First-Time Home Buyer Tips

Purchasing a house can be nerve-wracking, particularly when you are a first-time home buyer.

The following tips will help guide you through the process, avoid common mistakes and save you money.

Tips for your mortgage down payment


Begin saving early for your down payment

It is very common putting 20% down, but numerous lenders these days allow a lot less, and there are first-time home buyer programs that let you put down as little as 3% for a down payment. But putting less than 20% for the down payment might result in higher costs and having to pay for private mortgage insurance, and even when you have a small down payment it still can be a lot of money. For example, on a $200,000 house a 5% down payment will be $10,000.

You can play around with a down payment calculator to come up with a goal amount. Some useful tips to help you save for your down payment include setting an automatic savings plan up, setting aside your work bonuses and tax refunds, and use an app for tracking your progress.

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Explore your mortgage and down payment options

There are numerous mortgage options that are available to you, and each of them have their own pros and cons.  So if you are struggling to come up with your down payment, check these out:

Conventional mortgages conforming to standards that are set by Freddie Mac and Fannie Mae, which are government-sponsored entities, and required as low of a down payment as 3% down.

FHA (Federal Housing Administration) loans, which allow down payments that are as low as 3.5%.

VA (Veterans Affairs), which do not require any down payment sometimes.

The amount that you put down affects your interest rate and monthly mortgage payment.  If you would like to have the smallest possible mortgage payment, choose a 30-year fixed mortgage. However, if you can afford a more significant monthly payment, then you can obtain a lower interest rate by getting a 15-year or 20-year fixed loan. Our calculator can be used to determine whether a 30-year or 15-year fixed mortgage is the best fit for you.  Or maybe you will prefer getting an adjustable-rate mortgage, and that is riskier, but it does guarantee you a low-interest rate during the first couple of years of a mortgage.

Tips for your Mortgage Application


Determine how expensive of a house you can afford

You need to determine what is in your price range before you begin to look for the home of your dreams. Use a home affordability calculator in order to determine the amount you can afford to safely spend.


Check your credit and do not engage in any new activity

When you apply for a mortgage loan, one of the key factors that will determine whether you are approved or not, will be your credit, and it will help to determine your interest rate and potentially the loan terms as well.

So before you start on the home buying process, check your credit first. Make sure to dispute any errors that may drag your credit score down and search for opportunities that can help with improving your credit, like making a dent with any outstanding revolving debt that you have.

In order to prevent your score from going down after applying for a mortgage, do not open any new credit accounts, such as an auto loan or credit card, until after your home loan has closed.


Compare mortgage rates

Numerous homebuyers only get a rate quote from a single lender.  However, that can leave a lot of money on the table quite often. According to the Consumer Financial Protection Bureau, if you compare mortgage rates from three lenders at least, it can help you save over $3,500 over the initial five years on your loan.

When you are comparing quotes, find out if you can purchase discount points, and that means you are prepaying interest upfront in order to obtain a lower interest rate for your loan. Two key factors that determine whether purchasing points, you’ll need to understand whether you have the money on-hand and/or how long you are planning to stay in the house. This calculation can be used to decide whether or not it makes sense for you to purchase points.


Obtain a pre-approval letter

It is possible to become pre-qualified on a mortgage, and that provides you with an estimate of the amount a lender might be willing to lend to you based on your debts and income. Then as you get closer to purchasing a house, it is a good idea to get a preapproval.  In this process the lender examines your finances thoroughly and confirms in writing the amount the lender will lend to you, as well as under what terms. When you have a preapproval letter, it makes you appear more serious to sellers and will give you the upper hand compared to buyers who have not taken that extra step.

Home shopping tips


Hire the best buyer’s agent

You and your real estate agent will be working closely together, so it is critical that you find somebody you get along with. The best buyer’s agent will be knowledgeable about your local area, motivated, and highly skilled.


Choose the right kind of neighborhood and house

You might be assuming you will purchase a single-family house, and that might be ideal if you are wanting to have plenty of room or a large yard.  However, if you are willing to sacrifice some space for extra amenities and less maintenance, and you are okay with paying homeowner association fee, then a better fit might be a townhouse or condo.

Even if the house is right, it might be the wrong neighborhood.  So make sure you:

Research the schools nearby, even if you don’t have any children, since your home value can be affected by it.

Check crime and local safety statistics.

Map out the closest grocery stores, pharmacies, hospitals and other types of amenities that you will be using.

Drive through a neighborhood you are considering at different times and on various days to check out the activity levels, noise, and traffic.


Stick with your budget

Focus on looking at properties that cost under the amount you have been approved for.  You might technically be able to afford how much the preapproval amount is, but that is your ceiling – and it won’t account for problems such as a broken dishwasher that come up during home ownership or other monthly expenses that you are going to have.  When you shop with a firm budget, it can help when it is time for making an offer.

In a real estate market that has limited inventory and that is very competitive, it is very likely you will be bidding on homes that receive multiple offers  Whenever you find a house that you really like, it can be very tempting to want to give a high-priced offer to ensure you win. However, you can’t allow your emotions to take over.  When you shop under your preapproval amount, it helps to create a bit of wiggle room for the bids. Stick with your budget so that you avoid getting a mortgage payment that you cannot afford to pay.


Not budgeting for your closing costs

Along with saving for your down payment, you also are going to need to budget for paying for your closing costs, which can be quite high. Generally, the closing costs on a house will be around 2-5% of your loan amount. There are certain expenses that you can comparably shop for, like title searches, home inspections, and homeowners insurance. You also can defray your costs by requesting that the seller pay for part of the closing costs or negotiate with your real estate agent on the commission they are paid. To help you with setting your budget, be sure to calculate what your expected closing costs are.


Not saving enough money for your move-in expenses

After you have saved money for your down payment and accounted for the closing costs in your budget, you also should have savings to pay for things that will go inside of your home. That includes things like any improvements you might want to make to your house after you move in, new paint, updated fixtures, rugs, appliances, and furnishings. is not a mortgage lender or mortgage bank and does not directly offer any mortgage products. This site is not an advertiser for consumer credit as defined in 12 CFR1026.2(a)(2).

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