10 First-Time Homebuyer Tips: How To Get That House
Key Takeaways
Before you start looking for homes, take time to evaluate your finances and improve your credit score. There's a big difference between meeting the minimum credit score requirement and showing your lender a credit score well above 750.
Remember to account for the variable expenses of owning a home, which include insurance, property taxes, maintenance and repairs.
While sellers still have the edge in most parts of the country due to limited inventory, buyers are gaining more bargaining power. Work with an expert real estate agent to develop a negotiation strategy and score a better deal on your first home.
If you're still renting your place, the thought of buying a home can feel pretty overwhelming. A recent TD Bank survey of first-time homebuyers found that 64 percent of people who have never owned a home are concerned about affordability due to high mortgage rates. Despite those worries, nearly half are working to save up for a down payment. If you're one of them, read on for some money-smart moves that can put you on the path to successfully buying a home.
House Hunting Tips for First-Time Homebuyers
Check Your Credit (and Work on It)
The higher your credit score, the better the interest rate on your mortgage. Pull a free copy of your report at AnnualCreditReport.com — the site lets you pull your report every week without paying anything.
"Look for any errors or past-due accounts that might have gone to collections. These liabilities can create roadblocks when you apply for a home loan. If anything is amiss, contact the creditor to see if you can sort it out."
Nail Down Your Budget
When you're building a budget to narrow your search for properties, don't just think about how much house you can afford, but how much in recurring costs you can handle once you've purchased your home. Consider principal and interest, homeowners insurance, property taxes, and HOA fees.
Consider Your Needs and Wants
Finding the ideal location and address can take more time than you expect, so begin scouting neighborhoods early in the process. Drive and walk around that area at different times of the day and night to get a feel for what you like and don't like.
Get Finances in Place
Regardless of income level, you should be able to document to potential lenders that you have a stable source of earnings. Lenders look for a two-year employment history and want to see consistent income — whether you're receiving a salary, hourly pay, or are self-employed.
"It's best to avoid opening new credit accounts or loans, or racking up more debt, at this stage. All those activities could possibly ding your credit report."
Comparison Shop Mortgage Lenders
Compare mortgage rates from at least three different types of lenders, as well as different types of mortgages. Read customer reviews and pay close attention to lenders' responsiveness and communication.
"Even in this market, you can find competitive rates and service, but you want to pay close attention to lenders' responsiveness and communication."
Get Preapproved
Once you settle on a lender, get preapproved for a mortgage. Unlike prequalification, a preapproval is an official letter from a lender stating exactly how much it will loan to you — putting you in a much stronger position when making an offer.
"Preapprovals usually expire after 90 days, so ask your lender how long yours will be good for. If you're a first-time homebuyer with significant debt or so-so credit, you might want to apply for a preapproval as soon as possible to identify issues to fix."
Look for Down Payment Assistance
There are many first-time homebuyer and down payment assistance programs at the local, regional, and national level that can help cover your down payment or closing costs. Often, your loan officer can provide info on the available programs and what you might be able to pair with your mortgage.
Work With a Real Estate Agent
After you have your financing squared away and a preapproval letter in hand, hire a real estate agent who knows the area you're looking to buy in especially well. They can advise on market conditions, identify potential issues, and negotiate pricing and terms on your behalf.
Negotiate With the Seller
Even when you see the home of your dreams, don't be afraid to negotiate the price with sellers. Use comps to justify a lower offer, ask for concessions based on the home inspection report, and consider requesting a different closing timeline.
Draw Up a Contract
When you find a home and prepare to make an offer, work with a real estate attorney to spell out any conditions or situations that will allow you to walk away from the deal. These are known as contingencies and typically include major inspection issues, mortgage denial, or a low appraisal.
Tips for Finding the Right Mortgage
Check Your Credit (and Work on It)
The higher your credit score, the better the interest rate on your mortgage. Pull a free copy of your report at AnnualCreditReport.com — the site lets you pull your report every week without paying anything.
"Look for any errors or past-due accounts that might have gone to collections. These liabilities can create roadblocks when you apply for a home loan. If anything is amiss, contact the creditor to see if you can sort it out."
Nail Down Your Budget
When you're building a budget to narrow your search for properties, don't just think about how much house you can afford, but how much in recurring costs you can handle once you've purchased your home. Consider principal and interest, homeowners insurance, property taxes, and HOA fees.
Consider Your Needs and Wants
Finding the ideal location and address can take more time than you expect, so begin scouting neighborhoods early in the process. Drive and walk around that area at different times of the day and night to get a feel for what you like and don't like.
Get Finances in Place
Regardless of income level, you should be able to document to potential lenders that you have a stable source of earnings. Lenders look for a two-year employment history and want to see consistent income — whether you're receiving a salary, hourly pay, or are self-employed.
"It's best to avoid opening new credit accounts or loans, or racking up more debt, at this stage. All those activities could possibly ding your credit report."
Comparison Shop Mortgage Lenders
Compare mortgage rates from at least three different types of lenders, as well as different types of mortgages. Read customer reviews and pay close attention to lenders' responsiveness and communication.
"Even in this market, you can find competitive rates and service, but you want to pay close attention to lenders' responsiveness and communication."
Get Preapproved
Once you settle on a lender, get preapproved for a mortgage. Unlike prequalification, a preapproval is an official letter from a lender stating exactly how much it will loan to you — putting you in a much stronger position when making an offer.
"Preapprovals usually expire after 90 days, so ask your lender how long yours will be good for. If you're a first-time homebuyer with significant debt or so-so credit, you might want to apply for a preapproval as soon as possible to identify issues to fix."
Look for Down Payment Assistance
There are many first-time homebuyer and down payment assistance programs at the local, regional, and national level that can help cover your down payment or closing costs. Often, your loan officer can provide info on the available programs and what you might be able to pair with your mortgage.
Work With a Real Estate Agent
After you have your financing squared away and a preapproval letter in hand, hire a real estate agent who knows the area you're looking to buy in especially well. They can advise on market conditions, identify potential issues, and negotiate pricing and terms on your behalf.
Negotiate With the Seller
Even when you see the home of your dreams, don't be afraid to negotiate the price with sellers. Use comps to justify a lower offer, ask for concessions based on the home inspection report, and consider requesting a different closing timeline.
Draw Up a Contract
When you find a home and prepare to make an offer, work with a real estate attorney to spell out any conditions or situations that will allow you to walk away from the deal. These are known as contingencies and typically include major inspection issues, mortgage denial, or a low appraisal.
Tips for Buying Your First Home
Check Your Credit (and Work on It)
The higher your credit score, the better the interest rate on your mortgage. Pull a free copy of your report at AnnualCreditReport.com — the site lets you pull your report every week without paying anything.
Nail Down Your Budget
When you're building a budget to narrow your search for properties, don't just think about how much house you can afford, but how much in recurring costs you can handle once you've purchased your home. Consider principal and interest, homeowners insurance, property taxes, and HOA fees.
Consider Your Needs and Wants
Finding the ideal location and address can take more time than you expect, so begin scouting neighborhoods early in the process. Drive and walk around that area at different times of the day and night to get a feel for what you like and don't like.
Get Finances in Place
Regardless of income level, you should be able to document to potential lenders that you have a stable source of earnings. Lenders look for a two-year employment history and want to see consistent income — whether you're receiving a salary, hourly pay, or are self-employed.
Comparison Shop Mortgage Lenders
Compare mortgage rates from at least three different types of lenders, as well as different types of mortgages. Read customer reviews and pay close attention to lenders' responsiveness and communication.
Get Preapproved
Once you settle on a lender, get preapproved for a mortgage. Unlike prequalification, a preapproval is an official letter from a lender stating exactly how much it will loan to you — putting you in a much stronger position when making an offer.
Look for Down Payment Assistance
There are many first-time homebuyer and down payment assistance programs at the local, regional, and national level that can help cover your down payment or closing costs. Often, your loan officer can provide info on the available programs and what you might be able to pair with your mortgage.
Work With a Real Estate Agent
After you have your financing squared away and a preapproval letter in hand, hire a real estate agent who knows the area you're looking to buy in especially well. They can advise on market conditions, identify potential issues, and negotiate pricing and terms on your behalf.
Negotiate With the Seller
Even when you see the home of your dreams, don't be afraid to negotiate the price with sellers. Use comps to justify a lower offer, ask for concessions based on the home inspection report, and consider requesting a different closing timeline.
Draw Up a Contract
When you find a home and prepare to make an offer, work with a real estate attorney to spell out any conditions or situations that will allow you to walk away from the deal. These are known as contingencies and typically include major inspection issues, mortgage denial, or a low appraisal.
Bottom Line
For a first-timer, buying a home can feel overwhelming and endless. But breaking down the process into steps and tackling them one at a time can help you stay focused and get the job done. Doing your research in advance and working with a trusted real estate agent can help you stay on track throughout the process. Keeping your finances steady and limiting other big-ticket purchases can also help you qualify for a loan and get into your first home.
Key Takeaway
The path to homeownership starts well before you tour a single property. Get your credit in order, nail down a realistic budget, get preapproved, and work with a trusted agent. Ralph DiBugnara's advice: monitor your credit, avoid new debt, and act quickly once you have a preapproval in hand — they expire after 90 days.
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