12 Essential Tips for First-Time Home Buyers
Buying a house for the first time is a thrilling experience, but it can also be overwhelming and wild. To help you navigate your home-buying journey with confidence, we’ve put together 12 essential tips for first-time home buyers.
Key Takeaways
1. Don’t buy a house until you’re financially ready.
2. Set a budget and stick to it.
3. Always hire a real estate agent when you’re buying a home.
12 First-Time Home Buyer Tips
We’ll cover tips in these four categories: Money tips, Mortgage tips, House-hunting tips, and Closing tips.
Money Tips for First-Time Home Buyers
1.
Pay off all debt and build an emergency fund.
Before you even think about buying your first home, pay off all your consumer debt using the debt snowball method. You should also save an emergency fund of 3-6 months of expenses to cover unexpected costs. This will help you maintain a healthy financial margin and avoid stress.
2.
Use the 25% rule to figure out how much house you can afford.
Determine how much house you can afford by calculating your monthly housing costs, including principal, interest, property taxes, home insurance, private mortgage insurance (PMI), and homeowners association (HOA) fees. Your monthly housing costs should be 25% or less of your monthly take-home pay.
3.
Aim for a 20% down payment.
Save for a down payment to avoid paying extra fees for private mortgage insurance (PMI). Aim for a 20% down payment, but a smaller down payment of 5-10% is also acceptable.
4.
Save 3-4% for closing costs.
Plan to pay for buyers’ closing costs, which cover things like inspection and appraisal fees, loan origination and processing fees, property taxes, title insurance, and homeowners insurance.
Mortgage Tips for First-Time Home Buyers
5.
Pick the right mortgage.
The best mortgage option for a first-time home buyer is a 15-year fixed-rate conventional loan. This type of mortgage has a lower interest rate and will help you pay off your mortgage in half the time.
6.
Pick a lender you’re comfortable with.
Choose a lender that offers great customer service, competitive interest rates, and low fees. Consider using Churchill Mortgage, which offers loans through manual underwriting for people who are debt-free and don’t have a credit score.
7.
Get pre-approved for a loan to show sellers you’re serious and can give you a leg up in a competitive market. Just remember to keep the 25% rule in mind when deciding how much to borrow.
House-hunting Tips for First-Time Home Buyers
8.
Find a trustworthy real estate agent.
Work with a good real estate agent who will help you find the right home and navigate the buying process. Consider finding a Ramsey-Trusted agent in your local area.
9.
Get clear on needs vs. wants.
Make a list of the three to five things your house must have, focusing on the true non-negotiables. Then, write down a few wants that could be the cherry on top of your first home.
10.
Do your research.
Research neighborhoods, crime rates, and the quality of schools. Think long-term and make sure to buy a home you can resell down the road.
Closing Tips for First-Time Home Buyers
11.
Get a home inspection.
Home inspectors can help you spot potential problems so you can ask the seller to either fix them or knock down the price based on the repair cost.
12.
Stick to your budget.
Remember to stick to your budget and avoid fudging the numbers. Don’t let your monthly house payment go past 25% of your take-home pay.
Time to Get Started!
Buying a home is a long and stressful process, but it’s also an exciting milestone. Enjoy the process as much as you can, and don’t be afraid to celebrate a little bit once it’s all said and done.
Next Steps
* Spend some time writing out your lists of needs and wants for your new home.
* Take our Am I Ready to Buy? quiz to make sure your ducks are in a row.
* Find a Ramsey-Trusted agent in your local area.
Frequently Asked Questions
* What credit score is needed to buy a house? You don’t necessarily need a credit score to buy a house, but most mortgage lenders require a credit score of 620 or above.
* What percentage of the purchase price do you need for a down payment? As a first-time home buyer, you should make a down payment of 5-10%. But if you can put 20% down, that’s much better – it’ll keep you from paying extra fees for private mortgage insurance (PMI).
* How can I get a low mortgage payment as a first-time buyer? Increasing your down payment will decrease your monthly payments on your mortgage. You can also lower your monthly payments by stretching out your mortgage over more years, but that’s never a good idea – it leads to paying more in interest and spending more time in debt.
About the Author
Rachel Cruze is a #1 New York Times bestselling author, financial expert, host of The Rachel Cruze Show, and co-host of Smart Money Happy Hour. Rachel writes and speaks on personal finance, budgeting, investing, and money trends. As a co-host of The Ramsey Show, America’s second-largest talk radio show, Rachel reaches millions of weekly listeners with her personal finance advice. She’s appeared on Good Morning America and Fox News and been featured in TIME, REAL SIMPLE, and Women’s Health, among others. Through her shows, books, syndicated columns, and speaking events, Rachel shares fun, practical ways to take control of your money and create a life you love.
Frequently Asked Questions
What credit score is needed to buy a house? You don’t necessarily need a credit score to buy a house, but most mortgage lenders require a credit score of 620 or above.
What percentage of the purchase price do you need for a down payment? As a first-time home buyer, you should make a down payment of 5-10%. But if you can put 20% down, that’s much better – it’ll keep you from paying extra fees for private mortgage insurance (PMI).
How can I get a low mortgage payment as a first-time buyer? Increasing your down payment will decrease your monthly payments on your mortgage. You can also lower your monthly payments by stretching out your mortgage over more years, but that’s never a good idea – it leads to paying more in interest and spending more time in debt.