23 Tips for Buying Your First Home

Knowing where you stand financially and having everything as prepared as possible will allow you to choose the right homes to look at from the get go and will make the loan process much smoother (or as smooth as possible). Here are some things to get in check as early as you can.

1. Know your credit score. The better your credit score is, the better your chances are of being approved for a loan, as well as getting a great interest rate and lower down payment. So even if you are not planning to buy your first home for another couple of years, it’s never too soon to check your credit score and report.

First, you’ll want to make sure all of your information is accurate. If there’s anything that doesn’t belong, get it disputed and removed as quickly as possible.

Next, you’ll want to work towards improving your score. This includes making as few hard inquiries to your credit report as possible (i.e., don’t sign up for new credit cards, buy a car, etc.), paying off your debts as much as possible, and making sure that every payment is on time. The latter includes your rental payments as your bank will want to know how timely you made those as it will show how timely you make your mortgage payments.

If you’re looking for free services, using Credit Karma, Credit Sesame, and Quizzle will help you get your reports and scores from all three credit services (Experian, Equifax, and Transunion). If you don’t mind paying a monthly fee, Experian will allow you to monitor your Experian report for a monthly fee as well as get reports / scores from the other two immediately for a one-time fee.

2. Know the current interest rates. Some times are better than others when it comes to home loan interest rates. Try to plan your first time home buying experience for when rates are lower to get the best loan possible.

3. Get your paperwork in order. Things that you might be asked for when getting your loan include recent paycheck stubs, up to 12 months of bank and credit card statements, retirement plan statements, tax documents, and other financial paperwork. If you’re looking to specialized loans such as a VA home loan, you will also need military records.

4. Figure out what you can reasonably afford. While you may be able to get a high loan amount, it won’t be worth it if you can’t make the payments. You can use tools like the Home Affordability Calculator to estimate the price of the home you can afford, and the Mortgage Payment Calculator to see what that price means in monthly payments. Since you don’t want to over-extend your budget, you’ll want to …

5. Create two budgets. One budget should be your current finances plus your new estimated home mortgage. The second budget should be what you would do in case of an emergency, such as you or your spouse losing your jobs. Having a worst-case scenario budget can help you determine what you can really afford when times get tough.

For more resources to help you with personal finance, see our post with 50 free personal finance resources.

6. Figure out where you want to live. Think about all of the things you like to do on a regular basis – go to Whole Foods, work out at the gym, play tennis, hiking, etc. Any activity that you want to do on a regular basis, you will want to make sure you are in close driving distance.

7. Get to know the neighborhood. Home search sites like Trulia and Zillow offer a lot of details beyond just those of the house. Be sure to look at crime ratings, school ratings, the value of houses around you, and similar statistics.

8. Consider the home’s age, size, and features. Age can mean a lot when it comes to potential repairs and maintenance, which can be costly. You’ll want to make sure that the home has enough room for you to live and potentially grow in. It doesn’t hurt to move into an apartment that is too small, but it will if you know you’re going to spend the next five to ten years (or more) without the space you need. Also, things like air conditioning, finished basements, and three car garages are expensive to add on later, so aim for a house that has all of the features you want.

9. Find out about HOAs. The downside of homeowners associations is that they can control the number of pets you have, how you decorate your yard, the color you paint the exterior of your home, and many other factors. The upside is that they sometimes offer amenities (community parks and swimming pools) and make sure that property values in the neighborhood stay stable. Figure out if the restrictions are worth the benefits, or whether you would prefer to avoid homes in an HOA area.

10. Save your favorite homes with a pros / cons list. When you meet with your agent, giving them a list of the homes you like and why you like them, or what features you wish they had, will help your agent find more properties that may have just come on the market. So keep good notes while you’re browsing around.

Since you will be working with a real estate agent for the first time when buying your home, here are a few good tips so you have the best experience.

11. How to find an agent. Lots of sites offer real estate agent reviews, including Zillow, Redfin, Realtor, and others. Look for someone where you plan to buy your home and find someone whose reviews sound like they will match your needs.

12. Don’t be afraid to say what you feel and change your mind often. You are about to buy your first home. You will want it to be everything you need. Don’t be shy about saying what you like or dislike in the homes the realtor shows you so they can get a feel for what you want. Also, if you say you want something specific, then change your mind, let them know so they can pick properties that fit your needs.

If you don’t want to go blind into the home buying process and risk looking at homes that turn out to be outside of your budget, you’ll want to get preapproved. Here are some tips for that process.

13. Choose your bank carefully. If you’ve been with your bank for a long time, then you should choose to go with yours. Some people may advise you go with a smaller bank, a bank local to where you plan to move, a credit union, or another option. But the truth is, even if you are with a big name bank, the fact that you have history there will make it easier for them to get you the best options for your loan.

14. Prepare to spend a lot of time working with your bank. Some banks will have multiple people handling your loan approval process. This means that you might be on calls where you are repeating the same information for one person that you gave to another, or doing a lot of back and forth emails between multiple people to get on the same page. Chances are, they’ll even ask for you to send the same paperwork from one person to the next. So plan to spend a good bit of time (and patience) getting the information you need to your bank.

15. Keep up and follow up often. Don’t ever assume that things are in progress, especially if it’s getting close to the closing date. Make sure you get documents to your bank as soon as they are requested, and continuously follow up on the loan status.

Your agent will likely suggest the best strategy for negotiating an offer on your dream house. Here’s are some tips about what you can expect during the cost negotiations.

16. Put in a bid and plan for a counteroffer. Chances are, the first offer you put in will not be the one that is accepted, so expect the owners to counter offer. If your agent tells you that there are more potential buyers competing against you, you will need to decide whether you want to save a little or beat the other offers more.

17. Figure out costs for problems found during home inspections. After a home inspector evaluates your future home, you may be presented with a list of things that they suggest the soon to be previous homeowner fix. This may be part of the negotiation as well – the homeowner may only agree to fix some things. You’ll want to figure out the costs and time involved in fixing those items and try to get the homeowner to take care of the most difficult, costly, and time consuming items.

18. Work towards lowing your closing costs. While you cannot get things like taxes or home insurance costs lowered, there are lots of other fees throughout the buying process that can be negotiated, lowered, waved, or credited towards your closing costs. Be sure to review all of yours. If you are promised a credit, but it doesn’t appear on your loan, follow up with the agent.

Moving into your newly purchased home is going to be nothing like moving into an apartment or a rental property. There is no landlord to help you with utilities or any problems that may arise. Therefore, you’ll want to do the following.

19. Get utilities set up as soon as you know your closing date. As required by your bank or your HOA (or both), you will need to have services turned on in your name on your closing date. The sooner you get these things taken care of, the less they will be a nuisance when you are preparing to physically move.

20. Bring your essentials first and have everything else delivered a few days to a week later. This way, you can do a thorough walkthrough of your house to see what needs to be fixed, cleaned, and taken care of without immediately covering everything in boxes and furniture.

21. Plan ahead so you know who to call for cleaning, pest control, and lawn maintenance. Unlike apartments and rental properties, the previous homeowner will have no responsibility to prepare the house for your arrival. So plan to have someone come in to do carpet cleaning, bug spray, and lawn cleanup when you move in unless you want to do them yourself.

22. Prepare numbers for handymen and contractors. Because you will not have a landlord to coordinate repairs and maintenance, you will need to find handymen and contractors who are licensed and bonded to fix specific problems. It never hurts to do a little research ahead of time so you are not struggling to find someone when something goes wrong. Numbers for electricians, plumbers, locksmiths, and general contractors are always handy to have on hand. Locksmiths especially since you will want to change out your locks so the previous owners will not have access to your new home.

23. Keep a close eye out. The home inspector will not catch every problem with your house. So just because they only list a few things does not mean those will be the only things that need to be taken care of.

There’s a lot that goes into the home buying process, and it can be intimidating for first time homebuyers. But if you know some things going in, you’ll be able to anticipate potential problems, reduce some unneeded stress, and enjoy getting into your first home!