Home Real Estate 39 First-Time Home Buyer Tips For A Successful Homebuying Experience (In 2021)

39 First-Time Home Buyer Tips For A Successful Homebuying Experience (In 2021)

by Carter Taylor
First-Time Home Buyer Tips

A home buying experience is good if all has been well thought out from the beginning to the end. We’ve compiled a list of items to consider as a first-time home buyer to help you handle the process, save money, and buy a home. Here are 39 of the best first-time home buyer tips for you:

In this Article:

1. Basic Real Estate Tips for First-Time Home Buyers

You can’t know everything there is to know about purchasing a house, even though you’re a first-time home buyer. To be confident, you can do some experimental tests, which will help you achieve a positive result.

When you learn more awareness, you will feel happier and less depressed. There’s a chance you might get a better loan on your new home.

Tips before buying a house:

  • You can make contact with at least three mortgage lenders to find the lowest rate. Many first-time home buyers struggle to draw on thousands of dollars in savings by selecting their first lender.
  • Enlighten yourself on the wide variety of loan options open to you. Major loan programs such as traditional, FHA, VA, and USDA are by far the most common, with more than 90% of buyers using one of these four loan forms. In order to find the loan that is the right match for your needs, look at different loan forms such as loans with low down payments, loans with low credit scores, loans for self-employed individuals, loans for small companies, loans with high loan amounts, and so on.
  • Know the budget you have and how much you’ll be spending each month. To calculate your monthly mortgage payment, take the principal, interest, taxes, and insurance into account. Be mindful of your mortgage and budget as you apply for a mortgage. This will give you the peace of mind you’re looking for when shopping for a house and a mortgage.

It is possible to get the best mortgage rate on your new home by taking these three things into consideration.

2. How Mortgages Work

According to the National Association of Realtors, ten percent of buyers pay cash for a home. Many others have to borrow money to fund their new home purchase. Mortgages of this sort are called mortgage loans.

So, what is it that differentiates mortgages from other loans?

  1. Low interest rates: It’s been under 3% annually during the writing of this post.
  1. Rates and payments are generally fixed: The overwhelming majority of people “fix” their existing mortgage interest rate in order to make their monthly payment the same for the lifetime of the loan. Adjustable-rate loans are, however, also available.
  1. Extended repayment periods: The majority of homeowners repay their mortgage in the time frame of 30 years.
  1. The loan is “secured”: If you don’t make payments, the lender will repossess your home in order to recoup their losses.

A mortgage is often used to pay for the entire cost of a home. However, the majority of people who buy something with their own money spend a part of their own money in it.

The “down payment” is the amount charged out of pocket. The mortgage covers the remaining balance.

Let’s say you’re buying a $250,000 home and you have $25,000 saved from your own money. In this situation, you have made a 10% down payment. You will still have $225,000 left after your mortgage is full.

3. Tidying up Your Finances

The level of your credit rating is one of the major components that determines whether you are eligible to secure a mortgage as well as the interest rate you can pay. This is for borrowers with at least a 740 credit score. The best mortgage rates are usually found for them.

In order to secure a traditional loan, you would need a credit score of at least 620. Minimum credit score of 500 and a 10% down payment are expected for an FHA loan. However, if your credit score is 580 or higher, you can get an FHA loan with only 3.5% down.

In addition to assessing your debt-to-income (DTI) ratio, lenders think about your overall monthly debt payments as a percentage of your gross monthly income. 43% or lower is preferred. Other useful first-time homebuyer advice: Apply for a mortgage only after having paid down some of your debt.

4. Build An Emergency Fund

When you own a home, having an emergency fund is an absolute necessity. As the name suggests, the money is to be used only for paying an emergency or unforeseen expense; in other words, you do not use any of your savings or incur any additional debt. You can think of it as a safety net in terms of your finances.

Money you have put aside in case of an emergency, such as a car crash, medical emergency, or job loss, is usually one of the many unforeseen expenses you use your emergency fund for. Homeowners may be liable to extra expenses if they have problems with their home, such as damaged construction, broken appliances, or busted pipes.

The general rule of thumb for calculating how much money you should have in your emergency fund is anywhere between three and six months of your living expenses. Use it to avoid financial distress if your partner or you lose your employment.

5. Determine If It’s The Right Time To Buy A Home

You may not be ready to buy a home even though you fulfilled the first-time home buyer qualifications, have saved a sizable down payment, and have a sufficient emergency fund. Purchasing a home is much more than just a financial decision. In order to do well in this profession, you will need to maintain your house, manage taxes, maintain landscaping, maintain appliances, and handle repairs. Work of this kind may enable you to give up weekend and evening time. Make sure that you are both financially and emotionally ready before buying a house.

6. Learn About The Home Buying Process

You would know what to expect when buying your first home if you understand what the process is like. This will help you cut down on your tension and ensure there aren’t any unexpected surprises along the way. This is a straightforward method that you would expect for any case. These will be addressed in more depth later in this post. Here are several tips for first-time homeowners interested in learning about the home buying process.

  • Save for costs and fees. Since you’ll want to have enough money for a down payment, you can first figure out how much you need. 3 – 6% of the purchase price would be required for closing costs..
  • Find a real estate agent. They will assist with the home-finding and offer-making process. They will be present in the process to provide support and advice in the industry.
  • Get preapproved for a loan. The first phase in the mortgage process is now complete. Lenders will tell you how much money they can lend you to buy a home if you’re accepted. This estimation is made on the basis of a superficial analysis of your credit, profits, and assets. But since you have been accepted, you will not yet have the loan.
  • Go house hunting. Looking through the numerous online property listings, meeting with your real estate agent, and going to open houses is a perfect way to find your next home.
  • It is a good idea to have your home inspected by a specialist. It’ll allow them to recognize any red flags or required repairs.
  • As soon as you’ve settled on a house, make an offer on it and put down an earnest money deposit.
  • Close your loan. When you’ve done paying off your loan, it is necessary to call your lender and close the loan so that you never have to pay any more interest. All of these items will be done, including signing all the papers, getting the title transferred to your name, and obtaining the keys to your new home.

7. Get a Loan Pre-Approval and Shop Around for a Mortgage

Different lenders have different loan structures and terms and fees. A half-percentage point differential in interest rates can seem negligible, but it will save you thousands of dollars over time. With a higher interest rate, some lenders can give a lower closing cost. Some lenders can combine lower interest rates with higher closing costs. Choose the choice that works best for you. You may want to choose a loan with lower closing costs if you plan to refinance or sell your home in the near future. If you want to keep your mortgage for a long time, a lower-interest loan could be a safer choice.

When comparing lenders, price isn’t the only consideration. You can also look for a lender who provides excellent customer service, reacts quickly, answers all of your questions, and has a smooth mortgage process.

You’ll be able to compare and save money on your mortgage if you shop around. Applying to several lenders, on the other hand, may have a negative effect on your credit score.

For a variety of factors, you’ll want to get preapproved for a loan before you start searching for homes:

  • It assists you in determining how much home you can afford, thus narrowing your search.
  • It signals to sellers and real estate brokers that you’re a serious buyer, making obtaining financing for your home purchase easier.

There is a distinction to be made between preapproval and prequalification. Prequalification is less important than pre approval. This is because the lender does not prequalify you based on all of your records. However, the lender can review your credit and validate your profits and properties during the pre-approval process.

8. Calculate How Much House You Can Afford

Review your monthly budget to see how much house you can handle before you become emotionally attached to a lovely home. Be sure that your annual living costs (including HOA dues, taxes, premiums, and other expenses) do not exceed 25% of your monthly take-home pay.

As an example, let’s imagine you earn $5,000 a month. Calculate the maximum monthly house payment of $1,250 by multiplying the figure by 25%. Here are the home deals you can manage (not counting taxes and insurance) based on a 15-year mortgage with a 4% fixed interest rate:

  • Home for $188,000 with a 10% down payment ($18,800).
  • Home for $211,000 and a 20% down payment of $42,000.
  • With a 30% down payment ($72,400), a $241,400 house may be yours.
  • With a down payment of 40% ($112,640), a house worth $281,600 may be yours.

That’s a quick way to get a number that’s in your ballpark. However, keep in mind that the monthly premium would be affected by income taxes and homeowner’s insurance. Before deciding on a maximum house price, you’ll need to take certain figures into account.

When you take the aforementioned scenario and enter $211,000 into a mortgage calculator, the gross monthly payment of $1,249 rises to $1,513 when you factor in $193 for taxation and $71 for benefits. To get down to your $1,250 monthly housing allowance, you’ll need to reduce the cost of the property you can afford to $172,600.

Since land tax prices and homeowner’s insurance costs differ, get quotes from your realtor and insurance provider to figure out how many houses you can afford.

9. Begin Saving as Soon as Possible

It’s time to start investing as soon as you make the decision to become a homeowner. When you buy a property, you’ll need to come up with a down cost, which usually ranges from 3% to 20% of the home’s buying price. Don’t neglect to put aside funds for any other bills involved with your new house, such as travel costs and new appliances, while you’re saving for a down payment.

10. Don’t Believe the Myth That Renting Is a Waste of Money

Renting isn’t a waste of money; it’s an exchange of cash for a roof above your head. The versatility that comes with renting can be immensely useful depending on your circumstances. Often, keep in mind that much of what is referred to as a “mortgage payment” is really rent, because the bank is the lender.

Consider how much of what you send away each month goes to taxation, interest, and benefits, and you’ll see that only a tiny amount of what you send away each month turns into actual equity. It’s a bit sad, to be honest.

Let’s imagine you’re renting an apartment for a year at $1,200 per month. You’d pay $14,400 on rent over the span of a year. Some might argue that you squandered that revenue. Think how much you’d pay as a landlord in the same year.

Let’s say you have a $1,600 monthly mortgage payment. Much of the capital isn’t moving toward the principal loan balance while you’re in the early stages of your mortgage. You should have “thrown away” $12,000 of the $19,200 you paid on interest!

But we aren’t done yet. Repairs and upkeep are normally covered by the owner while you secure an apartment. When you buy a house, though, you are responsible for paying the bills. If you pay $3,000 in home renovations and upkeep, which isn’t unheard of, you’ve already spent the same amount on homeownership that you would have if you rented.

11. Before You Buy Something, Check Your Credit

When it comes to applying for a mortgage, you don’t want any unpleasant surprises. Pull the credit report until you’ve decided to start saving for a house. This would inform you if you have a good enough credit score to apply for a mortgage. If it isn’t, you should try to raise it before approaching a lender.

By checking your credit report ahead of time, you will ensure that nothing is in it there shouldn’t be. You have time to negotiate with any payments that go to collections without your knowledge or any errors that are affecting your credit score.

12. Put an End To Any New Credit Activity.

If you’re planning to file for a mortgage soon, wait right after you’ve closed to submit something more to your credit sheet. Applying for new loans will lower your credit score temporarily, and the last thing you want is your credit score to decrease right before you apply for a mortgage. This is by far one of the best tips on buying your first home.

13. Look for the Best Rates by Shopping Around

Don’t just apply for a mortgage at the local bank and hope for the best. Interest rates differ greatly from one investor to the other, so make sure you’re having the best price possible. You’re looking for a lending institution that will provide you with the most inexpensive money (i.e. money with the lowest interest rate and closing costs).

Request loan estimates from five separate lenders to begin. Return to the three most affordable lenders and request a “good faith estimate” dependent on the credit score and ability to make a down payment. Since it’s usually bad policy to overestimate a good-faith calculation, these numbers can provide you a pretty reliable picture of mortgage prices and closing costs.

You should then take the highest of the three figures to see whether the other two are willing to lower their initial estimates. Allow mortgage lenders to compete for the lowest rate by bidding against each other.

14. Examine the Various Mortgage Options

Although the traditional 30-year mortgage is the most common, there’s no rule that says you have to take it. Many consumers aren’t really thinking of 15-year or 20-year mortgages. However, it’s worth remembering that these options typically have lower interest rates and will help you pay off your debt 10-15 years sooner. As these shorter mortgages have far higher costs, it’s important to understand how much room you have in your budget.

15. Interest-Only and Adjustable-Rate Mortgages Should Be Avoided if at All Possible

Prepayment fees and other fine print that frequently accompany subprime loans should be avoided. It’s usually safer to wait until you can afford a conventional fixed-rate mortgage. No one can foresee how interest rates will change. Although adjustable-rate mortgages can seem attractive when interest rates are low, they may quickly become unaffordable if rates rise.

16. Understand That Your Monthly Payment May Change

The first point you may note regarding escrow is that it is an annual sum of money determined by the landlord depending on your homeowners insurance agreement and the property’s past taxes. Since it is a calculation, the lender may be incorrect, and you may owe the lender money at the end of the year, or the lender will owe you money. Wait a minute before you get too excited. A home can be reassessed for tax purposes after it is sold. Property taxes normally increase as a result of this. You’ll owe the lender money if that happens. Your escrow will be reviewed every year, regardless of whether your taxes go up, down, or remain the same. Since your escrow is included in your monthly bill, this will trigger your payment to go up or down.

Here’s how it happens in practice:

Your landlord expects that your annual taxes would run $2,000 overall. Taxes, on the other hand, wind up costing $2,600. That ensures you have a $600 deficit in your escrow account. You’ll owe the loan $600 in this situation. In order to prevent a shortage next year, the provider may raise additional funds for your escrow account as the loan is checked later in the year. If they raise that by $600, you will see a $50 rise in your monthly interest payment.

On the other hand, if your taxes are less than the insurer predicted, they would reimburse you for the difference, lowering the annual interest payment for the next year. In the world of mortgages, this is less popular, but it does happen.

17. Enlist the Assistance of Experts

Purchasing a house entails a great deal of documentation and legal jargon. It also covers the housing sector and the investments. As a result, you’ll want to double-check if you’re following the rules. You should guarantee that you’re doing it correctly on a legal and financial perspective through recruiting experts. They’ll also relieve you of any of your responsibilities.

A licensed real estate agent can use their business experience and contacts to assist you in finding a house and submitting a competitive bid. They’ll be there to help you along the way and would act in your best interests to locate the perfect home and contract for you. We highly consider consulting with a financial planner to guarantee that you can finance the house and its expenses, as well as to read about the tax ramifications and advantages of home ownership. You would want to hire a real estate lawyer to make sure you grasp the lending conditions and the real estate contract.


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18. Consider Your Ideal Home

With vaulted ceilings, an expansive floor plan, and stainless-steel appliances, you’ve still already imagined your new house. But have you ever considered what you require? Remember the larger picture before you venture into the details of your home’s decor. What number of bedrooms and bathrooms would you require? Do you want a large backyard or a multi-car driveway?

Don’t just think of the house. Take into account the venue as well. If you want to cut your commuting time in half? Are you looking for a decent school district? Will you want to be able to walk to the central area? Do you give a damn about crime statistics?

Consider the prospects. What would happen if you intend on staying in the house for a few years? Is your family going to expand? Will you start a new career or pick up a new hobby? Would you be sharing a room? Can you not get accustomed to climbing stairwells?

Create a list of must-haves (needs), nice-to-haves (wants), and absolutely-nots when you pose yourself certain types of questions (deal breakers).

19. Locate Your Home

Browse web listings in your price range at your leisure. You can further refine the search by using the filters on the web. For eg, if you want at least two bedrooms, you can filter out one-bedroom houses.

Send links to any listings you need to your real estate agent. It can help them see what you’re searching for. They will even schedule a time to go over the ones you find online for you. And if you believe you’ve found the ideal house, go see it before making a bid.

Have you ever ordered things online that appeared great on the website but didn’t match or looked totally different in person? The same may be said about homes. Always look at a home in person before making a purchase. Walk around each room and see if the house is a good match for you, and ask questions to learn more. Prepare a set of warning flags to watch for and carry it with you so you can do an in-depth inspection of the home when you’re visiting.

20. Read the Disclosures Carefully and Get Clarification if Appropriate

Real estate leaks can expose some flaws in the house that might affect its valuation or how you feel about staying there. Real estate disclosures can aid the consumer in making an educated decision on whether or not to purchase the property. Disclosures will often prevent the purchaser from being kept responsible for any problems that arise once the customer has purchased the property. That’s why it’s important for them to have a compilation of any and all potential problems for prospective homeowners. There are certain disclosures that a vendor is required to provide by law, and those that are voluntary. The state will determine what is necessary and what is optional. The below are some of the more important problems you’ll see on a disclosure:

  • Asbestos
  • A leaky basement
  • Renovations and upgrades
  • Radon 
  • Lead paint
  • Paranormal activity
  • Boundary line disputes
  • Work carried out without a permit

Read the disclosures carefully and inquire about something that concerns you. Keep an eye out for subjective terms that can be difficult to refute in court. For example, if the disclosure states that the basement has a “small leak,” the seller is legally informing you that the basement has a leak. And if the “small” leak causes big puddles, the seller could claim that the scale of the leak is arbitrary, and it is small to them.

When it comes to living in the house, you’ll have to know what you’re willing to put up with. That’s one thing if you’re okay with living in a haunted house or don’t believe in ghosts in the first place. Another example is if you’re deciding whether or not to proceed with the purchase because a foundation problem has been identified. Here are a few red flags that, if they’re reported on the disclosure, might make you think twice about buying the house:

  • Any signs of a foundation issue (basement leaks, exterior cracks, bowed walls)
  • Flood damage
  • Any foundation issues
  • Work done without permits
  • Liens on the property
  • Environmental hazards

21. Make A Proposal

It’s difficult not to do – or sell – something to get your hands on a home you adore. But, particularly if you can’t afford it, you don’t want to make the mistake of giving too much. Yes, you’ll want to make a competitive offer; but, you’ll also want to make one that’s within the budget and reasonable. That is what the real estate company will assist you with. The seller has three choices when you make an offer:

  • Take the offer and go on with the sale.
  • Turn down the offer.
  • Make a counter-offer.

If the seller counters, you and the real estate agent will work together to reach an agreement with the seller. If you and the seller can’t come to an understanding, you will have to walk away from the house.

You’ll allow an earnest money deposit after a bid is approved. This deposit is usually between 1% and 3% of the home’s selling price. If you decide to buy the house, the funds would go toward the down payment or closing costs. You’ll get the money back if you back out of the contract for a valid cause, such as a missed home inspection or a poor valuation. However, if you pull out of a contract for any purpose, such as a mere change of heart, you will not be reimbursed.

22. Obtain the Appropriate Homeowner’s Insurance

You’ll need to get homeowner’s policy before you can close your loan. You can look around for a homeowner’s policy, much as you would for a lease, and various companies have different prices. When you need to file a lawsuit, make sure you completely appreciate what is protected and how high the deductible would be. Cheaper policies also implies fewer benefits and higher deductibles. In terms of what you need secured, you’ll probably want to remember where you work. If you live in a floodplain, for example, you’ll need flood protection. If you live along the coast, you may want to think about windstorm insurance to protect against hurricane destruction.

23. Down payments

Many first-time home buyers feel that they must put down 20% on a house. This, though, is not the case.

In reality, the average first-time home buyer’s down payment is just 6%. This will be just $15,000 on a $250,000 home buy.

There are also loan schemes that enable you to purchase a home with as little as a 6% down payment. Consider the following scenario:

  • VA loans — 0% down 
  • FHA loans — 3.5% down 
  • Conventional 97 loans — 3% down 
  • USDA loans — 0% down 

Few of these programs have specific standards, although the vast majority are open to the public. (We’ll go into loan services in more detail later.)

The key point to remember is that down payments may be changed at any time.

Yours can be determined by your monthly salary, the amount of money you have earned, the cost of the house, and the total home-buying objectives.

The below are the advantages and disadvantages of larger versus lower down payments:

Bigger down payment — Interest rate and monthly payment are lower.

Smaller down payment — Purchase a home to begin building equity faster, and retain even more your savings for unexpected expenses.

Examine your personal finances and home-buying objectives to determine the appropriate down payment.

24. Loans for First-Time Home Buyers

Here are a few of the most beneficial first-time home buyer loans and services that you may miss if you hurry through the procedure. They could be able to save you a lot of money.

  • FHA loan: For borrowers with bad credit, this is the go-to loan program.
  • State first-time home buyer program: Assistance tailored to residents.
  • USDA loan: On rural assets, 100% financing is available.
  • Dollar Homes: Specializes in government-owned foreclosed homes for sale.
  • Home renovation loan: Buy a home and remodel it with one loan.
  • Good Neighbor Next Door: Discounts on home prices for first responders and educators.
  • VA loan: Borrowers with a military background will get loans with no down payment.
  • Fannie and Freddie: Conventional loans need only a 3% down payment.

25. First-Time Home Buyers Grant

Grants for first-time homebuyers are often offered at the state or municipal level. They are often referred to as down payment assistance (DPA) schemes, and they will aid you with covering any or half of the down payment and closing expenses.

For first-time home owners, there are significant savings. According to one report, borrowers who used down payment aid saved almost $6,000 at closing and another $11,000 over the term of their loans.

The most common types of first-time home buyer benefits are:

A first time home buyer GRANT — You’ve been given money that you don’t have to repay. 

A low-interest LOAN — Money lent to fund your down payment or closing costs, which you would repay at a low interest rate.

The scale and availability of first-time home buyer grants varies depending on where you live. Depending on the software you use, there are also various eligibility criteria.

26. Credit Scores

When it comes to purchasing a home, your credit score is extremely important. It has an effect on your loan options, mortgage, interest rate, and home purchase budget.

This can be a source of worry for first-time home buyers with less-than-perfect credit.

Credit scores are usually graded in the following way:

  • 720+ = Excellent
  • 680 to 719 = Good
  • 620 to 679 = Fair
  • < 620 = Poor

Many with credit ratings in the “excellent” category are normally qualified for the best lending plans and lowest prices.

Those with average or decent credit ratings, on the other hand, have choices. For the most common first-time home buyer services, the following credit score criteria are typical:

  • Conventional loan — 620+
  • VA loan — 620+
  • FHA loan — 580+
  • USDA loan — 640+ 

Mortgage lending gets more challenging to come by as the credit score falls below 620.

FHA loans are technically possible with a credit score as low as 500, but only if you can put down at least a 10% down payment. And it may be difficult to locate lenders that are willing to be that accommodating.

Similarly, VA loans do not need a minimum credit score. However, most lenders need a minimum credit score of 620 for VA loans.

Start testing your credit long ahead of time — at least a year if necessary — before you agree to purchase a home.

This would enable you to identify and correct mistakes on your credit report, as well as focus on improving your credit score if it is needed to obtain a loan.

If you’re ready, pay off credit card balances as well.

Keep in mind that a better credit score translates to a lower mortgage interest rate, a larger home-buying budget, and a reduced monthly payment.

Under either case, having the highest available credit score while applying for loans is in your favour.

27. As a First-Time Home Buyer, How Can You Pick a Mortgage Lender?

One of the most common errors made by first-time home buyers is failing to look around for a mortgage.

They should only get pre-qualified at the bank where they still have accounts for checking and savings.

Alternatively, they can obtain a quotation and choose the first lender they talk with, ensuring that rates and prices are consistent across the board.

In reality, this isn’t the case. Lenders have a lot of leeway when it comes to the interest rates they bid.

Mortgage prices for a single borrower could differ by as much as 0.5 percent from one business to the next.

0.5 percent would seem insignificant. However, the gap will save you about $4,000 for the first three years on a $250,000 loan.

So, before you agree to a home loan, get quotes from a few different lenders to find the right offer and fees.

Some home buyers want to deal with a mortgage broker who will have a range of loan options all at once.

28. Locate a Reputable Real Estate Agent

Choosing the right real estate agent will make or break the process of purchasing a house. A successful agent will not only help you locate the best houses on the market—preferably before someone else does—but also render the process as painless as possible. A successful agent will teach you the ropes and walk you through each move if you’re a first-time buyer. Asking friends and family who have recently purchased homes for a recommendation on an agent is a safe way to start.

29. Make a Decision on Which Neighborhood Is Best for You

Don’t get so caught up in searching your perfect house that you overlook the surrounding area. The last thing you want is to fall in love with a home only to discover it is in a separate school system or is an hour away from your workplace.

Consider which neighbourhoods will be a good match for you ahead of time. If you have children who want to continue attending their present school? Will you like to live in a home that is close to restaurants and shops? How long can you travel to get to work? There are also things to think of while looking for a new house.

30. Don’t Get Attached Emotionally

I understand. Isn’t that easier said than done? This principle, on the other hand, will assist you in making a smarter financial judgment about the buying of your house. Be prepared to walk away from a vendor who refuses to work with you on a contract. Understand the “best alternative to no agreement,” which is that you would be motivated to find a new house, and be happy to walk away from a bad offer.

Don’t create sentimental compromises (e.g., I love this house so much that I’d be happy to pay a little less on food per month and purchase less clothes to be able to remain here) that would push you out of your budget. A house can not, as you might believe, satisfy your wishes and increase your happiness quotient. If you’re squeezed near (or beyond) your financial means month after month to support granite and stainless steel, they’ll lose their luster fast.

31. Avoid Buying at the Very Top of the Price Range

Let’s presume you’ve determined that you can make a mortgage payment of $1,200 per month. This isn’t to say you can purchase a house with a $1,200 monthly payment. When you budget for the additional expenses, you’ll probably wind up spending more than you intended.

When it comes to annual payments, the real amount to consider is PITI: principal, interest, fees, and premiums. The four elements that make up your monthly mortgage loan are as follows.

32. Get the Home Inspected

Another out-of-pocket expense you’ll have to bear as a homebuyer is a home inspection. But believe me when I say it’s well worth it.

The examination is where a specialist comes to the house to examine anything. Anything from the base to the electrical structure will be examined by the auditor. At the conclusion of it all, the inspector can compile a detailed list of anything that requires urgent treatment, as well as everything that will need repair in the coming years.

The customer is usually present at the inspection, and it can be a wonderful learning opportunity! I had no idea what I was getting myself into when I purchased my first property. The inspector spent extra time going through the basics with me and also made a compilation of maintenance projects I’d need to do on a weekly, quarterly, and annual basis.

33. Know What To Expect When It Comes To Closing

Closing on your house is the next phase in the home-buying process and one of the most rewarding for first-time home buyers. You’ll sign a bunch of papers to become the holders of the property at closing. Before you shut the door, make sure to do the following:

Purchase the above-mentioned homeowner’s insurance.

Your Closing Disclosure should be read and acknowledged. It gives you a breakdown of your loan’s total expenses. To proceed with your closure, you must accept receipt of this letter.

Attend a final walk-through of the property to ensure that it is in the condition specified in your purchasing contract. Verify that all renovations have been made, the house has not been affected, and the products that were sold with the home are still present and functional.

Make sure that anyone who is a part of the loan is available on the day of the closure. You may also hope to see anyone from the title firm. Such states may often include the involvement of an advocate or witness. The purchaser may be present at the closing or may have a different closing depending on the jurisdiction.

Make sure you have the following things with you before you close:

  • A driver’s license, passport, or other government-issued photo identification is needed.
  • A cashier’s check for the final closing expenses, as described in your Closing Disclosure.
  • A copy of the homeowners insurance policy (if you have one).

34. Budget for the Costs of Closing

When it comes to purchasing a home, the downpayment isn’t the only cost to consider. Closing costs—all of the payments associated with taking out and closing a mortgage—are mostly borne by the buyer. Closing costs usually range from 2% and 5% of the selling price. So, if you’re purchasing a house for $200,000, closing costs can range between $4,000 and $10,000.

35. Budget For Your Home Maintenance

So you’ve located your dream home, signed the documents, and moved in. You haven’t finished your job yet. Really, as long as you’re a homeowner, it’ll never really be over.

You should handle your maintenance budget in YNAB the same way you would any other true cost. Make it one of your monthly expenditures and budget for it. Then, if one of the appliances fails, you have the funds in your budget to repair it.

36. The Hidden Costs of Homeownership Are Often Underestimated

Wait before you weigh up the other expenses of buying a house if you were shocked at the current monthly principal and interest charge. Land taxes, income premiums, homeowners insurance, hazard insurance, renovations, upkeep, and electricity are only a few of the additional costs to consider as a prospective homeowner.

How this impacts you: According to a Bankrate poll, the typical homeowner spends $2,000 per year on upkeep. If you’re not planning, not getting enough cushion in your monthly budget — or a good rainy day fund — will easily put you in the red.

Instead, consider the following options: Taxes, home premiums, and utility costs will also be crunched with the assistance of the contractor or landlord. Compare insurance quotes when shopping around for coverage. Finally, plan to set aside at least 1% to 3% of the home’s sales price for repairs and operating costs per year.

37. Assuming That You’ll Need a 20% Down Payment

The long-held assumption that a 20% down payment is needed is (often) untrue. Although a 20% down payment helps you stop paying private home insurance, many borrowers nowadays don’t want (or can’t) make that kind of investment. According to the National Association of Realtors, the overall down cost on a house is 12 percent for first-time buyers and 6 percent for repeat buyers. Some communities, such as co-ops, rentals, and HOAs, will also need greater down costs, so consult with your real estate agent for details and prepare accordingly.

Delaying your home purchase to save 20% could take years, preventing you from achieving other financial priorities such as increasing your retirement funds, building an emergency fund, or paying off high-interest debt.

Other mortgage alternatives should be included. A traditional mortgage may be obtained with as little as 3% down payment (private mortgage insurance is required). Any government-insured loans need a 3.5 percent down payment, however you may be able to get a mortgage with no money down. Additionally, consult with the local or state rental agencies and see whether you apply for first-time buyer housing assistance programs.

38. Negotiating a Homebuyer’s Rebate Is Not an Option

Many first-time buyers are unfamiliar with the idea of homebuyer rebates, commonly known as commission rebates. There is a refund worth up to 1% of the home’s selling price that falls from the buyer’s agent’s fee.

What this means for you: Many, though not yet, jurisdictions in the United States provide home buyer rebates. Louisiana, Mississippi, Alaska, Oregon, Alabama, Missouri, Tennessee Oklahoma, Iowa and Kansas are among the ten states that do not allow home buyer rebates.

Instead, see if the representative is able to offer a home buyer refund at closing if you reside in a state that requires it. This will save you $3,000 on a $300,000 home buy, so it’s worth asking.

39. Using Credit Carelessly

Lenders pull credit reports at preapproval and again right before closing to ensure all is in order. They want to make sure your financial profile hasn’t shifted.

What this means for you: Any new loans or credit card balances on your credit report could jeopardize the loan’s final approval. This is a lesson that many buyers, particularly first-timers, have to learn the hard way.

Instead, consider the following options: From pre-approval to closure, maintain the status quo of your finances. In the months leading up to filing for a mortgage and into closing day, don’t launch new credit cards, close old accounts, take out new loans, or make major payments on existing credit cards. Reduce your current credit card balances to less than 30% of your credit cap, and pay your bills on time and in full every month.

Final Thoughts

These first-time home buyer tips should get you started on the road to filling in any information holes you might have about home purchasing. Remember, the more you know about the phase ahead of time, the less frustrating it will be, and the more able you will be to get the home you want at a price you can manage. When you’re done, you’ll have the assurance that comes from effectively negotiating a big life event.


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