Looking to Buy Your First Home? Don't Miss These 7 Tips

Getty | Steven Puetzer; Peter Dazeley; Studiocasper
Photo Illustration: Michelle Alfonso
Getty | Steven Puetzer; Peter Dazeley; Studiocasper
Photo Illustration: Michelle Alfonso

Purchasing your first home is one of the biggest milestones in your life. While being a first-time homebuyer will undoubtedly come with challenges, it should also be an exciting and rewarding time. We know this well, which is why we've gathered together first-time homebuying tips that will hopefully take a bit of stress out of the process and help you fully embrace it.

From beginner budgeting to officially making an offer, we tapped Laura Best, a real estate broker with Berkshire Hathaway, for her best tips to make the whole process run a little bit smoother.

"Your home is your biggest asset," she says, adding that there are many large and small things to consider when you're getting ready to make the move. Keep reading for tips to make the whole process smoother.

1. Get Your Finances in Check

Getting your finances in check is paramount before starting on your homebuying journey, and knowing where your credit score stands is the first step. There are plenty of reputable companies that can help you with that, including Experian, TransUnion, Credit Karma, and more. Experian, for example, will run a credit check for you for free. All you need to do is create an account and have your personal information handy.

Once you have an idea of where your credit score stands (it is generally recommended you have a score of 620 or higher for a conventional loan), you may want to start working at improving it, because "having a good credit score to buy a house makes the entire process easier and more affordable — the higher your credit score, the lower mortgage interest rate you'll qualify for," according to Rocket Mortgage's Victoria Araj. Rocket Mortgage also gives three straight-to-the-point steps for improving your credit in order to buy a home: pay off any outstanding debt, pay your bills on time, and don't apply for too much credit.

Best emphasizes the importance of paying your bills on time. "If homebuying is in the near future, make sure you have a history of making payments on time," she advises. "Don't let that doctor's office bill go to collections! Pay on time, even if it's just the minimum payment."

2. Know Your Budget — Your Real Budget — to Avoid Future Debts

There are several financial aspects of homebuying and owning that you should be aware of even before you start the process. As Best says, "You don't want to fall in love with a home you can't afford." One place to start is knowing that you'll be able to secure a loan. "Always get preapproved first to know you have a lender ready to approve your purchase," Best says. Similarly, she says, buyers should consult a tax professional to find out about the tax deductions allowed with homeownership.

While there are more than 10 types of mortgage loans, FHA loans and conventional loans are the two most common. An FHA loan is backed by the Federal Housing Administration and caters to borrowers who either have a limited amount of money for a down payment or do not have the best credit. In order to qualify for an FHA loan, borrowers will need a 580 credit score and a minimum of 3.5 percent for the down payment. If your credit score falls below 580, a borrower will need a 10 percent down payment.

Conventional loans are not backed by the federal government and typically require a credit score of at least 620. Borrowers who put down less than 20 percent are also typically required to pay private mortgage insurance on this loan. Once you've decided what type of loan works best for you — or after seeking professional advice about it — shop around for mortgage lenders.

When you're thinking about your budget, factor in not only monthly mortgage payments, but utilities, taxes, and — even before that — your down payment (learn more about how to think about down payments here) and closing costs (and learn more about those here). "Don't spend more in housing than you are comfortable with, as you'll need to leave money in the bank for repairs that your landlord or management company has taken care of before," Best says, adding that homeownership differs greatly from renting when it comes to having someone take care of unforeseen problems like plumbing issues, broken appliances, and much more.

"Buyers should also consider the total monthly out-of-pocket cost, not just the principal and interest of the mortgage," Best adds. "You need to make sure you have the money for property taxes, and, if buying a condo or townhome, the monthly or quarterly HOA dues."

While there is no one-size-fits-all in homebuying and budgeting, there are some recommendations when it comes to what percentage of your income should go toward your mortgage. Perhaps the most popular is the 28 percent rule, which states that no more than 28 percent of your gross monthly income should go toward total housing costs.

3. Do Your Research

When you're financially ready to purchase your first home, it can be easy to want to take the leap as soon as possible. While you may be a pro at browsing Redfin, Zillow, or another reputable house-searching site, simply finding something eye-catching isn't the only thing you need to think about. Start by making a checklist of things that are important to you, such as the neighborhood (walkability, schools, etc.), house type (bungalow, two-story, condo, etc.), and how much you are able to pay.

"Do your research on the area you are interested in before you have your heart set on a location," Best suggests. "Oftentimes, buyers 'think' they want to live in an area they heard about, but they find out they don't want to be in that particular area for one or many reasons. Then they have to start their search all over."

4. Find a Real Estate Agent You Vibe With and Trust

Chances are you'll be spending a lot of time — both in person and on the phone — with your real estate agent, so it's important they are someone you not only click with personality-wise, but also trust immensely. There are plenty of factors that go into choosing a real estate agent, including their knowledge of the area you're hoping to buy in.

"Your agent must be knowledgeable in the areas you are considering. Whether selling, buying, or both, your agent must be able to address any questions or refer you to local experts," Best explains. "A good agent must also have strong negotiation skills and the ability to think outside the box to help your offer be strong and stand out from other offers, like limiting the number of contingencies in the offer, post-closing possession, and other tricks to getting the home of your dreams."

"Some agents only do real estate on the side, or as a secondary job, not full-time," she adds. "You want an agent that reads about real estate and thinks about real estate as a full-time job to be on top of the market trends."

Like any important decision, asking family and friends for referrals is always extremely helpful. If no one fits the bill, or you don't know anyone in the area to ask, do a quick Google search for real estate professionals in the town you're looking at homes in and look up reviews. Additionally, apps like Redfin can match you up to a real estate agent in the area you're searching, and it can be worth it to meet with them to see how they stack up to others you've found. Don't feel pressured to work with the first person you meet.

It's also possible to get matched with agents through a network or stand-alone referral service, per Nerd Wallet; just be sure to know how you'll be matched and what will happen if you don't like who you're matched with.

5. Shop Around

Even if the first home you tour seems like it checks all the boxes, make it a priority to continue looking, as you may not know you want something until you see it. Your "dream home" might be lacking in comparison to others on the market because you don't even know other options exist.

In terms of how many houses you should look at before settling on one, journalist-turned-realtor Jonathan Pressman explains that the average homebuyer looks at eight homes while they're house hunting. But that doesn't necessarily mean you should try to hit that number: "The answer will likely be a combination of the average numbers for prospective homebuyers, your gut instinct, and your judgment of the homes you see," he writes. "In short, your number might look different from another aspiring homebuyer's number."

As far as exact recommendations, Pressman writes: "We recommend first-time homebuyers view around six to 12 homes before buying. This ballpark figure should be just the right amount to help you find the perfect home in your price range. Weighing your options is essential, but looking at every home that piques your interest can have downsides. The luxury of choice can quickly become a burden, and you may become overwhelmed by the sheer number of possibilities. After about 20 or 30 houses, it may be hard to keep everything straight and remember which places you like or never want to see again."

6. Ask ALL the Questions

Any and all questions you have are important. This is a decision that you shouldn't take lightly, and your real estate agent should be happy to answer your questions or refer you to experts who can answer the questions for you. Don't second-guess yourself because you think the question you have isn't important. You don't want to regret not asking it!

7. Factor in Taxes and What They Cover

Once you've landed on your budget and neighborhood, it's also important to factor in how much you'll be paying in taxes for wherever your home is. The rate is determined by your local government and based on many factors, including schools, safety, and services.

"The old saying 'location, location, location' still applies today," Best says. "If that means higher property taxes, make sure the services and resources available in that city or town are commensurate with the taxes you will pay. Consider the emergency response team (local police/fire/ambulance), services for the elderly and disabled, school districts, parks, overall upkeep and cleanliness of the neighborhood, etc. Sometimes it is worth it to pay more in taxes if some or all of these things are important to the buyers."

Depending on your mortgage type, your property taxes may be included in your monthly mortgage payments or not. These are questions to ask ahead of time, and there are also online tools that can help with tax calculation.

If you're still feeling iffy about this entire process, there are plenty of first-time homebuying workshops out there for you to attend, including online classes to arm you with the right information.