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10 Things New Homebuyers Need to Know

What you'll learn: 10 things to consider before buying your first home


When you are thinking about purchasing a new home, this can be one of the most exciting times of your life. Without proper planning and research, however, it can be one of the most stressful. A new home purchase is likely to be the most money you’ve ever spent, and before you dive into the prospect of becoming a homeowner, it’s important to do some research, examine your finances, and determine your housing needs. To help you get started, here are 10 things to consider before buying your first home.

  1. Understand Your Needs. Whether you’ve been renting or living with friends or relatives, before jumping into home ownership, it’s important to think about your specific housing needs. What are the nice-to-have options, and what are the things to absolutely rule out? Here’s a short list to consider:

    • How many bedrooms do you need or want?
    • How many bathrooms or half bathrooms are you looking for? (A half bath is a room with only a toilet and sink, and no tub or shower.)
    • How important is a view?
    • Are you looking for a condo, a townhome, a duplex (often listed as a “multi-family” home), or a single-family home?
    • How important is the location of the home relative to work or family?
    • How large of a house do you need or want?
    • What is your preferred maximum travel time from the home to favorite places, given possible traffic or mass transit options?
    • Do you have pets? Livestock?
  2. Understand Your Finances. Before taking on debt, you should have a good understanding of your creditworthiness. Consider the following questions:

    • What is your FICO score?
    • How much outstanding debt do you have?
    • What is your yearly or monthly income?
    • What is your current debt to income (DTI) ratio?

    Make sure to get a copy of your credit report as soon as you start looking into buying a home and ensure that there aren’t any errors. It’s not unusual to request that something be stricken from your report due to a potential error. If you are thinking about buying a home, you should also not take on any new additional debt. Avoid even shopping for cars, or at least giving out your full name and contact details, as dealers might pull your credit when you introduce yourself. All such credit checks can show up on your credit report.

    Understand what you can afford, based on your income, regular bill payments, and debt. A mortgage calculator can get you started on this. You can also apply for preapproval to see how much financial institutions are likely to lend you. Familiarize yourself with down payment requirements (if not using a VA Loan) and closing costs.
  3. Understand Home Ownership Costs. In addition to the funds that you’ll need for a down payment, insurance, and possible points (a point equals 1% of the loan amount and can be used to pay down your interest rate), you’ll need to consider the ongoing costs of actually owning the home. Here are a few things you will want to factor in when building a home ownership budget:

    • Regular maintenance and repairs to the following, depending on the type of home you buy, and who is responsible for various types of maintenance:

      • Lawn care including equipment and servicing
      • Plumbing
      • Cleaning
      • Roofing
      • A pool, if applicable
      • Pest control
      • Gutters
      • Trees
      • Fencing
    • Homeowners Association (HOA), if applicable
    • Water and sewage
    • Electric
    • Garbage
    • Property taxes
  4. Think About Location. Many different factors involving location may be important to you. Is the home located close to work, family, and friends? What type of environment do you prefer, and how might that affect your commute or fun time?

    Do you have, or are you planning to have children, and how easy is it to get them to school or the bus stop? Are there sidewalks and streetlights, and do you require a gated community? How close is the property to parks, pools, and shopping?

    Another thing you may want to consider is the location of the home with respect to the street or other access points. Do you live in a cold climate where ice and snow can make navigating steep driveways and even leaving your home a dicey option during the winter? Even little things like carrying garbage to and from the curb on steep driveways may be something that over time you may not happy with. Try to think ahead, maybe even meeting the neighbors to learn more about the neighborhood.
  5. Understand the Different Types of Mortgage Loan Options. If you qualify for a VA Fixed Loan, ask yourself if that is the right mortgage loan option for you, or whether you need an adjustable rate mortgage (ARM). Working closely with your PenFed Loan Officer, you can define the type of loan that best matches your unique situation and needs.
  6. Understand Your School Needs (if any). If you have children or plan to while you’re in your new home, you may want to understand what the school ratings are in your area. A great realtor can provide you with the school rankings and ratings, and so can a quick internet search for your area. While a particular neighborhood may seem perfect, a quick check of the local schools’ rankings and their scores and parent comments in ratings systems such as Great Schools can help you make the right choices for you and your family.
  7. Understand Your HOA Costs (if applicable). Homeowners association fees can cover things like maintaining properties in accordance with neighborhood standards; plants and upkeep for common areas; neighborhood signs, entry gates and pools; and maintenance on condos. Understanding how HOA costs may affect you is an important part of determining your total cost over time. Remember that HOA fees are generally a monthly expense and can increase over time, although they usually do not do so dramatically.

    Example: If a condominium has an HOA fee of $300 per month, while single-family houses or townhouses in the same neighborhood have HOA fees of only $80 per month, the condo HOA fee is a more significant factor in your monthly bills than that for a single-family home. You can compare the difference of $220 per month with the difference between the condo’s and single-family house’s mortgage and out-of-pocket maintenance costs for the condo and the single-family dwelling. The outcome may just be the differentiating factor in your choosing a house over a condo or vice versa.
  8. Find the Best Realtor You Can. A great realtor can save you a lot of time in your search and can also save you a lot of money. Choose a realtor who understands your needs, the area in which you’re searching, and provides top-notch services. This can make the entire process much easier for a first-time homebuyer. If you’re using a VA loan, try to find a realtor who understands the slight variances in VA loans from other mortgage loan options.
  9. Understand Your Budget and Stick to It. It’s one thing to have a budget; it’s another thing to stick to it. It’s easy to get tempted by the house with the pool, great view, or an amazing master bath or kitchen. Understanding that life throws curveballs every now and then will help you create a realistic budget; once you’ve done so, should do your best to keep to it.

    Here are some “don’ts” for home ownership budgeting:

    • Don’t use all your savings — keep some in reserve for emergencies
    • Don’t be consider the interest tax deduction a reason you can afford more
    • Don’t be tempted by “bigger” if it’s over your budget
  10. Buy with Your Heart and Your Head. It’s easy to get caught up in the home search process. We often see something that catches our eye, which might be just out of reach financially. It is human nature to try to convince yourself that it will all work out. To avoid home-related financial pitfalls, find a home that you can fall in love with, but make sure to utilize your research, your financial preparedness, and the advice from your loan officer and realtor before you make your final decision.

To learn more about PenFed Loans or what loan is right for you:


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Apply before becoming a member.

After your application, we’ll help you:

1. Discover you’re eligible to become a PenFed member

2. Open a Savings/Share Account and deposit at least $5