First-time home buyers usually face a number of challenges when buying their first house. This is because of all those requirements, prerequisites, documents, steps, and even tasks needed to close your sale. It can get such buyers overwhelmed altogether.

However, if you are a first time home buyer, you can take advantage of some perks the real estate industry offers. With these, it is possible to get the most out of your hard-earned purchase to do that. You must consider and expect a couple of things.

Let me guide you through that list below.

Questions to Consider Before You Buy

How is your financial health?

Before setting eyes on online listings as you look for your next home, it is important to look at your finances. Each buyer must be financially prepared and resilient throughout purchasing and spending items and maintenance for your home.

Review your expenses, savings, and the amount that gives you the ability to be resilient should unexpected house expenses arise.

Which type of home will best suit your needs?

There are tons and tons of options for choosing residential properties, and it can range from sizes to that of a single-family home. It can expand to duplexes, a condominium, or even those as huge as townhouses with multiple units in them.

Before you waste time trying to get the home, you would want to consider what you need first. For instance, it would be relatively illogical that when, for instance, one bachelor that has no family would be buying a home that can house eight people.

How much mortgage do you qualify for?

It is fundamental to know how much your lender will lend to you as you purchase your home. You will know this upon clarifying to them how much you can personally afford to spend. Usually, people might think that you can afford a $400,000 home, for instance. 

But sometimes your lenders might not see this as is, and they may suggest that you could only afford a $300,000 home. This perspective is an outcome of analyzing other factors in your finances, such as your income, your longevity at work, your current debt, among others.

How much home can you afford?

Contrary to the earlier point, some banks will do otherwise–they may loan you more than what you want to pay for, especially with a down payment. Be mindful not to take huge loans, especially if you don’t need that much. 

This is a common mistake amongst first-time homebuyers, and will usually have them end up without payment and closing, or “house-poor,” whose households have only a little left to spend because of such a high mortgage. In other words, the only loan that you can afford to spend.

11 Proven Tips for First-Time Home Buyers

Let’s take a closer look at some tips proven by experts to be effective in buying a house in general. As we run through these tips, we highly suggest some serious introspection, as buying huge purchases like these can somehow be the same as a “huge life decision.”

Here are eleven proven tips, and let’s start with our finances:

Start saving early

Consider that your down payment will rely on the mortgage type that you will be selected, as well as the lender you’ll be choosing. Depending on your credit score, a lender, for example, can offer as low as a 3% down payment relative to the summative cost of the house. However, even small percentages like these are hard to save.

Also, consider your closing costs, which are the fees that you would need to pay to close the mortgage. This would usually cost between 2 to 5 percent of the amount loaned. You can save on such expenses if your seller agrees to pay a portion of the closing cost.

Save early for your move-in expenses as well. These expenses include your repairs, furnishings, and other household maintenance fees.

Decide how much home you can afford

It is important to repeat this: make sure that you have figured out your spending ability based on your income, down payment, credit score, and debt. Strategically decide how much you can afford as you also consider where you plan to live.

Check and strengthen your credit score

It is common knowledge that your credit score’s quality will identify whether or not you are a person who can qualify for a mortgage. Your credit score will also influence how much interest rates your lenders will be offering you. To maintain a good credit score, make sure to keep your credit cards open and active, and track and pay your bills on time!

Explore mortgage options

A man calculating the payments on a mortgage loan

As you might already know by now, mortgages come in various types, and they all depend on your eligibility requirements, your down payment, and closing cost. The main types are as follows:

Conventional mortgage: This is usually for first time home buyer who may be required for as little as a 3% down payment. These mortgages are not usually guaranteed by the U.S. government.

FHA Loans: The Federal Housing Administration usually covers insurance on these loans, and can also allow down payments as low as 3.5%.

USDA Loans: Unlike FHA, these loans are usually guaranteed by the U.S. Department of Agriculture and are targeted to rural home buyers. USDA Loans do not require a down payment from their buyers most of the time.

VA Loans: These loans are usually guaranteed by the Department of Veterans Affairs. Just like the USDA loan, no down payment is required to access this, as long as you are a current or a veteran military service member.

Research first-time home buyer assistance programs

Assistance programs are usually available for a first-time home buyer, and these programs are designed to combine your down payment assistance, your mortgage rates, and your closing cost assistance.

Sometimes, tax credits may also be available for such first time home customers.

Compare mortgage rates and fees

Usually, lenders may also offer the opportunity to buy discount points. These points are essentially the fees that you may pay upfront to have a lower interest rate. For one, this method is strategic for those who have cash on hand already, and that if they plan to stay in that home for a long period of time.

CFPB or the Consumer Financial Protection Bureau would usually suggest that a buyer should request loan estimates for the same mortgage type between and among a variety of lenders — so that you can compare costs.

The more you compare costs, the more aware you are. This is a very crucial and smart move when it comes to buying your first time home.

Get a preapproval letter

Getting a preapproval letter signifies to sellers that you are a serious person interested in engaging in the market. This preapproval letter is an offer given to you, saying that they can loan you a particular amount, given a set of specific terms and agreements.

Choose a real estate agent carefully

Choosing one right real estate agent is also one of the fundamentally strategic steps you should do when purchasing your home. Good agents will exhaust the market for properties that are perfect for your needs. They will also guide you through your mortgage negotiations as well as your closing and finalization processes.

Please choose the right one by interviewing a couple of agents and request for their portfolio and references. You can even ask them for stories about how they helped a first time home buyer such as yourself!

Pick the right type of house and neighborhood

Again, I cannot stress this enough: purchasing the right home and the right neighborhood is key to enjoying your first home.

It is important to consider the pros and cons of these different types of homes. Consider the extra fees you’d have to pay for when choosing to live in a condominium, or other gated communities, for instance, like home association fees.

When considering the right house and neighborhood, think about what you will need in the long run. Will you decide to live there as your “forever home” or stay there temporarily, because you have plans (like creating or expanding a family)? Ask yourself, will you need more space in the future?

After having answered that, check out on potential neighborhoods that will fit your needs, and make a run through on their distance from work, the amenities involved, the security, accessibility, and so on.

Stick to your budget

As I have mentioned earlier, financial resiliency is very important. Whenever a lender offers you loans that seem huge (but at the end of the day, is one you can’t afford), you should learn how to review your finances again and make sure not to spend outside your comfort zone. Have the courage to negotiate with your lender and say “no” whenever you deem it necessary.

If you want a relatively stress-free road when it comes to your finances, a first time home buyer should be able to set a price range based on your budget, credit score, existing debt–and then stick to it.

Buy adequate home insurance

You can expect that your lender will require you to buy some home insurance before continuing with the closing costs and before closing the purchase. This type of insurance will help first time home buyers like you when it comes to having to cover the costs of repairs, maintenance, or replacements of your home (and even belongings).

Some would even provide home buyers liability insurance if you have been held responsible for an injury or accident in relation to your home. This might mean more closing costs and an added expense aside from your regular mortgage, but if you buy enough home insurance, you wouldn’t have to worry about rebuilding your house if it gets destroyed.

The Bottom Line

Being a first time home buyer is really challenging and even tedious for some people. Imagine how hard it might be to go through all these processes the first time around! But you wouldn’t need to worry. Being fully aware of these things is key to a successful purchase.


In this article, Penny Saved team explored buyers’ best practices regarding strategically lowering your mortgage or interest rate, or even your closing cost–all depending on proper introspection of your personal finances and your capabilities to spend. Mix it with a little bit more perseverance and passion for your next dream house, then boom–you’ll have your house in no time.

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Categories: Mortgage