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The Ultimate Guide for First-Time Homebuyers

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The Ultimate Guide for First-Time Homebuyers

Tim Weber

7 Year Award Winning Sr...

7 Year Award Winning Sr...

Oct 23 6 minutes read

Are you a first time home buyer? Homeownership comes with both economic and lifestyle benefits. In addition to certain tax advantages and the potential that your home will appreciate in value, you have the freedom to decorate, renovate and landscape to your heart’s content. You are the landlord.

With so many choices to make and so much at stake, it's essential that you prepare. Here are some tips for first-time home buyers ready to buy a home of their own.


1. Check Your Credit

Even the most meticulous bill payers can be surprised to find dings on their credit reports. Bills get sent to old addresses, and creditors sometimes make mistakes. You might find someone else’s credit mistakes commingled with your history if that person has the same name or a name similar to yours. 

Even worse, you might unwittingly be the victim of credit fraud or identity theft. Double check your credit and make sure you don’t encounter any surprises when you’re applying for loans.. You can pull your credit report from all three of the major credit bureaus including: Equifax, TransUnion and Experian.


2. Fix Any Errors and Improve Your Credit Score

Improving your credit score by even just a few points, can help you get better financing terms when shopping for a mortgage.  Interest rates, points and even city-funded first-time homebuyer assistance programs can all be influenced by your credit rating.

Here’s four ways to  improve your credit score:

  1. Contact each of the three credit bureaus and report any errors.

  2. Pay down your credit card debt.

  3. Pay off any small balances.

  4. Make sure to pay all of your bills on time.


3. Find a Lender

Most buyers spend several months working closely with a chosen lender. You want to make sure you’ve picked someone who understands your financial vision and won’t push products that aren’t in your best interest.

Don’t make the mistake of finding the perfect home before seriously sitting down with someone to work through the numbers. This can be a huge financial mistake. If you haven’t lined up a lender, and you find the home of your dreams, you might feel rushed into picking a mortgage provider.


4. Get a Pre-Approval Letter 

Before you start looking at homes with a real estate agent. You will need to get a pre-approval letter from your mortgage lender. A pre-approval means a lender has pulled your credit report, verified your income and down payment and you meet the requirements for a loan up to a certain amount. Once you have your pre-approval letter it’s time to start looking for homes.

To get pre approved, you’ll need at least the following:

  • Bank statements for the two most recent months

  • Verification for the source of your down payment

  • Tax returns from the last two years

  • A copy of your driver’s license and Social Security card


5. Set Your Home Buying Budget

Think about how much cash you have to pay the upfront costs, which will include your down payment and closing costs, as well as what you can afford to fork over each month in mortgage, tax and insurance payments. 


6. Understand What a Mortgage is

Mortgage payments are usually broken into four parts: Principal, Interest, Taxes and Insurance (PITI).

  1. Principal is the amount that you borrow.

  2. Interest is what the lender charges you to borrow the money.

  3. Taxes are property taxes paid to the state and municipality (and sometimes the county). Property taxes vary by state and county

  4. Insurance includes homeowner’s and hazard insurance and, sometimes, mortgage insurance.


There are three basic types of mortgages:

Fixed-Rate Mortgage: charges an interest rate that stays the same (fixed) for the life of the loan. This is the most popular type of mortgage. Most borrowers don’t want to risk paying higher rates in the future.

Adjustable-rate mortgage (ARM): charges an interest rate that may rise or fall. In some cases, a lender will offer you a low introductory rate and then raise the rate on specific dates. In other cases, the rate is tied to market conditions – usually the prime interest rate set by the Federal Reserve Bank. In the short term, you can save money with an ARM, but if interest rates rise, you may want to refinance to a fixed-rate mortgage.

Government-Backed Mortgages: are loans made by private lenders, but guaranteed by government agencies such as the FHA, USDA and Veterans Administration (VA). Because these agencies guarantee repayment of the loans if the borrower defaults, they are often good first-time home buyer mortgages. Thanks to the guarantee, many lenders make it easier to qualify for the loans, and the interest rates and fees are often lowe


7. Make a List of Your New-Home Must-Have

Decide ahead of time what your ideal house includes, what your deal breakers are and where you’re willing to compromise. Not every home will be perfect so list every feature you want in your ideal price range. When emotions run high during the home search, as they inevitably do, a prepared list can provide added clarity to your decision-making process.


8. Find a Real Estate Agent

When searching for a real estate agent, consider the agent’s industry expertise, of course, but also how willing he seems to jump in and help you when things get messy. First-time — and sometimes second- or third-time — homebuyers can get emotional and make mistakes, some of which can fracture a deal or cost a lot of money to correct.

Buying your first home doesn’t have to be hard. Let our team help you!

Ready to live the American Dream?

You'll want to start with a pre-approval first. Contact us today to see how easy it is to get started.

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