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11 Expert Tips for First-Time Home Buyers for 2023 (From a 20-Year Mortgage Pro)

Our advice is based on experience in the mortgage industry and we are dedicated to helping you achieve your goal of owning a home. We may receive compensation from partner banks when you view mortgage rates listed on our website.

This article is a collection of the most important tips for first-time home buyers that I’ve gleaned throughout my career as a lender. This is real advice I’ve shared with actual first-time buyers. What you are about to read is inside information based on 20 years of lending. 

Prior to starting Homebuyer.com, I was a top-producing mortgage loan officer. I sat across the table from thousands of first-time home buyers and helped them buy their first home. With these tips, I hope to help you avoid some common mistakes that first-timers make. 

Here are my 11 tips for first-time home buyers.

1. Know Your Maximum Monthly Payment

The first step toward owning a home is deciding how much you want to spend each month.

There’s no rule for making a monthly budget for housing. Some first-time buyers use their current rent as a benchmark. Other buyers do spreadsheets with mortgage calculators. Choose which method works for you and choose a monthly payment. Use that number as a guide throughout your home search.

When you know how much you’re comfortable spending, it’s easier to make good decisions.

2. Hard-Check Your Credit for Your Pre-Approval

2.5 million first-time home buyers buy homes each year. As you look for the home of your dreams, you’ll compete with many of them. To make your bid stand out over other offers for a home, get a strong pre-approval as the first step in your search.

Your mortgage pre-approval is a purchase dress rehearsal. Pre-approvals use your income, savings, and credit score to confirm how much home you can afford to buy and what your monthly payment might look like. It highlights danger zones in your application and provides guidance for getting a low mortgage rate.

Mortgage lenders provide pre-approvals to first-time buyers at no cost similar to how architects give estimates on a project or design. They do a check-up and analysis and tell you the results in as little as 3 minutes online.

Be aggressive about your pre-approval. Let the lender look at everything — your credit score, your income, your savings, and your history of work — it’s for your benefit. Don’t let a lender tell you a pre-qualification is just as good because it isn’t.

Having a pre-approved mortgage makes you credible to sellers, real estate agents, lenders, and yourself. 

3. Improve Your Credit Score While You Still Have Time 

Your credit score affects your final mortgage terms and down payment choices, and credit scores for buyers are time-based which means, with ample time to plan, you can make credit score improvements and get a lower rate.

The typical Homebuyer.com customer uses about 5 months to find a home. In that time, credit score issues can be corrected and account balances can be reduced strategically. Erroneous collection items can be removed.

More than thirty percent of credit reports have problems that reduce a FICO score. You can’t do anything about errors when you find out late in your home search so let a mortgage lender do a hard credit pull for you and examine the output for defects and errors while there’s still time.

Learn more about fixing your credit score.

4. Decide Whether You Want to Make the Smallest Down Payment Possible

You don’t need a twenty percent down payment to buy your first home and most first-time buyers put down less. According to the National Association of REALTORS, the median down payment for buyers between 22-30 years old is 6 percent.

Many first-time home buyers can buy a home with no money down, 3% down, or any other down payment size. So, before starting your search for a home, decide how important making a down payment is to you because you also have money in savings after your purchase is complete.

Many U.S. renters qualify for special first-time home buyer mortgage programs such as Fannie Mae’s HomeReady and Freddie Mac’s Home Possible. Both mortgage loans allow for three percent down and give subsidized mortgage rates and insurance to qualified buyers.

Another government agency, the FHA, makes 3.5 percent down payment loans available to buyers. VA and USDA allow for no money down to eligible buyers. 

You have the option to put down twenty percent on your home but you don’t have to. So, before starting on your search for property, decide how much cash you want to lock up in your new home. You can always add more later. 

5. Don’t Spend Everything You Have Just to Buy a Home

Homeownership can be an excellent means for building household wealth. Home values increase approximately 7 percent per year, on average, which is why the typical U.S. homeowner has 40x more net worth than the typical renter.

To benefit from rising home values, though, you have to maintain ownership of your home and that means making on-time payments to your lender each month. 

There are some general home-buying rules to help you stay in budget long-term:

  1. Devote only a comfortable portion of your income to your housing budget
  2. Minimize your down payment to leave money in your bank account after closing
  3. Get a life insurance policy that will cover your mortgage balance, at minimum

The leading cause of foreclosure is loss of income from illness, divorce, or death. Protecting yourself from these forces will help you and your loved ones keep your home and build long-term, generational wealth. 

6. Look For Automatic Down Payment Assistance 

There are more than 30,000 down payment assistance programs available to first-time buyers. Some are automatic and some require an application.

Automatic down payment assistance is often issued as tax credits or cash grants from a federal entity. Automatic assistance includes the proposed $15,000 First-Time Home Buyer Tax Credit, which the IRS credits; and, the LIFT Act which is a joint stimulus between the FHA and the U.S. Treasury.

Manual down payment assistance programs are ones that home buyers must research and apply for on their own. These include most state and local programs, which require extra documentation and may introduce delays into your home buying timeline. Local down payment assistance won’t always be compatible with a mortgage approval, either, so investigate programs early.

The FHA maintains a list of state and local down payment assistance programs on its website. 

7. Consider a Conventional 30-year, Fixed-Rate Mortgage

Mortgage lenders famously advertise “thousands of mortgage programs” but, as an individual, you’ll only need one. The majority of first-time buyers use the same mortgage setup.

First, see a list of all home loans for first-time buyers.

According to data from the CFPB and Federal Reserve, 81% of first-time home buyers use conventional 30-year fixed-rate mortgage financing. Some will use FHA-backed mortgages and some will use VA and USDA loans. The majority, however, do not.

Before starting your search, have your mortgages preferences picked out:

  1. Do you want a fixed-rate mortgage or an adjustable-rate mortgage?
  2. Can you make a 3% down payment for a conventional loan?
  3. Are you a veteran or active military and want to put 0% down?

You don’t need a lender with thousands of mortgage programs. You need a lender with one great one.

8. Get More Than One Quote For a Mortgage 

Mortgage rates are different between lenders. A 2018 Freddie Mac study showed that home buyers who compare mortgages from two or more lenders save $2,000 on average when they buy their home. The study found that consumers save from lower mortgage rates, fewer closing costs, or a combination.

Different mortgage lenders markup mortgage rates differently. 

Sometimes, a lender does too many loans in a certain state and it raises its rates to slow new business. Or, sometimes two loan officers have different commission structures that negatively affect your rate.

Even if you’re a Homebuyer.com customer, we recommend that you get two or more rate quotes to ensure you’re getting the best mortgage terms.

9. Make Sure Your Real Estate Agent Doesn’t Also Represent the Seller

According to the National Association of REALTORS®, just two percent of home buyers opt to represent themselves in a real estate transaction. The rest use a real estate agent.

Real estate agents are trained salespersons and often licensed. They present and manage offers, negotiate contracts, and oversee transactions to purchase a home. 

Buying a home is a legal transaction so it’s common to have two real estate agents attached to each purchase. One real estate agent works for the buyer’s best interest. The other real estate agent works for the seller’s best interest.

When you’re buying a home, you may not want a real estate agent at the start but when you’re ready to make offers, seek your own representation. Much like you wouldn’t choose an attorney to represent you and your opponent in a lawsuit, your real estate agent should not represent both parties in a transaction.

10. Know It’s OK to Make Compromises 

A well-known difference between renters and homeowners is that homeowners can customize their homes. According to the National Association of REALTORS, the most popular home customizations include painting walls or replacing floors.

Another difference is that homeowners are responsible for upkeep and repairs. The typical homeowner spends 1% of their home’s value for maintenance costs annually which may include HVAC systems, plumbing and electrical issues, and exterior landscaping.

Before starting your home search, have a wish list of what matters to you:

  • Do you like having home maintenance checklists and doing the work yourself?
  • Do you want to live in a particular school district?
  • Do you want to buy a home with new roofing?

Home buyers with wish lists are less likely to experience buyer’s remorse.

11. Don’t Skip the Home Inspection, Please

A home inspection is an examination of a home’s systems and structure, conducted by a state-licensed home inspector. They provide complete information to a home buyer about the home they’re about to purchase. Inspections can cost between $300-800, depending on a subject home’s size and the complexity of its fixtures and systems, and are usually completed in 4 hours.

Home inspection rights are customarily granted in a home purchase contract. The home inspection clause allows buyers to inspect a home at their own expense, and present the seller with findings in order to renegotiate purchase terms. 

Defects found can include:

  • The hot water heater leaks carbon monoxide gas
  • Black mold is found behind a sample of drywall
  • The electrical system is not up to code

However, in competitive real estate markets, sellers may strike the standard inspection clause from their purchase contact and prohibit the buyer from conducting an inspection.

When you’re faced with this option, insist on the inspection. Waiving a home inspection puts you at risk for taking on costly home repairs, minor and major injury, and contracting illness or disease. Don’t let your love for a home block your common sense. Inspect every home, every time. 

Our Advice: Keep It Simple, Shopper

You are a first-time home buyer. In your lifetime, you may only buy two or three more homes. Nobody expects you to be an expert in mortgage and that’s okay. 

Even real estate agents get confused because mortgage rules are fluid. Loan guidelines change multiple times monthly. Mortgage markets move hourly. The forces that drive interest rates are interwoven and complex. 

So, stay informed and screen the mortgage advice you let into your process. Consider the source and their hands-on experience with mortgage lending. Good advice will save you. Mistakes will cost you.

Happy homebuying.

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