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First-Time Home Buyer Tips: A Guide

January 23, 2024 9-minute read

Author: Andrew Dehan

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The lure of first-time homeownership is powerful. Your focus could be building generational wealth or creating an investment to sell when you retire. Whatever your reasons for buying a house, you may be quite a few steps away from the moment you can kick back and enjoy your home purchase.

Next up, uncover our best advice for first-time home buyers looking to embark on the journey to homeownership.

13 Tips For Buying A House As A First-Time Home Buyer

Buying a house is one of the biggest financial moves you’ll ever make so it’s important to be prepared, especially if it’s your first time buying. Explore some first-time home buyer tips and advice intended to help you along the way.

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1. Be Sure You’re Ready To Commit To A Loan

One of the most important things for first-time home buyers to know is that they shouldn’t purchase a home prematurely. As a first-time home buyer, above all, be sure you’re ready to buy. Most mortgage loan terms are 15 or 30 years. Although you may not stay in your home for that long, buying a house is still a major commitment.

Start by asking yourself these questions:

  • Am I ready to commit to this home and city for at least 5 years?
  • Do I have an emergency fund that can cover at least 3 months of expenses?
  • Do I have a stable income?

If the answer to any of these questions is “no,” you may want to hold off on a home purchase for now. Consider whether you have any events on the horizon that could affect your location, income or expenses. If so, these are other reasons to pump the brakes.

2. Don’t Skip The Preapproval

It can be tempting to jump right into hunting for the perfect house, particularly if this is your first time – and especially if you’re in a rush to move out of your parents’ house. However, it’s a good idea to get a mortgage preapproval before you begin comparing properties.

Knowing how prequalification differs from preapproval is also important. Let’s review that difference now.

  • 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.

Benefits Of Preapproval

Benefits of getting preapproved include:

  • You know exactly how much home you can afford. You and your real estate agent know your home-purchasing power once you have a preapproval letter in hand. This will help you shop within your budget.
  • You can make a stronger offer. Sellers need to know that the buyer they choose can afford their home. A preapproval 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.

3. Maintain Your Credit

Now isn’t 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. Lenders may also monitor 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.

Be sure to keep paying your bills on time. Don’t attempt to influence your credit rating for better or worse or begin any risky spending. Lenders want to see that your behavior patterns are consistent and reliable for future payments.

4. Understand Your Loan Options

Did you know you can decide between multiple types of mortgage loans? The type of loan you choose will influence your down payment amount, the type of home you can buy and more. Here are some of the more familiar mortgage loan types:

  • Conventional loans: Conventional loans are the most common type of home loan. You can purchase a home with as little as 3% down in some cases.
  • Federal Housing Administration (FHA) loans: An FHA loan can allow you to buy a home with less strict financial and credit score requirements than a conventional loan. You can get an FHA loan with a 3.5% down payment and a credit score as low as 580.
  • US Department of Agriculture (USDA) 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. Rocket Mortgage® doesn’t offer USDA loans at this time.
  • Department of Veterans Affairs (VA) 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.

Once you have a goal in mind, you can begin to set up automatic payments to your savings account, where you’ll likely save up for a down payment, making it easier to predict when you can make your move.

Get approved to buy a home.

Rocket Mortgage® lets you get to house hunting sooner.

5.  Save For A Down Payment

With conventional loan down payments going as high as 20%, a down payment can be a big financial step for first-time homebuyers.

If you qualify as a first-time home buyer, you can benefit from several assistance programs that bring the range from 0% for VA loans to 3.5% for FHA loans. These programs provide down payment assistance loans and grants. However, if you have a down payment for at least 20% of the purchase price, you’ll be able to avoid private mortgage insurance (PMI) on a conventional loan.

One of the most important priorities of the FHA is helping home buyers with the purchase of their first home, and this includes assisting borrowers with their down payment. If you qualify as a first-time home buyer, you may have access to state programs, tax breaks and an FHA loan.

According to the U.S. Department of Housing and Urban Development (HUD), a first-time home buyer is any one of the following:

  • An individual who’s had no ownership in a principal residence during the 3-year period ending on the date of purchase (This includes a spouse, and if either spouse meets the aforementioned test, they’re considered a first-time home buyer.)
  • A single parent who’s only owned a principal residence with a former spouse while married
  • An individual who’s a displaced homemaker and has only owned a principal residence with a spouse
  • An individual who’s only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations
  • An individual who’s only owned a property that wasn’t in compliance with state, local or model building codes and that can’t be brought into compliance for less than the cost of constructing a permanent structure

6. Don’t Forget Closing Costs

Don’t assume your down payment is all you’ll need to close on your mortgage loan. You’ll also need to cover closing costs before taking control of your property.

Closing costs are upfront expenses that go to your lender in exchange for arranging certain loan services. Common closing costs you might see include:

You’ll see your exact closing costs on a document called a Closing Disclosure. Generally, you can expect to pay 2% – 5% of your total loan amount in closing costs.

As a first-time buyer, you may qualify for government-backed grants or loans that assist with closing costs. Additionally, it’s fairly 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.

7. List Your Needs, Nonnegotiables And Nice-To-Haves

Your reason for buying a home will be your north star for making decisions about your purchase. If your goal is to dip your toe into real estate investment, a duplex may be the perfect option for you.

If you’ve decided to move closer to older parents or a support system as you start a family, consider a condo or townhouse that’ll require less upkeep.

Once you’ve decided on the type of home that’s right for you, you can begin to prioritize which features you want in your home based on your needs.

For example, you might focus on finding a home with extra bedrooms if you plan to have children or need a home office. If pets are the light of your life, a big yard or a location near plenty of green spaces may be nonnegotiable.

Sit down and create a list of qualities you want and need in your new home. This will help you shop for homes more effectively and be less stressed when you compare properties.

8. Work With A Real Estate Agent

Work with a real estate agent (who might also be a REALTOR®) to find the perfect property. Agents and REALTORS® are local professionals who are experts in the home buying process and your local market.

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
  • Helping you negotiate with the seller’s agent after you submit an offer
  • Attending the closing with you to make sure everything is in order with your sale

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. Always choose a qualified real estate agent to help you buy a home.

Tested. Trusted. Top-rated.

Visit Rocket HomesSM to get a proven real estate agent that’s handpicked just for you.

9. Be Confident When You Submit An Offer

You should never submit an offer on a home unless you’re 100% committed to the purchase – or you could risk losing your earnest money deposit, also known as a “good faith deposit.” Giving this money signals to the owner that you’re serious about the offer.

The deposit is typically equal to 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.

10. Hire An Inspector

You need to hire a professional inspector before getting a home. An inspection is different from the appraisal required by your lender. Here’s how:

  • The appraisal: During an appraisal, your appraiser tells you and your lender how much your home is worth based on certain features of your home, market trends and recent sales of comparable properties (comps).
  • The inspection: During a home inspection, the inspector tells you about specific problems with the property. You can use the results of your inspection to learn more about your home and request concessions from your seller.

An earnest money deposit letter often includes a home inspection contingency, which can allow you to invalidate an offer and not lose your deposit if extensive repairs are needed.

11. Stick To Your Budget

Many first-time home buyers get emotionally invested in a house, but this can backfire if you can’t get the loan for the house or don’t have the funds to address major property issues that the inspection revealed.

Don’t go over your budget for a house, even if the house seems perfect for you. Be sure to budget for repairs and renovations. The right home is out there for you, so keep searching until you find a home that fits your budget and satisfies your list of must-haves.

12. Save Physical Copies Of Your Paperwork

Once you get moving on a house purchase, don’t forget about the paperwork. We recommend keeping a physical copy of your mortgage statements, Closing Disclosure, deed and other related documents in a safe place.

Let anyone else named on your loan know where the documents are and how to access them in the event of an emergency.

13. Don’t Stop Learning

Investing in homeownership education can help you avoid making costly mistakes, prioritize smart investments that offer reliable ROIs, and build sweat equity in your first home.

Not sure where to start? Consider taking a first-time home buyers class, which can help you:

Both in-person and online real estate courses are available. Some programs even offer financial perks, such as low down payments and closing-cost assistance.

The Bottom Line: Plan Ahead When Buying A House For The First Time

Buying a home for the first time doesn’t have to be overwhelming. Wherever you land, it’s you and your loved ones who bring a home to life. Maintain your financial health so your quality of life increases, rather than decreases, with the purchase.

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

Get approved to buy a home.

Rocket Mortgage® lets you get to house hunting sooner.

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Andrew Dehan

Andrew Dehan is a professional writer who writes about real estate and homeownership. He is also a published poet, musician and nature-lover. He lives in metro Detroit with his wife, daughter and dogs.