Advice for the First-time Homebuyer


Being a first-time home buyer can be very exciting, but at the same time it can be just as nerve racking. So here are a few mortgage, down payment, and house shopping tips to help the first-time homebuyer navigate the purchasing process, avoid common mistakes and save money.

Find the Right Agent


Whether you are going to buy or sell a home, it is necessary to work closely with a local Realtor. Therefore, it is essential for the buyer to find an agent that they are compatible with. In addition to being compatible with the buyer, the agent should be knowledgeable of the area, highly skilled and motivated.

Save as Much as Possible for the Down Payment


Commonly, most first-time home buyers will need 20% of the home’s purchase price for a down payment. There are lenders that will allow for a much lesser amount, but paying a lower down payment amount may result in higher ending costs. The first-time buyer should save money from their paychecks, work bonuses, and tax refunds, and keep track of savings.


Check out all of the Mortgage and Down Payment Options


With all of the existing mortgages available, there always one option that can save you money, so check around before you commit to a loan.  The first-time buyer should look into all of the pros and cons of each loan before deciding which is best. Buyers that are struggling to save up enough for the down payment should also consider conventional mortgages, FHA loans and, for qualified veterans, VA loans.


The down payment has a direct effect on the amount of the monthly mortgage payments and the interest rate. A fixed mortgage that is taken out for 30 years usually offers the lowest mortgage payment.  The customer who wants a lower interest rate would benefit from a 15-year fixed rate, which has a much lower interest rate for the duration of the loan. However, the customer that needs the lowest possible interest rate for the first few years of ownership might consider an adjustable mortgage because, even though they are risky loans, they offer the lowest interest rates during the first years of ownership.


Look into State, Local and Federal Assistance Programs


First time home buyers can usually find assistance programs offered through the states, counties, and municipalities, including the the federal government as well. These programs can assist the buyer with down payment and closing costs, tax credits and interest rate discounts.


Keep up with Credit Scores


The credit is a key factor in determining if the loan will be approved, and has an impact on the interest rates, as well as the loan terms. Keep up with credit score information and dispute all errors that may be lowering the credit score, and at the same time keep your eyes out for opportunities to improve the credit score, such as paying down debts. Avoid opening new credit accounts or making any major purchases until the home loan closes to prevent the score from dipping.


Take Time to Compare Mortgage Rates


It’s not a good idea when you buy a home to only get a quote from just one lender.  Without a second opinion, you’ll never know if you’re overspending or leaving money on the table. According to the Consumer Finance Protection Board (CFPB), a first-time buyer can save nearly $3,500 by comparing the rates of at least three different lenders. While comparing quotes, ask if the lender allows for discount points, where the buyer has the option to prepay interest “points” to obtain a lower overall interest rate.


Always ask for Pre-approval


Buyers should be pre-qualified for the mortgage before starting home shopping.  A preapproval gives the buyer an estimate of how much money they can borrow based on the buyer’s income and debt. As the buyer gets closer to being ready to buy a home, it is a good idea to be pre-approved.  A pre-approval means the lender has thoroughly examined the buyer’s finances and confirmed in writing an amount the lender is willing to loan, including the loan’s general terms. A pre-approval letter gives the buyer an upper hand over other buyers, by making them appear more serious to the seller. When one is going to sell a home, they seek a serious buyer.


Find the Right Agent


Whether you are going to buy or sell a home, it is necessary to work very closely with a real estate broker. Therefore, it is essential for the buyer to find an agent that they are compatible with. In addition to being compatible with the buyer, the agent should be knowledgeable of the area, highly skilled and motivated.


Select the Right House and Neighborhood


For some, a single-family home with a big yard and lots of space is ideal.  For others that don’t need the space or don’t want all of the maintenance of taking care of a big yard, a townhouse or condo may be a better fit. It is also important to make sure that the neighborhood is just as desirable as the home itself.


The buyer should thoroughly research the local crime and safety statistics, and even if the buyer has no children, it is important to research any nearby schools, because it impacts the value of the home. It is also a good idea drive around the neighborhood at various times of the day to find out how the traffic flows and to check on any noises and activities throughout the neighborhood, as well as mapping out the nearest grocery store, hospital and pharmacy that the buyer will be using.


Stay within the Budget


Shop around for properties that are less expensive than the loan approval amount. The pre-approval letter tells you the maximum amount you are qualified to borrow, but does not account for any expenses such as broken appliances or other needed repairs that may pop up after the deal is sealed.


Most likely the buyer will find that there are other bids on any real estate they choose. Still yet, making a high-priced offer is not always the best idea. It is always good to shop below the pre-approval amount to guarantee a little wiggle room when bidding and to avoid an unaffordable mortgage payment. For guidance in buying strategies, this is where having a great real estate agent will help you out.


Many first-time buyers make common first-time buying mistakes, some that may be regretted for years to come. To avoid this fate, always budget for closing costs, save enough money for post-closing and moving expenses, always rely on an experienced Realtor to assist in negotiating your deal, know the limits of the home inspection and purchase adequate insurance.  For more information on how to avoid many first-time buyer pitfalls, consult your local experienced buyer’s representative real estate agent. Happy buying!