Tips for First-Time Home Buyers

March 7, 2024
Shannon O'Sullivan

Preparing to buy tips

For many first-time home buyers, the idea of purchasing a house can seem daunting. Yet, with the right preparation and knowledge, you can navigate the process smoothly. One of the essential first-time home buyer tips is ensuring you have a good credit score. This affects your ability to get a mortgage and influences your mortgage interest rate. Before you begin looking for a house, check your credit report and work on paying down any credit cards to improve your score. Another crucial step is getting a mortgage preapproval. This not only helps you understand how much house you can afford but also shows home sellers you are a serious buyer.

Exploring first-time home buyer programs can provide you with additional support. Programs like the FHA loan, VA loan, and USDA loan (backed by the Department of Agriculture) offer mortgage options that might be more favorable compared to a conventional home loan. Speaking with a mortgage lender about these options can help you understand which loan amount and monthly payment scenarios fit your budget, especially if you aim to buy a more expensive home. It's also worthwhile to calculate potential closing costs and other expenses related to the purchase price of the home you love.

When it’s time to start home shopping, hiring a knowledgeable real estate agent can make a significant difference. They can help you find a home that fits your needs, assist in negotiating with the seller, and guide you through the home inspection process to ensure the condition of the home meets your expectations. Remember, deciding on the right home involves more than love at first sight; consider practical aspects such as home maintenance and whether the house includes extra features you want in a home. With these tips for first-time home buyers, you’re well on your way to purchasing the first house perfect for you.

Mortgage selection tips

When you think about buying your first house, understanding mortgage selection is crucial. Before you dive into the home purchase, you need to make sure you're fully prepared for the financial responsibility that comes with owning a home. One of the important things to consider is how much home you can afford. This isn't just about the home price itself but also includes the ongoing mortgage payment, home insurance, and cost of repairs and renovations that may arise. Lenders may require you to have private mortgage insurance if your down payment is less than 20%, adding to the monthly costs. Therefore, plan your finances accordingly and ensure you can keep up with the bills on time. If you'd like to get in touch, I can put you in contact with a variety of lenders that I think would be great members of your homebuying team.

For first-time buyers, understanding the type of loan that best suits your situation is essential. A conventional loan is a common type of home loan that many buyers opt for, but there are specialized programs designed to help first-time buyers get into their dream home. For instance, if you're looking to buy a home in a rural area, you might qualify for a loan that doesn't require a down payment. It's important to talk with a loan officer to understand all the available options, including the loan terms, payment and closing costs, and whether you can roll the cost of repairs into your loan.

During your home search, it's easy to become emotionally attached to a home, but buyers in 2024 need to remember the practical aspects of buying a house. Evaluate if the property allows you the flexibility to make changes or expansions if needed. Sometimes, you may find a home you like but it requires a bit of work; you’ll need to decide if you're ready to take on those projects yourself or if you should purchase the home with extra considerations for those expenses. Lastly, being clear about what you want vs. what you need in a house for the first time can help streamline your search and keep you focused on what matters.

Some first-time homebuyer mistakes to avoid

Fixating on the house over the neighborhood

So, you're charged with excitement and ready to buy your first home. Congratulations! You're about to join the proud ranks of property owners, a decision that for many is akin to finding one's soulmate. However, let's take a moment to discuss a common pitfall in the home buying journey. You've found the perfect house — it's as if it whispered your name the moment you walked through the door. But, did you remember to check if the neighborhood whispers sweet nothings as well? It's a classic tale; buyers in 2022 getting so fixated on the house that the surrounding area becomes an afterthought. Oops!

Now, the process of buying your first home is filled with important decisions. From deciding the type of loan you're going to use, to figuring out if you want a home that says "this is where I keep my collection of rare artisanal cheeses," there's a lot to consider. And, amongst those considerations should undoubtedly be the broader canvas upon which your dream house is painted — the neighborhood. Remember, when you’re ready to buy, it's not just the property you're purchasing, but a slice of the local community pie as well.

Sure, buyers looking for their perfect abode often have a list longer than a CVS receipt — wanting everything from open-concept kitchens to a bathroom for every pet. But what good is a designer kitchen if you're not jazzed about where you're living? The purchase of a home is not just about the house; it's about envisioning your future in that setting. For those first-time homebuyer hopefuls out there, remember, don’t just want a home, want the neighborhood too. After all, it's where you'll be borrowing more than just a cup of sugar.

Making decisions based on emotion

Making decisions, especially significant ones like choosing to purchase a home, can often feel overwhelming. It involves numerous considerations, from the financial aspects to the emotional ties you will inevitably develop with your new residence. However, embracing your emotions in this decision-making process can cause some buyers to leave their logic at the front door which is something to be wary of. Say you love the layout of a home, the wrap-around porch, and the spacious backyard but the interior of the house is badly in need of extensive repairs. Allowing your vision of spending evenings sitting on your expansive porch to dictate the course of your buying process could lead to financial hardship down the road. It's important that we occupy the dreamer as well as the accountant head spaces while looking for our first home. Search long enough, and the perfect place for you will appear (trust me, I've seen it happen again and again!)

Ignoring moving and other upfront costs

Ah, the rite of passage for the 16 first-time homebuyer, where optimism runs as high as your soon-to-be mortgage rates. We embark on this joyous journey with visions of paint swatches and the perfect curtain fluttering in the breeze of our new home, blissfully ignoring those pesky little details like moving and upfront costs. Why fret over the small print when there's a dream house to decorate? Sure, the notion of actually calculating the total expense involved in transporting your life from Point A to Point Fabulous might momentarily cloud your sunny disposition. But, fear not, for denial is not just a river in Egypt; it's a handy survival tactic for the first-time homebuyer!

Let's face it; worrying about moving costs is about as enjoyable as assembling furniture without instructions. It’s a complex puzzle that somehow always results in leftover pieces. Why concern ourselves with the logistics of moving sofas and endless boxes, or the upfront costs that add up faster than you can say "unexpected expenses"? After all, the thrill of owning your first home should not be dampened by reality checks. So, here's to the brave first-time homebuyers sailing into homeownership, navigating the treacherous waters of expenses with the grace of a swan. Here's a handy list of homebuying expenses you'll need to factor in if you're going to have as complete a picture of the cost of homebuying as possible:

Closing Costs

Get ready to cross the finish line of your home buying journey! At the moment of home closing - when the keys to your new kingdom are finally handed over - there are some costs involved, known as closing costs. These cover everything from the application fee, points, to your first homeowners insurance payments. Based on the latest insights from Zillow, anticipate investing between 2% and 5% of your home’s purchase price to cover these expenses. This is your step towards officially making that dream home yours!

Property tax

As you explore various towns and neighborhoods for your new home, keep in mind that property tax varies from one location to another and remains a constant financial commitment as long as you're a homeowner. Typically, expect this cost to gradually increase over time. It's an important aspect to consider while choosing the perfect place to live. In most states, the amount you pay in property tax is determined by your property's assessed value and the local tax rate. Usually, this expense is conveniently included in your monthly mortgage payment, simplifying your financial planning. Embrace this knowledge as part of your journey to finding your dream home!

Homeowners insurance

Before you can embark on the exciting journey of securing your mortgage, there's a step you'll need to take: obtaining homeowners insurance. This crucial protection plan covers both mishaps and unforeseen events that could happen to your home (imagine a fallen tree branch damaging your roof) and the precious items within (consider adding coverage for special possessions, like your engagement ring). It also provides liability coverage for any accidents that may occur on your property (think slips on icy steps or bathroom falls), ensuring you're safeguarded from the unexpected. Often, when you make your mortgage payments, the cost of this comprehensive coverage is conveniently included, making it one streamlined step towards securing and enjoying your dream home with peace of mind.

Mortgage insurance

Don't let the lack of a 20% down payment hold you back from owning your dream home! While it's true that not having this amount might mean you'll need to opt for mortgage insurance (PMI) as most lenders need it to mitigate their risk, it's a step worth considering. This minor addition will appear among your closing costs, but it paves the way for you to step into your new home sooner than you might think.

So what do you think? Are you ready to purchase your first home? Let's embark on this journey together!

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