15 first-time home buyer tips

Buying your first home can be an exciting adventure — but like riding a rollercoaster, that adventure can quickly go from thrilling to overwhelming. From securing financing to navigating the real estate market to finally closing on your new home, the process involves many decisions that can feel downright scary. But with the right information, you can approach each step with confidence and avoid common pitfalls in the home buying process.

1. Invest in homeownership education

Given the size of the investment you’re making, it’s critical that you spend some time educating yourself on the ins-and-outs of purchasing a home. There are a lot of details, and you want to be well-versed in them before wading into these deep waters.

For starters, acquaint yourself with the definition of mortgage, which is a loan for buying a house that you pay back over time with interest. Most buyers put down anywhere from 3% – 20% up front and finance the rest.

The two most common options are 15-year and 30-year loans, and this choice dramatically affects your finances in the long term. A 30-year mortgage gives you lower monthly payments but costs more in interest over time, while a 15-year loan has higher monthly payments but saves you money overall. With home prices around $379,000, that rate difference can mean hundreds more per month and tens of thousands more over the loan’s lifetime.

You also might want to consider taking a home buying education class, which can provide benefits such as in-depth insight into processes like budgeting, lender assessment, and much more. Note that some down payment assistance programs require these types of courses, while others don’t.

Some questions to ask yourself as you evaluate your situation:

• Are you ready to commit to this home for at least 5 years? Buying a home involves significant up-front costs, such as closing costs, moving expenses, and potential repairs — all of which means you typically need to stay put for several years to break even. If there's a good chance you'll need to move within 5 years, renting might be more cost-effective since selling a home quickly can be expensive.
• Do you have an emergency fund that can cover at least 3 months of expenses? Homeownership can bring unexpected costs such as broken water heaters, roof repairs, and much more. Three months of expenses can give you breathing room if you lose income or face a major home repair.
• Do you have a stable income? If your income fluctuates significantly or you’re in a job that feels uncertain, you could struggle to make payments during lean periods, potentially putting your home at risk.
• Do you have enough money for a down payment? While you can sometimes put down as little as 3% on a conventional loan (or even zero with certain government programs), having a larger down payment reduces your monthly payments and helps you avoid private mortgage insurance (PMI). Remember that you'll also need extra cash beyond the down payment, so don't drain your entire savings account just to hit a down payment target.

If you can answer “yes” to those questions, get your documents together and prepare to take the first steps in your home buying process.

But if the answer to any of these questions is “no,” you may want to hold off on a home purchase for now.

If you've been renting for a while and you're looking to make the transition, we're here to help. With RentRewards, Rocket Mortgage^® is offering a credit toward your closing costs of 10% of your yearly rent payments.

2. Explore first-time home buyer programs and their benefits

As a first-time home buyer, you may be eligible for one of the programs and benefits that can make purchasing a home achievable. Here are some key options to consider:

• State and local assistance programs: Many states and local governments offer down payment assistance, closing cost aid, and other benefits to help first-time buyers. These programs can vary widely depending on your location, so research what’s available in your area.
• HomePath Ready Buyer™ program: Offered by Fannie Mae, this program provides first-time home buyers with up to 3% of the purchase price toward closing costs after completing a home buyer education course.
• Good Neighbor Next Door program: Offered through the U.S. Department of Housing and Urban Development (HUD), this program offers significant discounts on homes in revitalization areas for law enforcement officers, teachers, firefighters, and emergency medical technicians.
• First-time home buyer tax credits: Some federal and state programs offer tax credits for first-time buyers, which can reduce your overall tax liability. For example, the Mortgage Credit Certificate (MCC) program allows first-time buyers to claim a credit on a portion of the mortgage interest paid each year.

As with much of the homebuying process, you will need extensive paperwork to complete these programs. So research what documents you’ll need and have then ready when you begin — the more prepared you are, the less arduous the process will be.

3. List your needs, nonnegotiables, and nice-to-haves

It helps the homebuying process if you have thought about what you want in a home, and you can start by making a list of things called “needs, nonnegotiables, and nice-to-haves.” These are qualities of a home that you seek in descending order of necessity.

• Need: If you’re planning on having children, a home with extra bedrooms may be a need — something that’s utterly essential.
• Nonnegotiable: If you have dogs, for instance, a big yard or a location near plenty of green spaces may be nonnegotiable. This is a value that’s of critical importance to you, but it’s not absolutely necessary.
• Nice-to-have: Qualities like a well-appointed kitchen or proximity to nice restaurants might be nice to have, but they’re not crucial for a home purchase.

Once you have a list of these features, you’ll be less stressed when you compare properties because you’ll have a foundation of qualities to work from.

4. Find the right real estate agent for you

Now that you have your list of what you want out of a home, you can start looking for a real estate agent to move you forward. Steps to find the right agent for you include asking friends for referrals, doing research online, and interviewing multiple agents.

Potential interview questions include:

• What services do you offer?
• What experience do you have in the local market?
• How long are homes typically on the market in this neighborhood?
• What is your fee?
• Do you have reviews from previous clients?

Once you’ve found the right agent, present your list of preferred home qualities and they can tell you what’s available. Your agent will likely ask you pragmatic questions about home features, such as:

• What type of home?
• How many bedrooms and bathrooms?
• How many cars?
• What amenities, like nearby parks and grocery stores, are important to you?

A real estate professional can help by:

• Showing you properties in your area that fit your needs and price range
• Attending showings with you to learn more about your priorities as a homeowner
• Helping you decide how much to offer for a property
• Submitting an offer letter on your behalf
• Negotiating with the seller’s agent after you submit an offer
• Going to the closing with you to make sure everything is in order

Remember that only a buyer’s agent will work on your behalf — don’t rely on the seller’s agent to represent your best interests. Also, ask potential agents about their commission structure and what services they provide, and remember that while you want good representation, the cheapest option isn't always the best when it comes to one of the biggest purchases of your life.

5. Learn the difference between a preapproval and prequalification

Before you get too far into the process, it’s a good idea to consider a mortgage preapproval — and knowing how prequalification differs from preapproval is important. Here are the distinctions between the two.

• Prequalification letter: A prequalification is an estimate of the amount of home loan you can get. It’s based on an informal evaluation of your income and other information.
• Preapproval letter: A mortgage preapproval is an official document from a lender that tells you exactly how much loan money you can get based on your financial information, such as W-2s, bank statements, and your credit score.

A preapproval shows you’re a qualified buyer who can close on the purchase, giving you a competitive edge in bidding situations. If you’re just getting started and not fully ready to commit, a prequalification might be all you need.

The benefits of getting preapproved include:

• You know exactly how much home you can afford, which will help you shop within your budget.
• You can make a stronger offer, because a preapproval letter shows a seller you have the money needed to purchase the home.
• You’ll experience fewer surprises. When you’re preapproved, you’re less likely to run into last-minute surprises or delays with your mortgage lender.

6. Get a handle on your credit

If you’re trying to take out a mortgage, now is not the time to open a new line of credit, like a credit card or a personal loan. When you apply for mortgage preapproval, lenders will pull your credit report and keeping an eye on your credit report to see if you have new debt. If they find that you’ve taken out another loan or line of credit, your credit balance has increased, or you’ve started to make late payments, it could risk your final approval.

7. Decide which mortgage you need

When you are a buyer, there are multiple types of mortgage loans you can choose from. The type of loan you choose will influence your down payment amount, the type of home you can buy, and more.

Here are the most common mortgage loan types:

• Conventional loans: Conventional loans are the most common type of home loan, and they are essentially a loan between you and a private entity like a bank or another lending institution. In some cases, you can purchase a home with as little as 3% down.
• FHA loans: FHA loans are backed by the Federal Housing Administration, an agency under the U.S. Department of Housing and Urban Development. FHA loans are insured by that institution, which means that the owners of your mortgage are protected against loss if you default on your loan. An FHA loan can allow you to buy a home with less strict financial and credit score requirements than a conventional loan — for instance, you can get an FHA loan with a 3.5% down payment and a credit score of as low as 580.
• U.S. Department of Agriculture loans: USDA loans are for people who want to buy a home in a qualified rural or suburban area. You can get a USDA loan with 0% down, subject to household income restrictions. (Note: Rocket Mortgage^® doesn’t offer USDA loans at this time.)
• Department of Veterans Affairs loans: VA loans are exclusively for veterans, active-duty members of the armed forces and National Guard, and qualified spouses. You can buy a home with 0% down if you qualify for a VA loan.

8. Compare mortgage lenders

Choosing the right mortgage lender can save you thousands of dollars over the life of your loan, so it's worth shopping around rather than going with the first lender you find.

When comparing lenders, get loan estimates from at least three companies and look at the interest rate and the annual percentage rate (APR), which includes additional fees. Consider lenders like Rocket Mortgage that offer streamlined digital experiences, allowing you to manage your application online and get faster approvals.

9. Save for a down payment

A down payment is the money you pay upfront toward your home’s purchase price, with the mortgage covering the rest. It behooves you to save as much as you can for a down payment for a simple reason: the higher your down payment, the less you’ll have to take out as a loan. If it’s a true problem for you, you can explore down payment assistance programs.

Something else to note: If you put down less than 20% for a down payment, you have to pay PMI. You can, however, cancel it once you've built 20% equity through payments and home appreciation.

10. Prepare for closing costs

Be forewarned: If you assume your down payment is all you’ll need to close on your mortgage loan, you’ll be in for a big surprise when you hear about something called “closing costs.”

These are upfront expenses that go to your lender in exchange for arranging certain loan services, and you’ll see your exact closing costs on a document called a Closing Disclosure. Generally, you can expect to pay 3% – 6% of your total loan amount in closing costs.

Common closing costs include:

• Attorney fees
• Pest inspection fees
• Appraisal fees
• Escrow fees
• Homeowners insurance
• Title insurance expenses
• Discount points

As a first-time buyer, you may qualify for government-backed grants or loans that help pay closing costs. Additionally, it’s common to ask the seller to help cover closing costs. Seller concessions could be a flat percentage of the total closing costs, or the seller could cover specific fees, like appraisal or attorney fees.

11. Consider future resale value and equity

While your home is where you’ll be living your life and pursuing your share of the American Dream, it’s also important to think about pragmatic/financial issues, such as the home’s future resale value. Factors like the state of the neighborhood (is it getting better?), local amenities (are there popular shops nearby?), and overall market trends can impact how much your home will be worth down the line.

There are other factors to consider for resale value, as well, such as the condition of the house, the quality of the local school district, and the price of comparable nearby homes. Even if you plan to stay for the long term, thinking about the potential resale value can ensure you’re making a sound real estate investment.

Building equity in your home is crucial to this equation, as well — it represents the difference between what you owe on your mortgage and what your home is worth. Every mortgage payment you make increases your ownership stake, and property appreciation can boost your equity even further.

This growing equity becomes your financial foundation when it’s time to sell — it’s what allows you to move up to a larger home, relocate to a new area, or simply walk away from the sale with cash in hand. Without sufficient equity, you might find yourself unable to sell without bringing money to the closing table, which can limit your housing options and financial flexibility.

12. Make an offer that works for you — and the house

While you may find a home that qualifies as your “dream house,” you must be aware of financial realities, too. (You don’t want to end up “house poor,” which means a disproportionate percentage of your income is tied up in mortgage payments, insurance, property taxes, and the like.) With that in mind, when you make your offer, be aware of what you can afford while also taking into account the home’s market value.

The deposit is typically equal to between 1% – 3% of your total home price and goes toward your down payment. If you back out of the sale for a reason not listed in your offer letter, you’ll lose your earnest money deposit.

13. Hire an inspector and appraiser

A home inspection and appraisal are two critical steps that protect both you and your lender before closing on a mortgage.

• Appraisal: This determines the home’s market value based on its features, local market trends, and recent sales of similar properties, ensuring the lender isn’t loaning more money than the house is worth.
• Home inspection: This process involves a qualified professional who closely examines the property’s condition, from the foundation to the roof, identifying potential problems like electrical issues, plumbing leaks, or structural damage.

Most mortgage lenders require an appraisal before approving your loan, while a home inspection is highly recommended for your protection. When you begin this process, hire licensed professionals with strong local reputations and ask for references from your real estate agent.

Include an inspection contingency in your purchase offer so you can negotiate repairs with the seller or walk away without losing your deposit if major issues are discovered. Remember that while an appraisal protects the bank's investment, the inspection protects yours.

14. Plan for home maintenance

Even the most thorough inspection won’t catch every potential issue, so create a budget for both routine maintenance and unexpected home repairs. It’s a good idea to create a separate savings account for home expenses and start funding it before you even close, since costly home issues don’t tend to announce their appearance.

If your inspection reveals problems, you have a few options: You could negotiate with the seller and ask them to fix the issues before closing, request a credit toward repairs at closing, or negotiate a lower purchase price to account for the needed work. Remember that in competitive markets, sellers may be less willing to negotiate, so prioritize the most critical repairs and be prepared to handle minor issues yourself after moving in.

15. Save physical copies of your paperwork

Once you get moving on a house purchase, the paperwork is absolutely essential. We recommend keeping a physical copy of your mortgage statements, Closing Disclosure, deed, and other related documents in a safe place. Indeed, consider purchasing a fireproof-waterproof safe to secure these documents inside. Let anyone else named on your loan know where the documents are and how to access them in the event of an emergency. If you get a safe, let them know how to get into it.

The bottom line: Take the time to plan ahead when buying a home

Buying a home for the first time is a significant milestone, and a dramatic step toward building a new future. While the process has its complexities, you can navigate it successfully with proper preparation.

The key is maintaining your financial health throughout the process, ensuring that homeownership enhances rather than strains your quality of life. When you buy within your means, your home becomes both a place to live and a long-term investment that can build wealth over time.

If you’re a first-time home buyer, explore your options with the Home Loan Experts at Rocket Mortgage. We’re here to help you every step of the way.