Here’s what every first-time home buyer needs to know to dive into house hunting with confidence—and with as few curveballs as possible.
1. How much home you can afford as a first-time home buyer?
Homes cost a bundle, so odds are you’ll need a home loan, aka mortgage, to foot the bill, along with a hefty down payment. Still, the question remains: What price home can you really afford? That depends on your income and other variables.
In general, experts recommend that your house payments (mortgage, maintenance, taxes) should not exceed 28% of your gross monthly income. So, for example, if your monthly (before-tax) income is $5,000, multiply that by 0.28 and you’ll see that you shouldn’t pay more than $1,568 a month on your home.
2. Pick the right real estate agent
You buy most things yourself—at most, sifting through a few online reviews before hitting the Buy button. But a home? It’s not quite so easy. Buying a home requires transfer of a deed, title search, and plenty of other paperwork. Plus there’s the home itself—it may look great to you, but what if there’s a termite problem inside those walls or a nuclear waste plant being built down the block?
And did I mention there’s a whole lot of money involved?
All of which is to say, you will want to have a trusted real estate agent by your side to explain the ins and outs of the process and help you make the best decisions at every step. Make sure to find an agent familiar with the area where you’re planning on purchasing; the agent will have a better idea of proper expectations and realistic prices, I always say. “Finding a Licensed Real Estate Agent is not hard, but finding one that is best-suited for you and your purchase is a challenge.
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In the home buying process, you don’t go alone because You should know information such as the price of comparables sold in the area, the market value of the property and more; It’s a good idea to hire a Buyer’s Agent. once you commit to an agent, you will sign a contract barring you from working with other buyer’s agents—this ensures the agent’s hard work for you pays off.
Most of the times buyers don’t pay the buyer’s agent commission the sellers do
3. Know there is no such thing as a perfect home
It’s your first home I understand if you’ve dreamed about the ideal house and don’t want to settle for anything less. I’ve been there! But understand that real estate is about compromise. As a general rule, most buyers prioritize three main things: price, size, and location. But realistically, you can expect to achieve only two of those three things. So you may get a great deal on a huge house, but it might not be in the best neighborhood. Or you may find a nice-sized house in a great neighborhood, but the price is a bit higher than you were hoping for. Or else you find a home in the right neighborhood at the right price, but it’s a tiny bit, um, cozy.
Such trade-offs are par for the course. Finding a home is a lot like dating: “perfect” can be the enemy of “good.” Or even “great.” So find something you can live with, grow into, and renovate to your taste.
4. Do your homework
Once you find a home you love and make an offer that’s accepted, you may be eager to move in. But don’t be hasty. Don’t purchase a home without doing your due diligence and add some contingencies to your contract—which basically means you have the right to back out of the deal if something goes horribly wrong.
The most common contract contingency is the home inspection, which allows you to request a resolution for issues (e.g., a weak foundation or leaky roof) found by a professional.
Another important first-time home buyer addition: a financing contingency, which gives you the right to back out if the bank doesn’t approve your loan. A pre-approval makes this possibility much less likely, but a pre-approval is not a guarantee.
You also might want to consider an appraisal contingency, which lets you bail if your lender values the home at less than what you offered. This will mean you will have to come up with money from your own pocket to make up the difference—a tough gamble if cash is already tight.
5. Know your tax credits
The first-time home buyer tax credit may be no more, but there are a number of tax breaks new homeowners may not be aware of. The biggie: Mortgage interest deduction is a boon for brand-new mortgages, which are typically interest-heavy. If you purchased discount points for your mortgage, essentially pre-paying your interest, these are also deductible. Some states and municipalities may offer mortgage credit certification, which allows first-time home buyers to claim a tax credit for some of your mortgage interest paid. Check with your Real estate Agent and local government to see if this credit applies to you.
