First-Time Home Buyer Tips

Do you think you are ready to start searching for your first home? The process is exciting, but it can also be overwhelming if you don’t prepare yourself. Here are eight first-time home buyer tips you can use to support you during your path to homeownership. 

1. Know your budget before you start house hunting 

You don’t want to waste time looking at houses that are out of your budget, as the process can be frustrating. Instead, talk to a lender and do some research to find out how much your mortgage payment will be based on a certain purchase price. 

Keep in mind that your actual mortgage payment will vary depending on your interest rate, homeowner’s insurance, and additional fees, like HOA dues. 

2. Check and improve your credit score

Check your credit score to make sure you are eligible for a mortgage. In general, you’ll need a score of at least 620 for a VA or conventional loan. FHA allows for slightly lower scores of 580, and USDA requires scores of 640+. 

Don’t aim to meet the bare minimum score requirements. If you have a higher score, you may qualify for a lower interest rate. The lower your rate, the less you’ll pay in interest over the life of the loan. 

Tools like Kikoff can help you improve your credit score. With Kikoff, you can report on-time verified rent payments to strengthen your credit history. Demonstrating that you consistently pay your bills on time will contribute to a higher score. 

3. Save for a down payment and closing costs

The down payment and closing costs on a home purchase are separate expenses. For FHA loans, you will need 3.5% down. If you are getting a conventional loan, you will need anywhere from 3% to 20% down. USDA and VA loans offer 0% down options, but they have other eligibility criteria that you have to meet.

Your closing costs should be around 2% of the purchase price of the home. You’ll need to cover those as well. While you can ask the seller to contribute toward your closing costs, there are no guarantees. It’s best to have it saved so you can pay it yourself, just in case. 

4. Get pre-approved for a mortgage

Next, you should connect with a lender and get pre-approved for a mortgage. Your lender will need some basic documents, which may include:

• 30 days of pay stubs
• W2s
• A copy of your photo ID
• Bank statements

Most lenders conduct a hard credit inquiry during the pre-approval process. While this will temporarily impact your score, it's nothing to worry about, especially if you’ve worked to raise your score.

5. Research neighborhoods and choose the right home

Make a list of neighborhoods that would suit your needs. Research each one and start searching for homes in those areas that fit your budget. Home search applications allow you to filter homes by ZIP code and budget, which makes it much easier to focus on specific areas. 

You should also identify must-have items and nice-to-have features to help with your home search. Share this information with your real estate agent so the two of you are on the same page. 

6. Make a competitive and protected offer

When you find a home you like, submit a competitive offer. Make sure your agent includes contingencies, such as a home inspection window so that you can check the property for potential issues. These clauses protect you and your interests. 

7. Complete inspections and appraisals carefully

Hire a reputable home inspector and look over the report. Address any repair issues that pop up. Once you complete the inspection period, the lender will order an appraisal. If the home appraises for a value that is equal to or greater than what you are purchasing it for, you will be cleared to close. 

8. Prepare for closing

In the last few days before closing, wire funds using the account information provided by the title agency. These funds are used to start your escrow account. You’ll also need to provide any additional cash to close, such as the down payment. After that, show up on closing day, sign your documents, and get your keys. 

Conclusion

If you are ready to get to work on the building credit part of the list of first-time home buyer tips, Kikoff can help. You can create a free Kikoff credit account with no hard credit checks and take advantage of no-cost tools, like verified rent reporting. 

Kikoff offers a variety of other paid and free services designed to put consumers back in control of their financial journeys. 

Build credit fast with Kikoff.