First-Time Homebuyer Tips

Homebuying can be an intimidating process, even for seasoned house flippers, let alone first-time homebuyers. If you’re beginning to dip your toes into the housing market for the first time, you may feel overwhelmed by the industry jargon, all of the different costs, and more.

While buying a home isn’t a stress-free experience, don’t let it curb your excitement. In this article, we’ll lay out first-time homebuyer tips to help you stay on track to homebuying success!

Avoid personal loans and new credit accounts

There are some things in life (and homebuying) that you can’t control, but your credit score is not one of them. Lenders are required to pull your credit when you apply for your mortgage and will monitor it for changes up until your loan closes. Even after you’re pre-approved, a careless credit decision can have a big impact on your overall creditworthiness.

If you want to avoid loan denial from a lender, it’s important to steer clear of anything that will negatively impact your score. Taking out personal loans or opening new credit accounts may be tempting, especially as the homebuying costs add up, but these actions can lead to a ding on your credit and your loan being denied.

Utilize real estate apps to help your search

House hunting is no simple endeavor, but thanks to the internet, you have access to huge sources of information to aide in your search. While every buyer has their own strategy for finding their dream home, real estate apps are a great tool to have at your fingertips. There is no single best app to use, and you have plenty of options to choose from like Zillow, Redfin, and Realtor.com. Most of these platforms are free to use and have giant databases that will provide market insights, discover potential properties, and help you scope out the homebuying competition.

Many lenders also offer free mortgage calculators that can help you better understand what you’re able to afford. They are a great tool to use as you build your homebuying budget.

Research school districts and neighborhoods in your preferred locations

Whether you’re moving with the family in tow or you’re upgrading to a home to start a family, school districts may already be a big consideration in your search. However, even if you don’t plan on having children, school districts should still be on your radar as they play a role in determining the value of a home. This is because the rank of a school district will have a direct impact on the price of homes in that area. The higher the rank, the higher the prices will be for surrounding homes.

Distance from a school will also affect the price of a home. Properties that reside in close proximity to a school typically have higher value and cost more. You’ll also want to gather information regarding the neighborhoods in the area you’re searching. Crime rates and safety measures also have an impact on the value of a home. It’s also important to research how strong resales are for surrounding properties. If there is high demand in a particular area for homes, sellers will often set a higher asking price.

Be attentive during walkthroughs and open houses

No matter how great a house looks online, it’s imperative to take the time to go see it in person. Be sure to thoroughly research properties and have the information on hand during walkthroughs and open houses so you’re able to ask questions while you’re there. It’s better to be hypercritical as a buyer, so take note of the surrounding area, noticeable odors, and sounds as you tour potential homes. This way, you can compare properties you’ve visited to one another and your list of non-negotiable attributes.

Check and ask about project permits

Once you find a home you’re seriously interested in, the next step is checking permits. Open permits don’t disappear once a home is sold, meaning you could be on the hook for penalties incurred by the previous owner. Whether unpermitted work was done on the home, or the previous owner left permits open without final approval, these issues can halt your own renovation projects and end up costing you much more money than intended. Other risks of not checking permits include:

• Hard time reselling the home later
• Paying to remove the work that’s been done
• Requirements to finish the work yourself (at your expense)
• Title companies may not insure the home (Please note that title companies don’t typically pull permits; however, if they find out open permits exist, they may opt to not take on the financial risk)

If you’re wondering how to check permits on a house, many cities and counties have online portals you can use to pull a home’s permits to determine if they are open or closed. You can also call via phone or visit the local town hall in person.

Look into first-time homebuying assistance programs

Buying a home is a huge financial decision and can feel out of reach for first-time homebuyers who are unable to put 20% down or cover all the costs. The great news is that many mortgage lenders provide loan products that cater to first-time buyers with low down payment options, homebuying assistance programs, and educational materials. You may be eligible to apply for either a VA loan or an FHA loan. Entities like the Veterans Affairs (VA) and the Federal Housing Administration (FHA) work hard to provide borrowers with low to zero down payment options.

Be sure to research based on your location, too — federal, state, county, and private lender assistance programs exist to help buyers get the funding they need for a down payment. They can come in the form of grants, loans, and more.

Start building an emergency fund

No matter how stable your financial situation is, it is always subject to unexpected changes and unwanted surprises. Whether a change occurs as a result of medical bills, unpredicted expenses, or changing income, having an emergency fund prepared can save you a lot of stress. Determine your current financial situation and base building an emergency savings account on how much you need in order to cover 3 to 6 months of living expenses.

Shop around to find the right home insurance

You may think shopping for homeowners insurance before buying a home is a bit like putting the cart before the horse. However, starting the process early can actually help save you money. Many buyers may treat it as an afterthought, but finding the right homeowners insurance is just as important as finding the right home.

First, you’ll want to determine how much coverage you need so you don’t run the risk of being underinsured. Evaluate any add-ons and endorsements you want included. These add-ons will cover the gaps in a standard home insurance package that doesn’t provide coverage for specific types of damage.

Once you know how much insurance coverage you need, you’ll be better prepared to compare quotes from multiple companies and find the best deal.

Keep your credit cards open prior to applying

We discussed how opening new credit accounts can have a negative impact on your credit score, but another big credit mistake you want to avoid is closing credit cards during the mortgage loan process. Closing open lines of credit does have a negative impact on your credit. Though it may only drop a few points, under the microscope of your lender, those few points can have a big impact on their decision to approve your loan.

If you have older or unused credit accounts, it’s best to wait until after your loan has closed to terminate them.

Happy house hunting

It’s important to lead your heart with your head throughout the homebuying process. Now that you know what steps to take and where to start your research, it’s time to get out there and find your new home! Good luck and happy house hunting.

Are you a first-time homebuyer?

Download our free eBook — From Curious to Closing — with everything you need to know to buy your first home.