21 Home Buying Tips for First-Time Buyers

© 2009, Brandon Cornett. All rights reserved.

This list of home buying tips was created with first-time buyers in mind. We have organized these tips in chronological fashion, staring with the first steps in the home buying process. Follow the links provided to learn more about key topics.

1. Create a basic budget to find out how much you can afford to pay for a house. Failing to do so is a common mistake among first-time buyers. Don’t make this same mistake.
2. When you create your budget, be sure to account for all of your monthly expenses (except for your rent).
3. Subtract your monthly expenses from your net monthly income, and you’ll have a pretty good idea what you can afford to spend on a home.
4. Do not exceed the monthly budget you established in the previous steps, even if you are expecting a raise or additional income. When you exceed your budget, you increase the chance of a future home foreclosure. And nobody wants that.
5. Get copies of your credit reports from all three of the credit-reporting companies (TransUnion, Experian and Equifax). Check them for errors, and correct any errors you find by submitted a dispute through the company’s website. These errors can drag down your credit score, which can harm your chances of getting approved for a mortgage loan.
6. Start the credit review process early. It can take time to correct mistakes, so you need to start early.
7. You should also check your credit score early on in the home buying process. Your credit reports and scores are two different things. Your score is based on the information contained within your reports.
8. In the current economy (2009), you’ll need a score of at least 720 to get approved for a loan. You’ll probably need a 760 or higher if you want to secure the best interest rates on the loan.
9. If you need to improve your credit score based on the numbers listed above, start doing this early on. It’s a slow but steady process — more of a marathon than a sprint.
10. Follow the home buying tips offered in this article to improve your credit score as quickly as possible.
11. You should get pre-approved for a mortgage loan before you start the house hunting process. Sellers (and their agents) will take you more seriously if you have a pre-approval letter in hand.
12. Pre-approval is when a mortgage lender reviews your financial situation and gives you a maximum figure they’re willing to lend you. So it only makes sense to do this before you start looking at houses.
13. Find out what kind of financial documents the lender needs to pre-approve you for a loan amount. This will probably include your W-2 statements for the last two years, your pay stubs or other proof of income, bank balances over the last year, and other financial documents.
14. Consider applying online for a mortgage loan. This is a good way to save time, because you can often get quotes from several different lenders at once. I offer this home buying tip all the time, because it’s such an easy way to get the ball rolling.
15. Research the different types of mortgages so you can choose the best one for your particular situation. If you’re planning to stay in the home for many years, it’s wise to choose a fixed-rate mortgage for long-term stability.
16. If you choose an adjustable-rate mortgage (ARM), the interest rate will reset after the introductory period. It will continue to adjust periodically after that. Typically, this means the rate will keep going up. So you need to have a plan for refinancing the loan before that happens. Use caution when choosing an ARM — a lot of people get themselves into trouble with these loans.
17. If this if your first time buying a home, you should get a real estate agent to help you through the process. In most states, the seller pays the agent’s commission.
18. When you make an offer on a home, you need to base your offer on recent sales data in the area. Don’t just assume the seller has priced it fairly. In many cases, sellers price their homes well above current market values (wishful thinking on their part).
19. Make your offer contingent upon a successful home inspection. This gives you an exit strategy if the home inspector finds a serious flaw that you’re not willing to accept.
20. Start putting money aside for your closing costs — the more of it the better. Most lenders will check to see if you have sufficient funds to cover the closing. So start saving your cash early on in the home buying process.
21. Check out the home buying tips and tools listed below. We have gathered some of the most helpful resources for home buyers, and put them right at your fingertips.

Even More Tips for Home Buyers

This website is full of additional tips and tutorials related to the home buying process. It’s our entire mission, after all. Here are some extra stops to make before you leave the website:

• This list of 41 home buying steps is one of the most popular articles on our site. Check it out for yourself, and you’ll see why. It walks you through the entire process, from financial preparation to closing. It’s definitely a must-read article for first-time home buyers.
• We have created a video lesson to explain the biggest home buying mistakes among first-time buyers. It’s only a few minutes in length, but packed with useful information.
• If you want to start the mortgage pre-approval process, you can do so by visiting the mortgage quotes page of our website.
• If you have questions about anything that wasn’t covered in this article, check out the home buyer Q&A section of our site.

I hope you have found these 21 home buying tips helpful, and I wish you well in your real estate process.