8 Things Every First-Time Home Buyer Should Know

Buying a home for the first time can be scary, if not downright terrifying. But, armed with the right knowledge and the right real estate agency (hint hint, nudge nudge), it will more likely be a smooth process that leaves you settling into your dream home in no time. 

Here are 8 tips every first-time home buyer should know before they begin the journey: 

1. Set Your Budget

Managing a budget can be overwhelming, but it’s important to know exactly how much you can and are willing to spend when buying a home. That includes a few things:

1. Mortgage: How much are you able to spend on a mortgage, plus utilities, every month? If you aren’t sure, there are tons of free budget calculator apps that can help you. 
   
   
2. Down payment: When you buy a home, a down payment is almost always required, and this must be paid on or before closing. Some people pay a 20% down payment, but with a Federal Housing Administration (FHA) loan, for example, you can have a down payment as low as 3.5%. There are some instances where you can have a 0% down payment, which we’ll get to later.
   
   
3. Closing costs: In addition to the down payment, closing costs include things like an application fee, appraisal fee, property tax, private mortgage insurance, homeowners insurance, title insurance, and other miscellaneous fees. Closing costs can be as much as 6% of your home’s value so make sure you set aside enough to factor this into your budget.
   
   
4. Move-in costs: Moving can get expensive. Decide whether you will hire movers or cleaners when you move into your new home. Will you pay someone to repaint before you move in? Are you planning to buy new furniture? This can add up quickly, so do your best to anticipate these costs. Feel free to reach out to us for recommendations on vendors and services!
   
   
5. Emergency costs: Unexpected repairs are part of owning a home. You should be able to set aside at least 1% of your home’s value every year for repairs. 

2. Get Pre-approved for a Mortgage

Before you begin looking at houses you need to get pre-approved for a mortgage so that you know exactly how much you can spend on a home. Note that you should only complete a pre-approval once you’re ready to pound the pavement, since it can temporarily affect your credit score.

Contact a mortgage company (we recommend Meridian Bank, Movement Mortgage, and Guaranteed Rate) and complete the application process with them either online or in person, free of charge. Note that you are not obligated to work with them even if they complete your pre-approval. The mortgage company will ask you for financial information including bank statements, pay stubs, tax returns, and loan statements in order to complete the process. 

The pre-approval process is very quick — usually a few days — and your pre-approval lasts between 60-90 days.

3. Secure a Loan

Unless you are able to pay in cash, you will need a loan when buying your first home. Mortgage loans typically last 15-30 years so make sure you are ready for that kind of commitment. There four different kinds of loans:

1. Conventional Loans: A conventional loan is not part of any government program and is the most common type of loan for home ownership. With a conventional loan, you can purchase a home with as little as 3% down and it’s recommended that you have a credit score of at least 650.
   
   
2. FHA Loans: Mentioned previously, an FHA loan is a government-backed housing loan from the Federal Housing Administration. It permits you to buy a home with less strict financial and/or credit score requirements. With an FHA, you can have a credit score as low as 580 and a down payment as low as 3.5%.
   
   
3. USDA Loans: The U.S. Department of Agriculture backs a USDA loan, which is for people who wish to buy a home in designated rural areas. It is possible to get a USDA loan with 0% down, subject to specific restrictions. 
   
   
4. VA Loans: VA loans are backed by the U.S. Department of Veteran Affairs and are exclusively for veterans, active-duty service members, and eligible spouses. VA loans have more lenient credit score requirements and allow you to buy a home with 0% down in some cases.

If you aren’t sure what loan is best for you, talk to your real estate agent, mortgage broker, or financial advisor. 

4. Know Your Credit Score

As mentioned previously, mortgage companies will check your credit score, financial information, and outstanding loans during the pre-approval process. Don’t open or close new credit cards and make sure you are paying your credit card statement on time throughout the process. Getting pre-approved usually drops your credit score slightly but does not affect it significantly overall.

5. List Your Non-Negotiables and Nice-to-Haves

This step in the home-buying process can be both exciting and overwhelming. We recommend making a list of your non-negotiables and nice-to-haves for your new home. This can include location, type of home, number of bedrooms, parking, yard space, central air, garbage disposal, ceiling fans, and more. 

Keep this list with you when looking at properties as a reminder for what’s most important to you in your dream home. 

6. Choose a Real Estate Agent

Some people buy homes without the help of a real estate agent, but as a first-time buyer, we highly recommend choosing someone to help you. Real estate agents handle all communication and negotiation with the seller and can recommend mortgage companies and home inspectors they trust. Working with a real estate agent alleviates a lot of stress that can come with home buying.

There is no initial charge for working with a real estate agent — they only collect a commission once you choose and close on your home! Not to mention, they are knowledgeable about your desired location and can offer expert opinions on the properties you tour.  

7. Pay for a Home Inspection

We cannot stress this enough: do not skip this step! You are entitled to a home inspection before you sign any agreement with a seller, and you should pay for a quality home inspection with an inspector you trust. 

Home inspectors are able to tell you how old the roof is, whether or not the furnace will need to be replaced soon, if there is mold hidden behind the walls, and if the appliances are functioning properly, just to name a few. 

Once you receive your inspection and depending on what the report finds, your real estate agent will use the results to negotiate with the seller. 

We recommend Homepoint Inspections.

8. Choose an Insurance Company You Trust

There’s nothing more important than home insurance. It’s there to protect you and your new home, and you should choose an insurance company with great coverage that you can rely on, especially in an emergency. 

Don’t be afraid to shop around when looking for home insurance. Consider what features of your home need to be covered (are you in a flood zone, for example?), what the estimate is for these coverages, and read reviews from third-parties to ensure it’s the right insurance plan for you. 


If you have checked off these 8 tips and are ready to tour your dream home, contact us and let’s get started!