10 Things First-Time Homebuyers Always Wish They Knew Earlier

Buying your first home can be overwhelming, but being informed can save you time, money, and stress. Here are 10 essential tips every first-time homebuyer should know:

1. Get Pre-Approved First: Pre-approval helps define your budget, shows sellers you’re serious, and speeds up the process.
2. Plan for Hidden Costs: Closing costs (2%-5% of the home’s price), property taxes, insurance, maintenance, and utilities add up quickly.
3. You Don’t Need 20% Down: Many loans offer options with as little as 3%-5% down, but be aware of trade-offs like PMI.
4. Always Get a Home Inspection: Inspections uncover hidden issues and can save you from costly repairs later.
5. Research the Neighborhood: School districts, commute times, safety, and amenities matter more than just the house itself.
6. Manage Your Emotions: Stay focused on your priorities and avoid impulsive decisions during bidding wars.
7. The Perfect Home Doesn’t Exist: Focus on your "must-haves" and be flexible with "nice-to-haves."
8. Factor in Ongoing Costs: Budget for maintenance, HOA fees, and rising utility bills to avoid surprises.
9. Shop for Mortgage Rates: Compare multiple lenders to secure the best rate and save thousands over the loan term.
10. Keep Your Finances Stable: Avoid new debt, major purchases, or job changes during the buying process.

Quick Comparison of Key Considerations:

By focusing on preparation, budgeting, and research, you’ll feel confident and ready to navigate the homebuying process successfully.

WHAT I WISH I KNEW BEFORE BUYING A HOUSE | First Time Home Buying Tips, Experience, & Regrets 🏡

1. Get Pre-Approved Before You Start Looking

Before diving into home listings or scheduling showings, make getting pre-approved for a mortgage your first priority. This step sets serious buyers apart from those just browsing.

What is pre-approval? It’s a written confirmation from a lender that you qualify to borrow a specific amount for a home purchase ^[6]. Unlike pre-qualification, which is based on self-reported information, pre-approval involves verified documentation. You’ll need to provide pay stubs, W‑2s, bank statements, and tax returns, and the lender will conduct a detailed credit check ^[6].

Here’s how pre-approval compares to pre-qualification:

"Preapproval is as close as you can get to confirming your creditworthiness without having a purchase contract in place." ^[5]

Pre-approval offers several advantages: it defines your budget, shows sellers you’re financially ready, identifies potential credit issues early, and speeds up the buying process ^[8]. It’s a crucial step that sets the stage for a smoother home-buying journey.

Real estate experts strongly encourage buyers to get pre-approved. Phil Crescenzo Jr., Southeast division president of Nation One Mortgage Corporation, highlights its importance:

"A pre-approved buyer is more likely to win an offer over a less prepared buyer or realtor. The more information and detail that can be confirmed in advance, the smoother the process will be once an offer is accepted and processing begins. I would recommend a full pre-approval process whenever it’s possible and time allows." ^[7]

A pre-approval letter is typically valid for 60 to 90 days ^[6], giving you a window to shop with confidence. During this time, you can make offers knowing exactly what you qualify for, and sellers are more likely to take your bids seriously since your financing is already verified.

Keep in mind, pre-approval doesn’t guarantee the final loan amount. The full underwriting process might uncover additional details that could affect your loan ^[7].

2. Plan for Hidden Costs Beyond Your Down Payment

Once you’ve secured pre-approval, it’s time to prepare for the expenses that go beyond your down payment. Many first-time buyers mistakenly assume the down payment is the largest financial hurdle. However, closing costs alone typically range from 2% to 5% of the home’s purchase price ^[9].

Robert Haley, Branch Manager and Assistant Vice President at Huntington National Bank, highlights a common misstep:

"People focus on the mortgage payment while overlooking property taxes, insurance, maintenance, utilities, and association fees." ^[19]

Breaking Down Closing Costs

Closing costs can add up fast, covering a variety of fees. Here’s what you might expect:

• Property appraisal: $400–$700
• Home inspection: $300–$600
• Pest inspection: $50–$150
• Loan origination fee: 0.5%–1% of the loan
• Title search: $75–$400
• Attorney fees: $500–$1,500
• Survey costs: $200–$1,000 ^{[11] [12] [13] [18]}

On top of that, moving expenses can range from $1,000 to $3,000 ^[11]. And don’t forget the immediate purchases you’ll need to settle into your new home – things like furniture, appliances, and basic household items.

The Ongoing Costs of Homeownership

Once you’ve closed on the house, the financial responsibilities don’t stop there. The average homeowner spends about $1,180 per month on hidden costs, totaling over $14,000 annually ^[17]. Here’s a breakdown of some recurring expenses:

• Property taxes: Around 1.1% of your home’s assessed value nationwide ^[17].
• Homeowners insurance: Typically $1,400 to $1,600 per year ^[11].
• Flood insurance: An additional $818 annually if you’re in a flood-prone area ^[10].

Jules Borbely, Strategic Real Estate Consultant for Real Estate Bees and COO of Oxford Property Group, emphasizes the risks of underestimating these costs:

"Buyers often realize the true cost of homeownership too late, and get blindsided by the unexpected bills." ^[13]

Maintenance and Utilities

Maintenance is another area where costs can pile up. Experts suggest budgeting 1% to 2% of your home’s value each year for upkeep ^[14], or roughly $1 to $2 per square foot. For example:

• Replacing a broken refrigerator: $1,000 to $3,000 ^[16].
• Roof repairs: $300 to $1,200 for minor fixes, with major repairs exceeding $10,000 ^[16].

Utilities are another monthly expense, averaging $400 per month ^[17]. If your new home is part of a community with a homeowners association, expect fees ranging from $100 to $500 monthly ^[15]. Optional costs like home warranties ($80 to $125 monthly) ^[13] and pest control services ($300 to $500 annually) ^[12] can also add up.

Planning Ahead

With homeownership costs rising more than 25% since 2020 ^[11], careful preparation is more important than ever. Here are a few tips to help you budget effectively:

• Start shopping for homeowners insurance quotes early in your home search ^[11].
• Research local property tax rates before making an offer ^[11].
• Build an emergency fund covering 1% to 3% of your home’s value for unexpected repairs ^[16].
• Negotiate with sellers to cover some closing costs ^[11], or explore closing cost assistance programs to ease your upfront expenses.

3. You Can Buy a Home with Less Than 20% Down

You don’t need a 20% down payment to buy a home. In fact, the average down payment for first-time buyers is just 8% ^[23]. This shows that many people are successfully purchasing homes without meeting the traditional 20% benchmark.

Popular Low Down Payment Options

Different loan programs offer varying down payment requirements and conditions:

Conventional loans, provided by private lenders, have flexible down payment requirements based on factors like your credit score and debt-to-income ratio ^[20]. FHA loans, backed by the Federal Housing Administration, require just 3.5% down if your credit score is 580 or higher ^[20]. VA loans, available to eligible military members and veterans, often require no down payment and don’t include Private Mortgage Insurance (PMI) ^[20]. USDA loans also offer zero-down options but are limited to rural properties and have income restrictions ^[20].

Understanding the Trade-offs

While low down payments make it easier to buy a home, they come with trade-offs. A smaller down payment means taking on a larger loan, which leads to higher monthly payments ^[23]. For conventional loans, putting down less than 20% typically means you’ll need to pay for PMI ^[20].

"While many people still believe it’s necessary to put down 20% when buying a home, that isn’t always the case. In fact, lower down payment programs are making homeownership more affordable for new home buyers. In some cases, you might even be able to purchase a home with zero down."

• Chase ^[24]

PMI costs, which are usually around 1% of the loan balance per year ^[24], can add up. However, on conventional loans, PMI can be canceled once your loan-to-value ratio reaches 78%. FHA loans, on the other hand, may require PMI for the life of the loan ^[20][23]. As you build equity – typically reaching 22% equity – your monthly payments may decrease over time.

Making the Right Choice for Your Situation

Choosing the right loan depends on your financial situation. Compare different loan programs, factoring in upfront costs and ongoing expenses like mortgage insurance fees ^[21]. A down payment calculator can help you understand how various scenarios impact your monthly payments ^[23].

It’s also smart to seek advice from a housing counselor or lender. They can help you navigate specialized programs like HomeReady®, which supports buyers with financial challenges or nontraditional income sources ^[22]. Another option is HFA Preferred™ loans offered through state Housing Finance Agencies, designed for low- to moderate-income buyers ^[22].

Low down payment options can open the door to homeownership. Once you’ve secured financing, the next step is making sure your dream home passes professional inspections.

4. Always Get a Professional Home Inspection

Once you’ve secured financing, the next step is evaluating the home’s condition to avoid unexpected expenses. A professional home inspection, which typically costs around $343, can uncover potential issues – something 86% of buyers encounter during the process ^[26][35].

Why Professional Inspections Matter

A home inspection goes beyond a casual walkthrough. Inspectors use their expertise and specialized tools to assess the structure and major systems, such as plumbing and electrical, identifying issues that might be overlooked by an untrained eye ^[25][29].

Common Issues Found During Inspections

Inspections often reveal a mix of minor fixes and significant safety concerns. For example, nearly 20% of inspection reports highlight roof problems ^[27]. Older homes frequently have outdated wiring or aluminum conductors, which can pose fire risks ^[27]. Inspectors may also find Polybutylene plastic pipes (common between 1978 and 1994) that are prone to leaks, as well as older Zinsco and Federal Pacific electrical panels, which have been linked to fire hazards ^[25].

The Cost of Skipping an Inspection

Skipping an inspection can lead to hefty repair bills. Foundation repairs alone average $5,165, with costs ranging from $2,218 to $8,111 ^[26]. Rewiring a house can set you back about $16,000, while replacing an electrical panel averages $2,400 ^[25]. HVAC system replacements can cost anywhere from $5,000 to $12,000 ^[25].

"People fall in love with a piece of property based on the color of the walls, the location of the home, or something else; they are completely blind to the issues that can make that dream home a nightmare." – Greg Haskett, Director of Operations at TrueBlue Total House Care ^[36]

When to Consider Specialized Inspections

Depending on the age and location of the home, additional inspections might be necessary. These include radon testing ($125–$400), termite inspections ($75–$325), septic system evaluations (about $540), and well inspections ($300–$600) ^[26].

Leveraging the Inspection Report

An inspection report can be a powerful negotiation tool. Use it to request repairs or negotiate a price reduction, potentially saving an average of $14,000 ^[28][34]. Even if the seller declines to make repairs, the report helps you plan for future maintenance and avoid surprises.

"No home is perfect. Every home has some safety concerns or issues that may need to be resolved – some right away, some later on. But at the end of the day, every home has issues, and every issue is fixable. It’s up to the buyer, seller and agents to decide what to do about it." – Adam Long, President of HomeTeam Inspection Service ^[25]

Choosing the Right Inspector

To find a reliable inspector, ask for recommendations and verify their licensing, certifications (like InterNACHI or ASHI), and insurance. Read reviews and request sample reports to ensure they provide clear and thorough communication ^[30][31]. About 85% of homebuyers who hire inspectors believe it was a worthwhile investment ^[32].

Be sure to attend the inspection. This hands-on experience allows you to learn about the home’s systems and ask questions directly ^[33]. A thorough inspection not only protects your financial investment but also brings you one step closer to confident homeownership.

5. Study the Neighborhood Before You Buy

When buying a home, it’s easy to get caught up in granite countertops and spacious layouts. But the truth is, the neighborhood you choose will have a much bigger impact on your daily life. That’s why smart buyers take the time to understand the community before committing.

Why School Districts Matter (Even If You Don’t Have Kids)

A good school district doesn’t just benefit families with children – it impacts property values for everyone. Research shows that a 5% increase in school test scores can boost home prices by 2.5%. Plus, every dollar spent on public schools can add $20 to a home’s value. Even if you don’t have kids, homes in top school districts tend to hold their value better and sell faster, making them a solid investment ^[39].

Transportation and Commute: More Than Just Convenience

Your commute isn’t just about getting from point A to point B – it’s about time, money, and quality of life. Look into local public transportation options, highway access, and typical travel times to work or other key destinations. While homes in areas with great transit might cost more upfront, the savings in commuting time and expenses could be worth it. Also, keep an eye on future infrastructure projects like new transit lines or road expansions – they can affect traffic patterns and even property values down the road.

Safety: Look Beyond the Numbers

Crime stats are a starting point, but they don’t tell the whole story. To get a true sense of safety, visit the neighborhood in person – especially in the evening. Pay attention to details like street lighting, noise levels, and the general vibe. Talking to local residents can also give you insights that crime data alone won’t reveal ^[37][41].

Visit at Different Times and Days

Neighborhoods can feel completely different depending on the day and time. Weekday visits might highlight commuter traffic and school drop-offs, while weekends can showcase community events or recreational activities. Make sure to observe rush-hour traffic and parking availability to get a full picture of daily life ^[40][41].

Amenities and Future Plans

Think about what you’ll need nearby – grocery stores, parks, healthcare facilities – and check out what’s already available. Also, stay informed about upcoming developments. New businesses, parks, or infrastructure projects can enhance convenience and potentially increase property values. Local news outlets and community forums are great resources for staying in the loop ^[38].

Community Vibes and Demographics

A neighborhood isn’t just a collection of houses – it’s a living, breathing community. Consider whether the area’s demographics and overall vibe align with your lifestyle. Look for signs of an engaged community, like active neighborhood groups, well-maintained public spaces, and regular events. Most importantly, trust your gut. If something feels off, keep searching until you find a place that feels like home ^[37].

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6. Keep Your Emotions in Check During the Process

Once you’ve tackled pre-approval and budgeting, there’s another crucial piece to keep in mind: managing your emotions. Buying your first home is an emotional rollercoaster. In fact, 40% of participants in a U.S. study called it the "most stressful event in modern life" ^[43]. The emotions themselves aren’t the problem – it’s letting them dictate your decisions that can lead to trouble.

How Emotions Can Disrupt the Process

Christina Koepp, a licensed mental health counselor, explains:

"Buying a home taps into all parts of our mind: our basic need for shelter, and our attachment needs for a safe place to connect with ourselves and others. To take the risk and make an offer on a home, we need to be willing to attach to a new place to live, and – simultaneously – hold it loosely enough that it won’t be devastating to lose the bid." ^[42]

This emotional intensity can lead to missteps. Research shows that 31% of first-time homebuyers reported buyer’s remorse, while 38% felt pressured into quick decisions ^[44]. Those who felt overwhelmed (34%), stressed (28%), or nervous (25%) were especially likely to regret choices made under emotional strain ^[44].

Build a Non-Negotiable Checklist

To avoid emotional pitfalls, set clear priorities from the start. Before you even begin viewing homes, work with your real estate agent to outline your "must-haves" and establish a firm maximum bid. This helps you stay focused and avoid straying from your financial goals.

Dr. Mariyam Ahmed, a psychologist based in Toronto, advises planning ahead for high-pressure moments:

"When we feel anxious or stressed, our fight or flight response is activated. Behaviorally, we could freeze or act impulsively. Planning beforehand will help you avoid making an impulsive decision during a bidding war. I suggest having a discussion with your partner or your support network to outline what you will do if you’re up against multiple bids in advance." ^[43]

Keep Expectations Realistic

The home buying process often comes with unexpected twists and turns. Mary Beth Somich, a licensed clinical mental health counselor, cautions:

"Anxiety can cloud your judgment. Thus, you may second guess a home, even if it checks all of your boxes, simply because anxiety is in the way." ^[42]

Carrie Howard, a licensed clinical social worker and anxiety coach, echoes this sentiment:

"It’s important to do your homework, plan, and be as educated about the home buying process as you can, but also remember to be flexible when things happen that are out of your control or unexpected." ^[42]

Christina Koepp adds:

"Prepare for a marathon, even if it’s just a sprint." ^[42]

This mindset can help you handle setbacks, like deals falling through or surprise inspection findings, without losing focus. Setting boundaries and staying grounded will keep you on track during heated negotiations.

Take Breaks When Needed

House hunting can be overwhelming, so it’s important to pace yourself. Step back when you feel stressed, and avoid making other major life decisions during this time. Clinical therapist Amanda Sacks offers this reminder:

"While life is filled with uncertainty, the home buying process requires acceptance of the unknown." ^[42]

Consider bringing a trusted friend along to view properties – they might spot details you overlook when emotions run high. Also, carve out time to view homes on your own, away from sales pressure, to make balanced decisions.

There Will Always Be Another House

One common mistake is falling head over heels for every property you visit. Christina Koepp explains:

"If you ‘fall in love’ with every home you see, it leaves little room for discerning which is the best fit, and you can quickly become emotionally fatigued." ^[42]

The trick is to like a home enough to make an offer but not so much that you can’t walk away if issues arise. Every house has its quirks, and becoming overly attached can lead to regret later. Keep this in mind as you navigate the process, ensuring you make decisions that align with your financial and personal goals.

7. The Perfect Home Doesn’t Exist

After tackling the financial and emotional aspects of buying a home, it’s time to adjust your expectations about what your future home will look like. Here’s the truth: the perfect home simply doesn’t exist ^[46]. Trying to check every box on your dream home list can lead to frustration and an endless search ^[48].

First-time buyers often fall into the trap of thinking their first home needs to be their forever home, complete with every feature they’ve ever wanted ^[47]. This mindset makes decision-making harder and can leave you feeling let down when no property measures up.

Every Home Has Trade-Offs

Every home comes with its pros and cons ^[46]. For instance, a charming Victorian might have beautiful original hardwood floors but outdated plumbing. On the other hand, a modern condo may offer low-maintenance living but lack ample storage. The reality is, most people don’t stay in their first home forever. As your life evolves, your housing needs and opportunities often change too ^[47].

Create a Strategic Priority List

Instead of chasing an unattainable ideal, focus on what truly matters. Start by listing all the features you’d love in a home, then narrow it down to your top five priorities ^[48]. This process helps you distinguish between what’s essential and what’s just nice to have.

Real estate investor Jeff Fruhwirth puts it simply:

"The single most common must-have in real estate in my experience is location." ^[49]

By identifying your must-haves and deal-breakers, you can avoid wasting time on homes that don’t meet your essential criteria. This approach also helps you focus on a property’s potential rather than an unrealistic image of perfection.

Focus on Potential, Not Perfection

It’s easy to overlook a home’s potential ^[50]. That outdated kitchen? It might be the perfect blank canvas for creating your dream cooking space ^[50]. Cosmetic issues like old paint or outdated fixtures are often simple to fix. On the other hand, structural problems or a poor location are much harder – and more expensive – to change. If you’re unsure about renovation ideas, a local real estate professional can provide guidance on which improvements are worth the investment in your area ^[50].

Look Beyond the Surface

While shiny upgrades like granite countertops or crown molding might catch your eye, it’s the less visible factors – like neighborhood safety, school quality, commute times, and future development plans – that often have a bigger impact on your daily life ^[4]. Think about your long-term needs, not just your immediate desires. For example, an extra bedroom could become crucial if you start working from home or hosting guests more frequently. You can always update a home’s décor or renovate over time, but fundamentals like location, lot size, and layout are much harder to change.

The goal is to find a home that fits your current needs, stays within your budget, and checks off your most important priorities. Keeping this mindset will make your house-hunting experience less stressful and much more productive. Stay focused on what truly matters as you continue your search.

8. Factor in All Ongoing Homeownership Costs

Once you’ve tackled the upfront costs of buying a home, it’s time to prepare for the ongoing expenses that come with ownership. Many first-time buyers focus primarily on their monthly mortgage payment, but that’s just one part of the financial equation. Understanding the full scope of recurring costs is key to maintaining a realistic long-term budget.

The Hidden Monthly Reality

Owning a home comes with unexpected monthly expenses. On average, homeowners face hidden costs of about $1,180 per month – adding up to over $14,000 annually ^[17]. When factoring in all recurring costs, the total can climb to $21,400 per year ^[52].

Breaking Down the Major Ongoing Costs

Property taxes are one of the biggest recurring expenses. Across the U.S., the average property tax rate is approximately 1.1% of a home’s assessed value ^[17].

Homeowners insurance is another unavoidable cost, required by lenders before approving a mortgage. The average annual cost for coverage is around $2,400 ^[17], and premiums have increased by 24% nationwide between 2021 and 2024 ^[52].

Maintenance and repairs often catch new homeowners off guard. On average, home maintenance costs exceed $8,800 annually ^[52]. Experts recommend setting aside 1%-4% of your home’s value each year for upkeep ^[17]. For example, on a $400,000 home, this means budgeting between $4,000 and $16,000 annually. Routine maintenance alone can cost an average of $6,400 per year, according to Zillow ^[17].

Don’t Overlook These Expenses

Utilities are another key part of your budget, averaging $400 per month ^[17]. Since 2019, residential utility costs (including electricity and gas) have risen by nearly 40% ^[52]. Your actual costs will depend on factors like your home’s size, energy efficiency, and local rates.

HOA fees are a reality for many homeowners. Approximately 56% of homeowners pay HOA fees, with half of them paying at least $300 monthly ^[17]. These fees typically cover shared amenities, landscaping, and community upkeep.

Appliance replacements are more common than you might expect. Nearly 50% of homeowners report replacing a major appliance after moving in ^[17]. A professional home inspection can help you identify appliances nearing the end of their lifespan so you can plan ahead.

Smart Budgeting Strategies

To stay on top of these costs, consider these tips:

• Open a dedicated savings account specifically for maintenance and repairs.
• Set calendar reminders for periodic bills like insurance and property taxes, especially if they aren’t bundled with your mortgage.
• Research local utility averages to get a clearer picture of what to expect.
• Shop around for homeowners insurance quotes early, as rates can vary widely.
• Track your monthly expenses and maintain a financial cushion for unexpected costs. Keeping receipts and records of home-related purchases can also come in handy for warranty claims or tax purposes.

"Remember, budgeting for new homeowners isn’t about restriction. It’s about giving yourself the peace of mind to enjoy your space, take care of your responsibilities, and make smart decisions that support your future." – Finally Home! Staff ^[51]

9. Compare Mortgage Rates from Multiple Lenders

Once you’ve secured pre-approval and have a handle on hidden costs, it’s time to focus on finding the best mortgage rate. This step can significantly impact your long-term savings, yet many first-time buyers tend to overlook it. Here’s a compelling fact: borrowers who shopped around and obtained five rate quotes in the latter half of 2022 could have saved over $6,000 across the life of their loan ^[55]. Even just one extra quote could save an average of $1,500, while five additional quotes brought average savings of about $3,000 ^[54].

The Real Impact of Rate Differences

Even a slight difference in mortgage rates can lead to substantial savings over time. For instance, on a $300,000 loan with a 30-year fixed term, a 6.0% interest rate results in a monthly payment of $1,799. Lowering the rate to 5.5% reduces the monthly payment to $1,703 – saving you nearly $100 each month. Drop it further to 5.0%, and your payment decreases to $1,610, saving almost $200 per month compared to the 6.0% rate ^[59].

"Even slight changes in these rates can make a big difference in your monthly mortgage payments and total loan expenses, influencing your financial stability both now and in the future." – Liberty Bank ^[59]

How to Shop Smart Without Hurting Your Credit

A common concern among buyers is the potential hit to their credit score when applying to multiple lenders. However, credit scoring systems are designed to accommodate rate shopping. For instance, FICO scores treat all mortgage inquiries made within a 45-day period as a single inquiry, while VantageScore allows a 14-day window ^{[57] [58]}. The impact of these hard inquiries is minimal, typically reducing your score by zero to five points ^[57]. Given the potential savings, this small dip is well worth it.

Start by getting prequalified with a soft credit pull from several lenders. Then, submit formal applications within the 14- to 45-day window to minimize any effect on your credit score.

What to Compare Beyond the Interest Rate

While the interest rate is a key factor, it’s not the whole picture. Pay attention to the Annual Percentage Rate (APR), which includes the interest rate as well as lender fees, offering a clearer view of the loan’s total cost ^[56]. Other costs to watch for include origination charges, processing fees, and lender credits, as these can vary widely ^[53].

Request a Loan Estimate from each lender. This standardized document makes it easier to compare costs like closing fees, monthly payments, and total expenses over five years ^[53]. Additionally, evaluate the lender’s customer service, digital tools, and ability to meet your closing timeline ^[56].

With these details in hand, you’ll be ready to fine-tune your lender selection process.

Your Shopping Strategy

To get the most accurate comparisons, gather quotes from a mix of traditional banks, credit unions, online lenders, and mortgage brokers – all on the same day, since rates can change frequently ^{[54] [55]}.

"Keep in mind that a quote is just that, and nothing is guaranteed until you are locked in. But quotes should help you gauge the market, lender to lender." – Jon Meyer, mortgage loan expert ^[55]

Having multiple loan estimates gives you an edge in negotiations. Many lenders will match or even beat competitors’ rates when presented with better offers ^{[53] [56]}. Once you’ve identified the best deal, lock in your rate to shield yourself from potential market fluctuations while finalizing your home purchase ^[56].

10. Keep Your Finances Stable Throughout the Process

After choosing a lender, it’s crucial to maintain financial stability from pre-approval all the way to closing. Many first-time buyers mistakenly believe that once they’re pre-approved, their financial situation no longer matters. However, even small changes during this time can jeopardize your ability to purchase a home.

Why Financial Stability Is Key

Lenders will check your financial situation multiple times, including just before closing. As First Security Bank & Trust explains:

"When financial situations change between the time you are pre-approved for a loan and the time you officially close on your loan, the path to buying a home could be slowed or completely derailed. That is why it is important to make sure there are no major changes to your finances during this time." ^[63]

Even seemingly minor actions, like applying for a new credit card or taking on additional debt, can increase your debt-to-income ratio or lower your credit score. These changes might trigger your lender to reevaluate your mortgage eligibility ^[63]. Keeping your finances steady ensures a smoother process and secures your position for a favorable loan.

What to Avoid During the Process

To protect your financial profile during this critical time:

• Avoid new debt or major purchases: Big-ticket items or new loans can affect your debt-to-income ratio.
• Don’t change jobs: A job switch could raise questions about income stability.
• Hold off on switching banks: This can complicate your lender’s ability to verify your financial history.

Each of these actions could prompt your lender to reassess your application and potentially delay closing ^[63].

Safeguarding Your Credit Score

Your credit score remains a key factor until the day you close. Since payment history plays a significant role in maintaining a strong score ^[61], consider automating your payments to avoid missing due dates. Regularly check your credit report for errors, keep credit card balances below 30% of your limit, and pay off balances in full each month to demonstrate responsible credit use ^[61][62].

The 25% Rule for Financial Health

While keeping your finances stable during the buying process is essential, it’s just as important to avoid overextending yourself. Ramsey Solutions offers this advice:

"Make sure your monthly house payment doesn’t exceed 25% of your take-home pay." ^[3]

Sticking to this guideline can help you maintain a healthy budget and financial stability after becoming a homeowner.

Preserve Your Emergency Fund

Lastly, resist the urge to drain your emergency fund. Ramsey Solutions emphasizes:

"Don’t buy a house until you’re out of debt and have a full emergency fund of 3–6 months of your typical expenses." ^[3]

Owning a home often comes with unexpected costs. A well-stocked emergency fund can protect you from financial strain and help you handle surprises without compromising your long-term stability ^[60].

Conclusion

Buying your first home doesn’t have to feel like an uphill battle. With the right preparation and understanding, you can navigate the process with confidence. The ten insights shared in this article aim to help you save money and ease the stress often tied to purchasing a home. At the heart of it all are three key elements: preparation, research, and financial planning. These tools are your best allies in making smart choices and steering clear of common mistakes.

The numbers speak for themselves when it comes to the power of research. For instance, getting quotes from at least five lenders could save you up to $430 in interest ^[66]. Additionally, being aware of closing costs and down payment requirements highlights why detailed budgeting is essential from the very beginning ^[64].

"Knowing what to expect and being prepared can help you avoid serious setbacks."
– Carey Chesney, Realtor® and freelance writer ^[1]

Planning for long-term expenses is equally important. Setting aside 1%–3% of your home’s value annually for maintenance and repairs ^[64] can provide financial stability down the road. And don’t underestimate the value of working with experienced professionals – real estate agents, lenders, and home inspectors can guide you through the process, protecting your interests every step of the way.

As Caterina Peters, Realtor at Compass, puts it:

"It’s important that these professionals work together and stay on the same page so you have a positive result – the successful closing on your dream home." ^[65]

Educating yourself on homeownership doesn’t just impact your loan; it lays the groundwork for a solid financial strategy. Whether you opt for a 15- or 30-year mortgage ^[45], the knowledge you gain now will influence your financial well-being for years to come.

Northfield Bank sums it up perfectly:

"Buying a home is a significant financial decision and taking the time to plan ahead and educate oneself will help make informed choices." ^[2]

FAQs

What are the pros and cons of making a smaller down payment on a home?

Making a smaller down payment can make it easier to step into homeownership sooner, especially if saving up a large amount feels out of reach. This approach can be particularly useful in pricey housing markets or if you need to keep funds available for other priorities, like repairs, furnishing your new home, or covering closing costs. Plus, it lets you maintain a financial cushion for emergencies or other goals.

That said, putting less money down often comes with trade-offs. Smaller down payments typically mean higher monthly mortgage payments since you’re borrowing more. Over the life of the loan, this could result in paying more in interest. On top of that, lenders usually require private mortgage insurance (PMI) when the down payment is smaller, which adds another expense to your monthly budget. While it can open the door to buying a home sooner, it’s essential to consider the long-term costs and how they fit into your financial plans.

What ongoing costs should I plan for as a homeowner beyond the mortgage payment?

When planning your budget as a homeowner, it’s crucial to think beyond just your mortgage payment. There are several ongoing expenses you’ll need to factor in. For instance, property taxes typically average about $2,654 per year, while homeowners insurance costs around $1,820 annually. On top of that, maintenance expenses can add up quickly, often ranging from 1% to 3% of your home’s value each year.

You’ll also need to account for monthly utility bills, which average $430, and possible HOA fees, which are generally about $191 per month. These recurring costs can add a significant amount to your yearly expenses.

To avoid being caught off guard by unexpected repairs or maintenance, it’s a smart idea to build an emergency fund. On average, these unplanned costs can exceed $8,800 annually, so having a dedicated savings account can provide peace of mind and help you handle surprises with less financial strain.

Why is it important to keep my finances steady while buying a home, and what should I avoid doing?

Keeping your finances stable during the homebuying process is crucial because lenders keep a close eye on your financial situation from the moment you apply for a mortgage until the deal is finalized. Big changes, like switching jobs or making major purchases, can disrupt your loan approval by affecting your debt-to-income ratio or complicating income verification.

Here are some key actions to avoid:

• Switching jobs or income sources: Changes in employment can make lenders question your income stability.
• Making large purchases: Spending on items like cars or furniture can increase your debt and hurt your approval chances.
• Moving large sums of money: Transferring significant amounts between accounts can raise red flags and require additional documentation.
• Co-signing loans: Taking on responsibility for someone else’s debt can increase your financial obligations in the eyes of lenders.
• Opening or closing credit accounts: Any changes to your credit can impact your score, which is closely tied to your mortgage approval.

By keeping your financial situation steady, you can help ensure a smoother, less stressful journey to becoming a homeowner.

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