11 First-Time Home Buyer Tips

Whether you've been saving for years or want to take advantage of a first-time homebuyer program, taking the plunge into homeownership is always a major decision. The process can be confusing and complicated — especially if it’s your first time around the block. Let's take a look at some first-time homebuyer tips and common pitfalls you'll want to avoid so you'll be well informed before your purchase.

11 First-Time Home Buyer Tips

11 First-Time Home Buyer Tips

Whether you've been saving for years or want to take advantage of a first-time homebuyer program, taking the plunge into homeownership is always a major decision. The homebuying process can be confusing and complicated — especially if it’s your first time around the block. 

Let's take a look at some first-time homebuyer tips and common pitfalls you'll want to avoid so you'll be well informed before your purchase.

1. Prepare Your Finances

One of the most crucial home-buying strategies is to plan your money ahead of time. Your new home is an investment, but your bank's investment is a home loan. It's searching for low-risk loan consumers, so you'll need to demonstrate financial stability.

You can do a few things to prepare your finances before applying for a mortgage:

- Pay down debt

- Make on-time payments

- Avoid taking out additional loans or credit cards

At this time, you should start saving for a down payment, but the amount you'll need may be set by the mortgage you're applying for.

Rule of Thumb: You should have three to six months' worth of living expenses in an emergency savings account before you consider buying a home. This money should not be factored in for any down payments on the home as well! 

There will be significant upfront fees when purchasing a property, including the down payment and closing costs. Not only for those expenses but also for an emergency fund, you'll need money set aside. This is also often a requirement by the lenders (they want to protect the risk that they are taking on you).

Here are two different types of accounts where you can store your savings:

A certificate of deposit (CD) may be an excellent alternative if you have one to three years to achieve your goal. The same logic can be extended to buying a short-term bond or fixed-income portfolio, which will provide you with some gain while also protecting you from the turbulence of stock markets.

A high-yield savings account is a great account to keep the money liquid if you only have six months to a year. You should verify to see if it's guaranteed by the Federal Deposit Insurance Corporation (FDIC), which most banks are, so you can keep your money up to $250,000 if the bank fails.

2. Determine Your Budget Early On

Examine your purchasing habits. You need to know exactly how much money you spend each month and where it goes. This calculation will tell you how much money you have available to put toward a mortgage payment. Ensure you account for everything, including electricity, food, auto upkeep and payments, student loans, clothing, children's activities, entertainment, retirement savings, regular savings, and any other miscellaneous expenses. Your budget will be determined by a number of things, including the amount of money you put down and the mortgage plans you choose.

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Mortgage calculators can help you figure out how much you'll have to pay each month. It's also crucial to determine how much house you can actually afford based on your salary. To ensure that you can repay your loan, banks will typically require you to keep your debt-to-income ratio below 36%. 


Note: If you put down less than 20%, you'll almost certainly be responsible for private mortgage insurance (PMI). This may increase your monthly expenses. 


When making your budget, don't forget to factor in the "invisible" expenses of housing. These costs include things like maintenance and property taxes. Make sure you don't go over budget. Over time, this creeping trend has become more pronounced.

3. Think About Your Wants and Needs

Starting your search for the perfect location and address can take a lot longer than you think, so start visiting communities as soon as possible. Visit the neighborhood at different times of the day to get a better sense of what you like and don't like.


Along with determining the neighborhood, now is an excellent time to narrow down your home preferences. What kind of home do you want to live in? What are you willing to give up? What are the stumbling blocks? 


Consider what you appreciate about where you live now to help you create a list of requirements and “must haves” when buying your first home.

Keep in mind that you can change a lot of items in a house, including the kitchen, backyard, bathrooms, and bedrooms. You can't change the location or the size of the lot, so when deciding on your "must-haves,” really work on that pros and cons list.

4. Don't Buy Solely Based on the Market

The housing market is constantly changing. There are times when there are more residences for sale than there are potential purchasers. As a result, there is a buyer's market. Multiple-offer situations may become more likely at other times, since properties will be scooped up rapidly.

Timing the market entails attempting to forecast the ideal time to buy and then waiting until that period arrives. This could result in you saving money or facing less competition, but you should avoid attempting to time the market. Waiting for the market to change can have a number of drawbacks, including increased rent or the possibility of home prices continuing to rise.

5. Collect and Organize Assets

Mortgage lenders often check your bank statements from the previous two months when examining your application for liquid cash and overall financial health, in addition to reviewing your credit record. If you plan to deposit funds from other sources into your checking or savings accounts—such as a down payment gift—do it before the 60-day deadline.


This allows the money to "season" before being used.


Again, avoid adding to your debt load by opening new credit accounts or taking out new loans. All of these actions may have a negative impact on your credit score.

6. Explore Your Mortgage Options

Things are starting to take shape. You should now have a good idea of what monthly payment you can afford, as well as what locations you can afford and how much you can put down. It's time to start looking for a mortgage.


Compare mortgage rates from a variety of lenders and mortgage types to see if now is a good time to lock in your rate. Take into account your previous interactions with the lender.


There are many different types of mortgage loans available, including first-time homebuyer loans. These frequently come with lower interest rates or fewer down payments. 

For example:

- Conventional loans are the most common type of home loans. You can purchase a home with as little as 3% down. We don’t necessarily think 3% down is a good idea, but you can :). 

- FHA loans can allow you to buy a home with fewer, strict financial and credit score requirements. You can get an FHA loan with a 3.5% down payment and a credit score as low as 580.

- USDA loans are for people who want to buy a home in a qualified rural or suburban area. You can get a USDA loan with 0% down, subject to household income restrictions.

- VA loans are exclusively for veterans, members of the armed forces, the National Guard, and qualified spouses. You can buy a home with 0% down if you qualify for a VA loan.


Make sure you've thoroughly explored all of your possibilities before you commit to any one form of mortgage. 


For example, be sure to look at all of the terms of the mortgage, not just the rates: 


- What are the penalties for arriving late? 

- How much do you think the closing costs will be? 

- Is there a penalty for paying early? 

- Will you get a better deal if you get a mortgage from a bank where you already have an account? 

- When the other terms are better, it may make sense to choose a loan with a somewhat higher rate.

7. Get Pre-approval

Once you've decided on a lender, get pre-approved for a mortgage. A pre-approval is an official statement from a lender stating exactly how much they will loan to you, as opposed to a prequalification, which is a prediction of the possible loan amount you'll be able to acquire. 


When you're putting an offer on a house, having a pre-approval will place you in a much stronger position, and it will also make the process easier once your offer has been accepted and you're ready to apply for your loan.


Pre-approval has a number of advantages, including:


  1. You know exactly how much money you have: Once you have a pre-approval letter in hand, you and your real estate agent will know what you can afford. This will allow you to browse on a budget.


  1. You can make a better offer: Sellers want to know that the buyer they choose will be able to afford their house. A preapproval letter informs a seller that you have the funds to acquire the property.


  1. You'll encounter fewer surprises: When you're pre-approved, you'll have fewer last-minute surprises or setbacks with your lender.

8. Look Into First-Time Homebuyer Assistance

Many first-time homebuyer and down payment aid programs exist at the local, regional, and national levels to assist you with your down payment and closing fees. These programs are usually limited to borrowers with incomes below a specific threshold (depending on locale), and they can also impose a price constraint on the home. 


Discuss your possibilities with your loan officer to see what you might be able to pair with your mortgage. These can save you tens of thousands of dollars:


- First-time Homebuyer Programs

- Down Payment Assistance 

9. Hire a Real Estate Agent

As a first-time purchaser, you'll need to engage a real estate agent once you've figured out your financing and have a preapproval letter in hand. 


They'll be able to:


- Tell you if a home is correctly priced.

- Tell you whether the neighborhood is desirable.

- Give you an idea of how rapidly homes are selling.

- They will represent you in negotiations and prepare the essential paperwork.


It is feasible to do everything yourself, but for a first-time purchaser, an agent is nearly always a superior alternative!

10. Don't Skip the Inspection

A house inspection is intended to detect issues with the structure, plumbing, roof, and other components of the home that could be very costly to repair. Even if you have a good eye, a professional will be better suited to inspect the property. You'll have to pay for it, but once the inspection is conducted, the inspector will provide you with a detailed report outlining the condition of the property.


Pro tip: Make a list of contingencies. When you've found a potential buyer and are ready to make an offer, be explicit about any stipulations that will allow you to back out. These can include costly concerns discovered during a property inspection or your mortgage approval falling through. If these terms are written down and the dates are set, you'll have a way out if the transaction doesn't proceed as planned — and you'll also get your earnest deposit back.


If the house has a flaw, acquire estimates from professionals for any repairs or modifications it may require before you close.


It's also a good idea to hire a real estate attorney at this point to look over your purchase contract and defend your rights.

11. Plan Your Offer Carefully

The offer you make will be heavily influenced by market conditions. If there's less competition, you'll have more room to negotiate, but if it's a seller's market, you'll have to be ready for other offers.


Listening to your agent's recommendations is crucial while crafting an offer. Real estate has a lot of moving components, and an agent's advice can make the difference between success and failure.


To get your offer approved, you'll need to be adaptable and inventive. Consider mailing the seller a personal note, extending your budget for a dream property, or eliminating contingencies.

Bonus Tip!

12. Keep Physical Copies of Your Documents.

Don't forget about the paperwork once you've decided on a home. Yes, cloud-based storage is convenient, but you should retain a physical copy of your mortgage statements, deed, closing disclosure, and other documents in a secured, fireproof filing cabinet.


Make sure everyone on your loan knows where the documents are and how to get to them in case of an emergency.


Don’t let this list overwhelm you. Our team at Vincere can guide you in developing a plan that is tailored to your individual needs in order to achieve your desired outcome.⁠


Connect with us today and let’s get started on moving you into your dream home. ⁠Click here to set up a FREE session.

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