First Time Homebuyer Quick Start Guide
BY: TIM LUCAS | 2022
Read Time: 5 min
Congratulations on your decision to become a homeowner.
It’s quite possibly one of the most important decisions of your life. Owning a home leads to stability, long-term wealth, and a sense of pride.
But you know all that. That’s why you’re here!
So let’s cover some basics for you as a first time homebuyer (without being overwhelming). We’ll link to other resources as we go in case you want to learn more.
BRING ME TO
- Your future home payment could be more than your current rent. If you haven’t already, create a budget that doesn’t use your entire income
- Estimate how much you can afford with a home affordability calculator
Home Affordability Calculator
- Imperfect credit? Here’s how to improve your credit score
- Unsure of your credit score? Check your FICO® Score for free here.
Applying for the mortgage
- Calculators are a great start, but the next step is to get a pre-approval from a lender. This tells you how much home you can qualify for
- Real estate agents require a pre-approval from a lender to show you homes.
- It’s important to talk to a mortgage loan officer early in the process
- You don’t need anything on-hand to apply. Most people can apply in 20-30 minutes over the phone or online.
A note about speaking to a lender: As a first time homebuyer, you might be hesitant to speak with a lender. You’re afraid you’ll be talked into getting a loan or buying a house. However, you can often learn more in 5 minutes with a professional than from months of research on your own. It’s illegal for lenders to put you into a loan you don’t qualify to repay or discriminate based on certain buyer characteristics. Speak with a lender and get your personalized answers now.
First time homebuyer programs
- You don’t need to have a loan program picked out when you start home shopping
- Your lender will examine your situation and tell you about the options you qualify for
- But just so you’re familiar, here are some popular first-time homebuyer programs
Home loan types
- Conventional loan: 3-20%+ down programs available
- FHA loan: 3.5% down payment, especially suited for those with lower income or credit scores
- USDA loan: 0% down payment geared for single-family homes in rural and suburban areas
- VA loan: 0% down loan for those with eligible current and former U.S. military service
- Down payment and closing cost assistance is available from nearly every city, county, and state in the U.S. See our 50-state guide.
- Freddie Mac BorrowSmartSM down payment assistance
- Good Neighbor Next Door program: 50% off the home price and $100 down
Common first time buyer challenges
- You might be the first in your family to buy a home
- Little or no down payment: Learn about your low down payment options.
- You might not know where to start your homebuying efforts
- Credit challenges? You’re not alone.
Finding the home
- Now the fun part. Once you’re pre-approved, start looking at homes
- Hire an experienced real estate agent to help you find and view homes
- The more homes you tour, the better you’ll know what you want
- Create a list of must-haves and things you can compromise on
- More on finding the right home
Making an Offer
- It’s okay to make many offers on homes before a seller accepts your offer
- Eventually, your offer will be accepted by a seller
- Agree to a certain amount of earnest money (upfront funds to show you’re serious about buying the hone). Your real estate agent can advise you on the appropriate amount.
- Within a few days, pay the earnest money to the escrow company (this will be applied to your down payment and closing costs)
Get an inspection
- Don’t waive the inspection requirement even if the seller requests it
- There could be tens of thousands of dollars in repairs needed
- It’s better to walk away from a house than to buy one with serious issues
- That being said, be open to a renovation loan, which helps you buy and repair a home with one loan
Closing the home purchase
- Closing should take around 30 days
- Work with your lender and agent to supply any needed documentation
- The lender will order the appraisal, which helps verify the home is worth the price you’re paying
- Wire the down payment and closing cost funds a few days before closing. Be careful. Call your escrow company to confirm wiring details. Wire fraud is increasing
- You’ll sign a large stack of papers a few days before the official close of the transaction. This is normal
- Be available to supply any last-minute items through the closing date
- Your lender will finalize the loan. The county will record the purchase and note you as the new owner
Get the keys
- You’re a homeowner. Get your keys and move in!
The homebuying process isn’t something to be afraid of. It takes some perseverance, sure, but it can be completed by taking it step by step.
Whether you’re in the middle of the buying a home or just starting out, we hope we demystified the process for you.
It’s all comes down to the day you walk into your own home. It’s a major step in life and one you can be proud of. Congratulations on starting this worthwhile effort.