your purchase price, keep saving for those upfront costs, and on the house hunt. The right combination of purchase price and features will come.

Read Your Disclosures

Maybe you’re used to automatically clicking “agree to terms and conditions” when shopping online. But, when doing something as significant as purchasing a home, read everything!

Take your time on real estate disclosures. This document is meant to tell the buyer about any problems with a home that could decrease its value or your experience living in it. It’s where you learn if the basement has flooded before or if there was a treated termite infestation.

If there is anything you’re unclear about after reading the disclosures, do ask questions. Look out for vague words like “small” and ask for more details so you know exactly what you’re dealing with. Deciding whether living in a home with those issues is worth it is up to you.

You’ll also want to review your home inspection report, loan estimate, and closing disclosure to check that all the details are correct.

First-Time Home Buyer Tips

These tips are based on our experience working with first-time home buyers. But perhaps the best advice is to find a real estate agent with extensive experience helping first-time homebuyers like you. They’ll be your guide through the process, from how to search for the right property to how to get the financing. We will be happy to answer any questions you might have and do our part to make the process easier.

Updated November 2024

FAQs

How much to first-time homebuyers put down?

Historically, buyers aimed to put down 20% to avoid private mortgage insurance (PMI). However, this is less common today, especially for first-time buyers. In 2024, the National Association of Realtors reported that first-time home buyers put down an average of 8%. Many first-time homebuyers use conventional loans that require as little as 3% down, especially if they qualify for programs designed to help new buyers. Many states and local governments offer grants, low-interest loans, or forgivable loans to help first-time buyers cover their down payment.

How old are first-time home buyers?

The average age of first-time homebuyers in the U.S. has been increasing over the years, reflecting changing economic conditions, housing market trends, and lifestyle shifts. In 2024, the median age of first-time homebuyers was 38 years old, according to the National Association of Realtors (NAR). This is a significant increase compared to previous decades when the median age hovered around the late 20s or early 30s. Rising home prices and student loan debt make it harder for younger people to save for a down payment.

How much do I need saved to buy a home?

A rough estimate on the minimum you’d need to buy a home would be 3.5% for the down payment and 2-5% for closing costs. That assumes you’d qualify for a first-time home buyer program like an FHA loan, with the minimum credit score and proof you can afford the monthly payments. You’ll also want to look at the current housing market near you to see what the median home price is. Have a cushion for unexpected expenses, too.

What income do mortgage lenders look at?

When evaluating a borrower for a mortgage, lenders consider various sources of gross income (income before taxes and deductions) to determine if you can afford the loan. They review regular income from a full-time or part-time job, commissions, bonuses, and overtime pay. Lenders usually review your last two years of tax returns for self-employed persons and may average your income. Alimony or child support can be included if documented with legal agreements and proof of regular payments.

What much house can I afford?

Every person’s financial situation is different. Online mortgage calculators can help crunch the numbers based on your income, savings, and debt payments.