Five First Time Home Buyer Tips

Buying a home can be nerve-racking, especially for a first-time home buyer. These tips can help you navigate the process and avoid common mistakes.

1. Start saving for a down payment early

It’s common to shoot for 20% down but many lenders allow much less, and for first-time home buyers, some programs allow as little as 3% down. Waiting until you save 20% may mean you miss out on availability, as interest rates remain historically low, while a smaller down payment may enable you to buy a home and start building equity sooner.

Play around with our Empeople home affordability calculator to help land on a goal amount.  Some tips for saving for a down payment include setting aside work bonuses, saving tax refunds, setting up an automatic savings plan and using an app to track your savings goals. Keep in mind that a monetary gift from a family member can also be used to assist with a down payment.

couple working on laptop

2. Determine how much home you can afford

Before you start looking for your dream home, you need to know what’s actually within your price range. Many home buyers will find that they actually qualify for a larger loan than what they are comfortable paying per month, so knowing your price range numbers is an important step in the process.  You will also want to keep in mind that you will also have the monthly expense of property taxes and homeowner’s insurance to add to the payment when using our Empeople calculator.

median us home value

3. Get your prequalification letter

Having a prequalification letter in-hand from your lender makes you look much more serious to a seller and can give you an advantage over buyers who have not taken this step. Finding a mortgage lender who provides a prequalification letter in the application process will help you find a home loan with an interest rate and other terms suited to your needs.

4. Create your advisory board

This is by far our favorite tip to share with family, friends and members!

It is incredibly important to have a loan officer and real estate agent that you like, trust and want to work with over the next 90+ days!

Having your trusted advisory board means more than just helping you find a great home and loan. They will also:

  • Help navigate local market conditions with knowledge and experience
  • Advocate for you during the entire home buying process
  • Actively negotiate price and terms strictly on your behalf
  • Prepare necessary forms and written offers
  • Assist in procuring property inspections and advise on necessary improvements and repairs
  • Keep loan on track to close on time and attend closing to help address last-minute details and questions

couple talking to real estate agent5. Common mistakes to avoid

With so much to think about, it’s unsurprising that some first-time home buyers make mistakes they later regret. Here are a few of the most common pitfalls and how to avoid a similar fate:

  • Not budgeting for closing cost

In addition to saving for a down payment, you will need to budget for closing costs for your mortgage, which can be significant. Closing costs generally run between 2% and 5% of your loan amount. You can also defray costs by asking the seller to contribute towards a portion of your closing costs.

  • Buying a home for today instead of tomorrow

It’s easy to look at properties that meet your current needs. But if you plan to start or expand your family, it may be preferable to buy a larger home now that you can grow into. Consider your future needs and wants and whether the home you’re looking at can meet them.

  • Not figuring out how much house you can afford

Without knowing how much house you can afford, you might waste time. You could end up looking at houses that you can’t afford yet, or visiting homes that are below your optimal price level.

For many first-time buyers, the goal is to buy a house and get a loan with a comfortable monthly payment that won’t keep them awake at night. Sometimes it’s a good idea to aim low.

How to avoid this mistake: Use a mortgage affordability calculator to help you know what price range is affordable, what a stretch is and what’s aggressive.

  • Applying for new credit before the sale is final

Wait until after closing to open any new credit accounts or use existing credit for expenses.

Here’s why: The lender’s mortgage decision is based on your credit score and your debt-to-income ratio, which is the percentage of your income that goes toward monthly debt payments. Applying for credit can reduce your credit score a few points. Getting a new loan, or adding to your monthly debt payments, will increase your debt-to-income ratio, and from the mortgage lender’s perspective neither of those is good. Within about a week of the closing, the lender will check your credit one last time. If your credit score has fallen, or if your debt-to-income ratio has gone up, the lender might change the interest rate or mortgage fees, which could cause delays in your closing, or even result in a canceled mortgage.

  • Not checking credit report and correcting errors

Mortgage lenders will scrutinize your credit reports when deciding whether to approve a loan and at what interest rate. If your credit report contains errors, you might get quoted an interest rate that’s higher than you deserve. That’s why it pays to make sure your credit report is accurate.

How to avoid this mistake: You can get a free copy of your credit report at This is a Government run site that allows consumers to get a free copy of their credit reports once per year. You may dispute any errors you find.

Buying a house for the first time doesn’t have to be scary, follow these 5 tips and help put your nerves at ease so you can enjoy the home buying process. Please remember, too, that you’re part of the Empeople Family and we are always here to help you reach your financial goals.