7 Tips for Choosing Your First Home to Purchase

Buying your first home is one of the most exciting things you’ll do in life. It is also one of the most terrifying. It’s a huge investment for the average person. And, it’s a long-term financial commitment with the average home mortgage lasting 30 years or more. These seven tips will help you choose your first home to buy in a way that works best for your current financial situation and your long-term financial goals.

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Figure Out How Much You Can Afford Before You Begin Shopping

You know, better than anyone else, how much money is left at the end of each month, how much you’ve saved for a down payment and closing costs, and what kind of credit score you have at the moment. If you don’t, it’s time to sit down and crunch a few hard numbers to determine how much home you can comfortably afford. Don’t forget to include a few additional estimates in your number crunching to account for expenses you do not have as a renter. This includes things like the following.

  • Annual property taxes.
  • Increased utilities for larger spaces.
  • Home insurance.
  • Home warranty costs and savings for breakdowns and home improvement projects.
  • Furniture costs.

You get the picture. When you buy a new home, you’re going to need new things to fill your home. You need to work those within your budget as well. Otherwise, you could find your finances stretched uncomfortably thin for the next 10, 15, or 30 years.


Work on Strengthening Your Credit Score

Your credit score is one of the most important factors in determining how much you will ultimately pay for your home. If your score is too low, you may not be able to get a mortgage at all. If it is less than favorable for mortgage companies, you may qualify for a loan, but end up paying far more for your home than you’d like due to higher interest rates.

Take the time, now, to do everything in your power to improve your credit score. That includes doing these things and so much more.

  • Reduce your debt-to-income ratio. Pay down credit cards and work to pay off smaller loans.
  • Make all payments on time, every time.
  • Reduce your credit utilization score. This means you want to use 25 percent or less of the credit available to you. In other words, keep your credit card balances below 25 percent of your credit limit.
  • Dispute inaccuracies in your credit report to have them removed from your record.

It may take time to get your credit score where you want it to be before applying for a mortgage. However, that gives you time to save money for your down payment, closing costs, and other incidental expenses associated with buying a home.


Get Preapproval from your Mortgage Company

Do a little homework first. There are many different types of loans you may qualify for and that may work for you. The more you understand your options, the wiser choices you can make when getting your first home loan. Common loan types available include the following:

  • Conventional mortgages. These are standard mortgages that have more stringent qualification processes but offer a wide range of benefits to buyers for qualifying borrowers and homes.
  • FHA loans. Featuring down payments as low as 3.5 percent, FHA loans are outstanding choices for first-time homebuyers.
  • USDA loans. These loans are ideal for rural areas and can be used to buy, renovate, or build a home in qualifying areas.
  • VA loans. Specifically for active duty and retired military members, VA loans offer favorable interest rates and terms to our veterans for purchasing, renovating, and building homes.

You also might consider different terms for your loans. For instance, some loans offer fixed interest rates. This means your interest rate will be the same on day one as it is when you finally pay off your mortgage – unless, of course, you refinance along the way. An adjustable-rate mortgage, on the other hand, may vary according to current interest rates at every “term” interval. Many offer five years at the current rate with adjustments each year afterward.

The number of years you’ll pay for your mortgage also matters. Most mortgages are available in 10, 15, or 30-year options. While a few lenders will extend for up to 40 years, this is not an attractive option for lenders or for people who do the long-term math.

When applying for your first home loan or mortgage, don’t forget to explore various “first-time home buyer assistant programs” that are available in your state. These programs can help in many ways including those listed below.

  • Down payment assistance.
  • Tax credits.
  • Closing cost assistance.

When you go to the effort to get pre-approved you have a better idea of how much you can spend on your home purchase and what the banks are willing to lend to help you get the home you want. More importantly, home sellers take offers from pre-qualified buyers more seriously than those from buyers who will need approval after the fact.

In today’s “seller’s market” that is a huge leg up over people competing for properties in coveted neighborhoods and communities.

A good rule of thumb is to apply for mortgage pre-approval from multiple lenders to see which one offers you the best rates and terms. If you plan to do so, make sure to do it within a relatively short amount of time so that your credit score only takes one hit rather than several.


Identify Characteristics You Need in a Home

Now that you’ve managed a large part of the financial matters associated with buying your first home, it’s time to move on to the actual choosing of your new home. You have a budget to work with if you’ve crunched your personal numbers and sought pre-approval (those numbers aren’t always the same but if you are pre-approved for more than you’re comfortable spending, err on the side of your comfort level).

Now it’s time to deal with the things that will make a home suitable for your needs. This includes things like the number of bedrooms, number of bathrooms, lot size, and may even involve whether the home has a fenced-in yard or a covered garage. It’s important to prioritize, though, according to things the home must have (like a bedroom for each person or a quiet location where you can work from home when necessary) and the things you’d like your home to have. That could be a modern kitchen or a stunning master bathroom.

Other wants may include things like customized closets, built-in storage, certain school districts, etc. You need to figure out which things are most important to you and eliminate homes that do not meet those needs from your search.


Choose a Real Estate or Buyer’s Agent

In the day of the Internet, you may not think you need a buyer’s agent or real estate agent to help you with your search for your first home. However, these professionals know things you do not know about the home buying process. They can prove immensely helpful in your quest to find the perfect home to make your own.

More importantly, they can help you cut through the red tape and unpleasant necessities of the home buying process, like appraisals, inspections, and even closing your home.

Even better, they often know about homes that haven’t yet been posted on websites. This allows you to see the homes and make offers before the masses get in on the act giving you a huge advantage in highly competitive real estate markets.

If you live in an area where homes are flying off the market like hotcakes, this can be a huge benefit. One you don’t want to ignore.


Begin Exploring Homes

While you can count on your real estate agent to help you with many of the ins and outs of buying your first home, you can drive around town and explore options on the market to see which ones offer the greatest degree of curb appeal. You can also explore the neighborhoods much better than you can with Google maps and online images. This will help you decide if you want to schedule a tour of the home’s interior.

That doesn’t mean you don’t want to use the Internet to identify potential homes to meet your needs. The internet is one of the most valuable search tools available in your search for a home. Even in a competitive market. You might be tempted to stick with MLS listings alone. However, many people are selling their homes without a Realtor. You’ll be missing out on those options if you limit yourself to local real estate websites. Expand your search, especially in competitive markets, to have the best odds of finding your ideal match.


Find a Home You Like – But Don’t Fall in Love Until You Have an Inspection

It’s easy to get into the “Goldilocks” mindset when searching for a home. Your first home may not be the perfect or “just right” fit. However, many people, when buying a first home, find that if you get a few of the essentials at the right price and with the right terms, then everything else will work out in the end.

One thing you don’t want to do, though, is to fall in love with a home that will ultimately become a money pit. Before you fall completely in love with a home, take the time and go to the expense of investing in a thorough home inspection. While even the most skilled inspectors may miss a few costly repairs a home needs, they can identify any potential problems the average observer will miss. This includes things like roof problems, potential leaks, potential mold or mildew problems, plumbing problems, previous damage that hasn’t been sufficiently repaired, or even foundation problems that may prove costly to fix.

These things may not be deal-breakers for you but can provide wiggle room in the negotiation process. Also, it can help you identify problems you’re not willing to accept in the home you hope to buy. An inspection is your best tool to help ensure you don’t get in over your head by purchasing a home that requires extensive, not to mention expensive, repairs.

There is no one-size-fits-all home buyer solution that will guarantee you find the perfect fit the first time you buy a home. That shouldn’t diminish your excitement about the process, or the thrill of owning your first home. Buy a home that works for your needs today and make it the home of your dreams over time. Choices like this can help you keep your budget in check while allowing you to quickly move into your first home!

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