Tips for first time home buyers

Preparation and knowledge are two of the best weapons a first time home buyer
can have. By educating yourself and planning carefully you will not only feel
more confident about buying your first home, but you will also discover
important ways to help save you money.

Buying a home for the first time is a big step which makes it important to be
prepared. If you are a first time homebuyer, it is good to know there are a
number of advantages to owning property compared to renting. Owning a home
allows you to have a place to call your own and start building your financial
net worth.

However, before you look at homes you need to figure out if you have enough
financial stability to support the investment with these first time homebuyer

Evaluate your finances
Look at your finances to determine if you qualify for any first time homebuyer
program with the following steps.

  1. Calculate any financial obligations you already have, such as credit cards, car payments and groceries. Subtracting this total from your monthly income will reveal how much you can probably afford to put toward mortgage payments.
  2. Find your debt-to–income (DTI) ratio. To calculate your DTI ratio, add up you minimum monthly payments for items such as credit cards, car loan or lease, student loans and alimony or child support payments if applicable. Then, divide that total by your gross (before taxes) monthly income. Generally this number should be below 12% but may vary depending on the mortgage loan program you apply for.
  3. Determine if you have enough cash saved to make a down payment. Generally, you should have 20 percent of the purchase price or more saved up.  Keep in mind there are closing costs, which are typically several thousand dollars but can range depending on many factors. However, if you do not meet the above financial requirements, do not worry because you still have options.

If you crunch the numbers but still aren’t sure if you are ready to buy a home, remember that the price of a property should not be more than 2.5 times your annual income. In addition, no more than 28 percent of your monthly income should go toward mortgage payments.

Many buyers initially evaluate the 30-year fixed-rate mortgage, but there are many other first time homebuyer programs that offer a variety of benefits. For example, the Federal Housing Administration (FHA) provides helpful first time homebuyer assistance.

Are you in the armed forces or reserves, a veteran or military spouse? The Department of Veterans Affairs (VA) also offers unique home financing solutions for military service members.

Want more? Review the information provided below to help prepare you for your home buying experience:

Considering Your Options

  • Owning vs. Renting
  • Are You Ready to Buy?
  • How Much House Can You Afford?
  • Recommended Reading

Shopping and Buying

The home purchase financing process can be long and confusing. This section will help educate and guide you through this process.

  • Get Pre-qualified
  • Choosing a Mortgage
  • Avoiding Common Mistakes
  • The Right House
  • Smart Negotiating
  • The Closing

What to Expect the First Year

Be prepared for all the great pleasures and minor pains of homeownership. This section will help prepare you for what will happen during your first year of homeownership.

  • Homeowner’s Insurance
  • Taxes and Deductions
  • Home Repairs and Remodeling
  • Adding Outdoor Beauty
  • Money-Saving Tips
  • Enjoying Home Ownership

First-time Refinancers or Sellers

You’ve already gone through the purchasing process, but now it’s time to refinance or sell for the first time.

  • Is Refinancing Right For You?
  • Knowing When to Sell
  • How to Not Lose Money
  • Negotiating as the Seller
  • Giving Your House Sell Appeal