Navigating the housing market can be challenging, especially if it’s your first time buying a home. Becoming a homeowner is a goal for many people, and it can be achieved through organization and research. If you are thinking about buying your first home, check out these tips for first-time home buyers to help make the process easier and less stressful.

1. Keep an Eye on Your Credit

Checking credit score on tabletCredit is very important for first-time home buyers. The higher your credit score, the better interest rate you can get on your mortgage. You can pull free credit reports from agencies like Experian, Equifax, TransUnion, or your bank to get an understanding of where your credit currently stands. Check to see if there are any errors or if you have accounts that may have gone to collections, as these can create unnecessary hurdles when applying for a mortgage. Make sure you’re paying all your credit card bills and loans on time, as late payments can hurt your credit score. 

2. Determine Your Budget

It’s important to figure out how much you can afford to spend before you start house hunting. Not only will you need to cover a down payment and closing costs, but you also need to consider the costs of homeownership such as mortgage payments, insurance, and property taxes. It’s important to remember that you’ll also need to cover utility bills, regular maintenance, unexpected repairs, and possibly HOA fees. This means you may not be able to afford as high of a mortgage as a lender may be willing to approve for you. As a general rule, you should be prepared to spend around 1 to 3 percent of the home value each year on house expenses. Determine how much you can afford to spend monthly and yearly, and use this number to set a budget.

3. Consider Your Needs and Wants

Chalkboard with handwritten needs and wants chartFor first-time home buyers, buying a house is an exciting adventure that has so many possibilities, and you may have an idea of exactly what you’re looking for in a home. However, depending on your budget or market conditions, you may not be able to afford or find a house that checks all your boxes. It’s important to consider your needs and wants, determining what you absolutely must have and what you can live without, if necessary. To help you figure out your preferences, spend some time in the area you’re interested in and do research about the types of homes in that area.

4. Organize Your Finances

When you apply for a mortgage, you will need to prove to the lender that you have a stable source of income. Lenders will want to see your last 2 years of employment history and ensure you have consistent income. If you are self-employed, you may face closer scrutiny than salary or hourly wages. A mortgage lender will also typically look at your bank statements for the last 2 months, so plan to make any large deposits before that time period. Be prepared to provide employment and bank documents as part of the application process. It’s also a good idea to avoid opening any new credit cards, loans, or other debt accounts during this process, as these activities can impact your credit report.

5. Research and Compare Mortgage Lenders

Couple meeting with mortgage loan officer

Once you know how much of a monthly mortgage payment and down payment you can comfortably afford, it’s time to start shopping for a mortgage. Compare interest rates from at least 3 different types of lenders and different types of mortgages. Some lenders may be willing to offer you a lower rate than others. Read online customer reviews to find out what it’s like to work with individual lenders. When you interact with a lender, note how quickly and easily you can get responses from them. In addition to interest rates, make sure you also pay attention to the rest of the mortgage terms, such as estimated closing costs, late fees, prepayment penalties, etc.

6. Get a Mortgage Preapproval

After you decide on a lender, it’s time to get preapproved for a mortgage. A preapproval letter is an official document from your lender that states exactly how much they are willing to loan to you. This will give you a stronger position when making an offer on a house and make the process easier when you’re applying for your loan after the offer has been accepted. Most preapprovals expire after 90 days, but ask your lender how long yours is good for. First-time home buyers with significant debt or lower credit scores may want to apply for preapproval as soon as possible to identify and fix any potential issues.

7. Look for First-Time Home Buyer Programs or Down Payment Assistance

Paper with heading first-time homebuyer program next to keys and calculator

There are a lot of programs available for first-time home buyers and down payment assistance, including at the national, regional, and local levels. These programs can help you cover your down payment or closing costs. They are typically limited to buyers from certain income levels, and they may include a cap on the home’s price. Your mortgage loan officer can often provide information on the available programs for which you may qualify and that you might be able to pair with your loan.

8. Work with an Experienced Real Estate Agent

Once you have your financing and preapproval figured out, it’s time to start house hunting. One of the biggest tips for first-time home buyers is to work with an experienced real estate agent to make the process go more smoothly. A real estate agent knows the area and can provide advice and recommendations based on market conditions and home values. An agent may be able to identify potential issues with a neighborhood or home that you didn’t notice, and they will be on your side to negotiate prices and terms. Ask people you know for referrals and do your research to find prospective agents, then interview them to get a feel for who is the best match based on expertise and personality.

9. Negotiate the Price with Sellers

Close up of two people shaking hands with house in backgroundWhen you find a house you like and want to make an offer, don’t be afraid to negotiate the price with the seller. It never hurts to ask, especially if you have a preapproval letter and are a strong candidate. Depending on the current market conditions and how long the home has been for sale, you may be able to put in an offer under the asking price or ask for concessions such as the seller helping to cover some repairs or closing costs. Your real estate agent can help you decide on the best offer and negotiate on your behalf to get you the best deal possible.

10. Create a Clear Contract

As you prepare to make an official offer on a home, make sure your contract is clear about any conditions or situations that will allow you to walk away from the purchase. You may want to consider including contingencies based on the home inspection or mortgage approval. If your offer is accepted, these contingencies will be included in the contract known as the purchase and sale agreement, which both you and the seller will sign. If these terms are properly spelled out in writing with deadlines, you’ll have an out to walk away if the transaction doesn’t go as planned.

What to Look for When Buying a House

For first-time home buyers, the process of buying a house can feel overwhelming and unending. However, following these tips and working with an experienced real estate agent can help you navigate through the process and find a great home. If you’re looking for more home-buying advice, check out this list of things to look for when buying a house so you can make sure it fits your needs and provides a good long-term investment.