If you’re getting ready to buy your first home, there are probably thousands of questions running through your mind — questions about location, real estate services, expenses, and more. It’s a huge financial commitment, and you want to make sure you have the best chance at getting exactly what you want. While it can be a difficult process to navigate, there is help for first-time homebuyers, including resources, advice, and programs to help you finance a home.
So if you’re worried you won’t ever be able to purchase a home, take a deep breath and have a good look at your finances. Start by reviewing your current financial situation and beginning to save for a down payment. (There are investment accounts and savings options that can help you reach your goal of buying a home, too.) Here are 12 helpful tips for first-time homebuyers.
- 1. Know Your Credit Score
- 2. Calculate What You Can Afford
- 3. Look Into First-Time Homebuyer Programs
- 4. Understand the Expenses
- 5. Remember That Location Matters
- 6. Plan for the Future
- 7. Use Your Imagination
- 8. Reserve Cash for Home Improvements
- 9. Get a Real Estate Agent
- 10. Know What to Expect From a Home Inspection
- 11. Negotiate the Offer
- 12. Find the Right Mortgage
Key Points
• Check your credit score for accuracy and calculate what you can afford, keeping your total housing expenses to 28% of your gross monthly income.
• Explore first-time homebuyer programs, which are authoritative resources for securing assistance with down payments, closing costs, or reduced interest rates.
• Look beyond the initial down payment and closing costs to account for recurring expenses, such as property tax, insurance, maintenance, and a reserve for unexpected repairs.
• Hire an expert local real estate agent who will simplify your home search, uncover off-market listings, and manage complex contract negotiations.
• Schedule a home inspection and compare multiple lenders to secure the best possible mortgage rate terms for your future home.
1. Know Your Credit Score
Your credit score is very influential in determining what kind of interest rate you can get on a home mortgage loan. You can get one free credit report from each of the three major credit bureaus (Equifax®, Experian®, and TransUnion®) every 12 months, and you may also be able to view free reports more frequently online. Review your credit report to spotlight any errors that may affect what lenders are willing to offer you.
If you find any errors, you can report them and have them removed. This process can sometimes take a while, even if the mistakes are obvious, so consider starting a credit report review early on in your home-buying process.
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2. Calculate What You Can Afford
Do you know how to figure out how much house you can afford? While the size of your mortgage is generally determined by an evaluation of your personal finances and debt, there are a few rules of thumb that may be relevant.
One general guideline is that your housing costs, including your mortgage payment, should ideally be no more than 28% of your gross monthly income.
If you’re paying off student loans, credit card debt, or an auto loan, you may want to adjust your budget accordingly. Some people try to keep their debt to 36% of their gross monthly income so they can still prioritize financial goals, such as saving for retirement. (This is just another rule of thumb, and everyone’s financial goals are different.)
Having less debt may make you more appealing to mortgage lenders. Understanding how much money you feel comfortable spending on a house can, in turn, impact the properties you consider. As you build your budget, you can also check out SoFi’s mortgage calculator.
The good news is that knowing what you can afford and sticking to your budget will help streamline the aspect of home buying that shoppers say is the most confusing: finding the right property. According to a 2024 National Association of Realtors® survey, 55% felt that choosing a property was the biggest challenge of the home-buying process.
Recommended: First-Time Home Buyer Guide
3. Look Into First-Time Homebuyer Programs
While you’re evaluating your options and creating your budget, consider looking into some first-time homebuyer programs. Some programs offer down payment and closing cost assistance or loans with reduced interest rates.
There are a variety of options available for first-time homebuyers looking for assistance. For example, the Federal Housing Administration (FHA) offers insured mortgages that often come with competitive interest rates and allow for smaller down payments.
The U.S. Department of Agriculture (USDA) also helps first-time homebuyers with a program focused in rural areas, while the Veterans Affairs (VA) loan program provides assistance to active-duty military members, veterans, and surviving spouses. There are even more first-time homebuyer programs and loans available from various states as well.
4. Understand the Expenses
Plenty of other expenses come with purchasing a home beyond your down payment and closing costs. For example, when you’re renting property, you don’t have to worry about property tax or general maintenance. When you own property, you do.
In addition to property tax, you’ll likely also need insurance to protect your new home. And you’ll be responsible for maintaining the property, of course, which can include painting, replacing windows, updating the roof, replacing appliances, and more regular maintenance and upkeep.
You may also need to factor in additional purchases, such as a lawn mower or professional landscaping if the property you are looking at has a yard. Will you need to buy a snowblower to clear the driveway during long winters? These are all factors that can come into consideration when figuring out the cost of your new home.
đź’ˇQuick Tip: Jumbo mortgage loans are the answer for borrowers who need to borrow more than the conforming loan limit values set by the Federal Housing Finance Agency ($832,750 in most places, and up to $1,249,125 in high-cost areas). If you have your eye on a pricier property, a jumbo loan could be a good solution.
5. Remember That Location Matters
Location is, obviously, important to many buyers. In some cases, you may have to decide if being in the neighborhood you want is more important than having extra square footage or other similar trade-offs.
If you have kids or are planning to, you’ll likely be considering the school district each potential property falls in. Even if you aren’t planning to have kids, it could be worth considering the school district since it can have an impact on the value of your property and could make it easier to sell the house down the line.
6. Plan for the Future
Zoning laws and development plans are another factor to consider when house-hunting. If there’s undeveloped land nearby, it can’t hurt to do some digging and see if there are any plans for development.
It may also be worth looking into the property value of other homes in the area. Have they been declining in recent years? If so, this could impact the future value of a home you’re considering.
7. Use Your Imagination
When shopping around for houses, take the opportunity to look at a property’s potential as well as its current value. It’s easy to be distracted by the current owner’s decor, paint, carpet, or other factors that are easy to change. You can easily repaint or update the appliances, but you won’t be able to adjust the location, floorplan, or add rooms to the home as easily.
đź’ˇQuick Tip: Backed by the Federal Housing Administration (FHA), FHA loans provide those with a fair credit score the opportunity to buy a home. They’re a great option for first-time homebuyers.
8. Reserve Cash for Home Improvements
When you’re getting ready to put a down payment on a house, it may be tempting to clean out your savings account. And while that’s completely understandable, keeping your emergency fund close at hand may be a good idea when becoming a homeowner.
After closing costs have been sorted out and you’ve moved into your new home, you may find that unexpected repairs pop up. Having a reserve stash of cash can be helpful if the roof in your new home starts leaking or you need to replace an appliance.
9. Get a Real Estate Agent
With all of the housing apps and free resources available on the internet, it may seem like a real estate agent is unnecessary. But in reality, navigating the housing market can be tricky, and hiring an agent up front can save you time and help make your home-buying experience easier.
While you could spend your time going to open houses and scouring real estate listings, an agent can tailor the home search so that you spend less time looking at houses that don’t meet your criteria. They also can have access to new listings that aren’t yet on the market and may be willing to preview homes for you.
A real estate agent can also help you navigate the intricacies of contract negotiations and paperwork. If you’re wondering how the real estate agent gets paid, don’t worry. They’re typically paid from the seller’s proceeds.
10. Know What to Expect From a Home Inspection
Having a home inspection completed is a critical step in buying a home, yet about a third of prospective homebuyers admit to being confused by this part of the process, according to SoFi’s survey. Inspection procedures vary from state to state, so it can be important to understand what is included in the home inspection in your state, since this is a great chance to truly examine the property and uncover any issues before they become your responsibility.
Inspectors should have access to every part of the house, including the roof and crawl spaces, and you should be able to attend the inspection yourself.
Don’t be afraid to ask the inspector questions. The more information you have, the better prepared you can be to decide if this is the right house for you.
11. Negotiate the Offer
You’ll have an opportunity to negotiate when you’re making an offer on a house. A lot of factors can influence an offer, and negotiating terms in your favor could result in serious savings, especially if you’re in a buyer’s market.
If you’re working with a real estate agent, they can help give you a good idea of what is considered a reasonable purchase bid by providing comparable sales. A comparable is a home similar to the one you are considering (and in the same condition and location) that has sold in the last three months. An agent can help give you an estimated price range and manage your expectations.
12. Find the Right Mortgage
SoFi’s survey found that understanding mortgage options is one of the most befuddling parts of the home-buying process, with 38% of would-be owners admitting they were confused. Before committing to a mortgage, it’s smart to shop around and see what various lenders are willing to offer you.
A few things to consider include the interest rates, loan terms, application process (Is it lengthy? Online only?), and any hidden fees included in applying for or repaying the mortgage. Familiarize yourself with the different types of mortgage loans available during this shopping process.
Looking for an affordable option for a home mortgage loan? SoFi can help: We offer low down payments (as little as 3% - 5%*) with our competitive and flexible home mortgage loans. Plus, applying is extra convenient: It's online, with access to one-on-one help.
FAQ
How do I determine how much I can afford for a house?
A general rule of thumb suggests that your total housing costs, including your mortgage payment, should ideally be no more than 28% of your gross monthly income. Some people also aim to keep their total debt, including housing, to 36% of their gross monthly income.
What are some first-time homebuyer programs I should look into?
Options include the FHA insured mortgage, the USDA program for homes in rural areas, and the VA loan program for eligible active-duty military members, veterans, and surviving spouses. These programs can offer assistance with down payments, closing costs, or reduced interest rates.
What expenses should I budget for beyond the down payment and mortgage?
In addition to your down payment and mortgage, factor in ongoing costs such as property tax, homeowner’s insurance, and general maintenance and upkeep. Also consider reserving funds for unexpected home improvements.
How does my credit score affect buying a house?
Your credit score is a large part of determining the kind of interest rate you can get on a home mortgage loan. Start the process early by getting a free copy of your credit report from the three major bureaus to review for any errors.
Do I need to hire a real estate agent?
While there are many online resources, hiring a real estate agent is highly recommended. They can save you time by tailoring your home search, may have access to new listings before they hit the market, and are essential for navigating contract negotiations and complex paperwork.
Photo credit: iStock/PeopleImages
*SoFi requires Private Mortgage Insurance (PMI) for conforming home loans with a loan-to-value (LTV) ratio greater than 80%. As little as 3% down payments are for qualifying first-time homebuyers only. 5% minimum applies to other borrowers. Other loan types may require different fees or insurance (e.g., VA funding fee, FHA Mortgage Insurance Premiums, etc.). Loan requirements may vary depending on your down payment amount, and minimum down payment varies by loan type.
ÂąFHA loans are subject to unique terms and conditions established by FHA and SoFi. Ask your SoFi loan officer for details about eligibility, documentation, and other requirements. FHA loans require an Upfront Mortgage Insurance Premium (UFMIP), which may be financed or paid at closing, in addition to monthly Mortgage Insurance Premiums (MIP). Maximum loan amounts vary by county. The minimum FHA mortgage down payment is 3.5% for those who qualify financially for a primary purchase. SoFi is not affiliated with any government agency.
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Qualifying for the reward requires using a real estate agent that participates in HomeStory’s broker to broker agreement to complete the real estate buy and/or sell transaction. You retain the right to negotiate buyer and or seller representation agreements. Upon successful close of the transaction, the Real Estate Agent pays a fee to HomeStory Real Estate Services. All Agents have been independently vetted by HomeStory to meet performance expectations required to participate in the program. If you are currently working with a REALTOR®, please disregard this notice. It is not our intention to solicit the offerings of other REALTORS®. A reward is not available where prohibited by state law, including Alaska, Iowa, Louisiana and Missouri. A reduced agent commission may be available for sellers in lieu of the reward in Mississippi, New Jersey, Oklahoma, and Oregon and should be discussed with the agent upon enrollment. No reward will be available for buyers in Mississippi, Oklahoma, and Oregon. A commission credit may be available for buyers in lieu of the reward in New Jersey and must be discussed with the agent upon enrollment and included in a Buyer Agency Agreement with Rebate Provision. Rewards in Kansas and Tennessee are required to be delivered by gift card.
HomeStory will issue the reward using the payment option you select and will be sent to the client enrolled in the program within 45 days of HomeStory Real Estate Services receipt of settlement statements and any other documentation reasonably required to calculate the applicable reward amount. Real estate agent fees and commissions still apply. Short sale transactions do not qualify for the reward. Depending on state regulations highlighted above, reward amount is based on sale price of the home purchased and/or sold and cannot exceed $9,500 per buy or sell transaction. Employer-sponsored relocations may preclude participation in the reward program offering. SoFi is not responsible for the reward.
SoFi Bank, N.A. (NMLS #696891) does not perform any activity that is or could be construed as unlicensed real estate activity, and SoFi is not licensed as a real estate broker. Agents of SoFi are not authorized to perform real estate activity.
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