First Time Home Buyer Guide
Complete First Time Home Buyer Guide.
The home buying process can be quite complex,
even for those who have been through it a few times. For the first time home
buyer, the process can seem impossible. This guide breaks down the home buying
process into 15 steps, with information and resources provided to make each step
achievable. Also, most
states offer first time home buyer grants and low interest loans for those
within specific income limits. For most people, these programs can make the
difference between being able to afford your first home or not.
Here are the 15 steps to buying your first home:
1. Establish good credit.
The first step in the home buying process is establishing good credit. Banks and
mortgage lenders will not lend to first time home buyers unless the borrower has
a history of borrowing money and paying it back in a timely manner. If you have
absolutely no credit references, you will need to get some. The most basic way
to do this is to visit a local bank and deposit a small amount, let's say $500.
You would then apply for a $500 loan, using the money that you deposited as
security for the loan. This is the simplest, quickest way to establish a good
If the loan term is for 6 months, make payments for the first 3 months, then pay
the entire loan off. Repeat the process with larger and larger amounts. This
will build up an excellent track record. Do this repeatedly, and you'll progress
to a point where you don't need to deposit any money as security, your track
record will be strong enough to be able to borrow with just your signature.
Unless you are independently wealthy, or come from a wealthy family, the process
of becoming a first time home buyer starts with establishing a good credit
history. At the same time that you are building your credit with bank loans as
just described, you should also be using credit cards responsibly as well. This
means paying off the entire balance every month.
2. Raise your credit score.
A high credit score is one of the most important elements to the first time home
buyer. Home buyers with high credit scores are able to get the lowest interest
rates on home mortgages. As a first time home buyer, it is doubly important to
have a high credit score.
Here are the basic tactics for getting a high credit score.
A. Always pay your bills on time.
B. Keep your credit card balances at zero, or at least very
C. Make more than the minimum monthly payments.
D. Negotiate to remove negative items from your credit report.
E. Borrow great credit from a relative or close friend.
For more in depth information on raising your
credit score, we suggest you send for an excellent free kit. Improving your
credit score will likely take a minimum of 2 months, but will be well worth the
wait. By getting a higher credit score, you will greatly increase your chances
of approval on the loan as well as qualify for the lowest rates given only to
those people who have the best credit rating.
3. Save for a down payment & closing costs.
When buying your first home, you'll need money for a down payment as well as
closing costs. This applies to previous home owners as well as first time home
buyers. Lenders want borrowers to have a vested interest in the property. If
you've put your own money into the house, you will be less likely to walk simply
away from the property.
It is very important to start saving immediately. Set aside a certain amount
every pay period and stick to it. Learn to live on what remains. Save now for
your future, and your future will take care of you. It will be very, very
beneficial to save every week, even if it is a meager amount. We strongly
suggest that you open an account and discipline yourself to set aside a certain
amount every week. It is a habit that will pay dividends the rest of your life. Even if you only save $10 per week, it
is a great habit to develop. We highly suggest you discipline yourself to save a
certain amount each and every week.
4. Keep detailed records of money spent.
First time home buyers (and everyone else for that matter!) should develop a
sound budget. To gain control of your money And how you spend it we recommend
that you keep track of every single purchase, no matter how small, for a period
month. At the end of this period, categorize this information to see the exact
breakdown of where your money is spent. you'll be able to easily see where there
is room for improvement in your budget. The important point to stress here is to
live within your means. The more you save, the quicker you'll reach your goal of
buying your first time home.
5. Develop a financial plan.
When constructing a house, builders use a set of blueprints as a detailed plan
they follow to accomplish the goal. In like manner, first time home buyers need
a financial plan to follow in order to achieve the goal: buying your first house
and moving in. To buy that first house you should set a goal of saving 20% of
the purchase price to use as the down payment. There are programs that will
allow you to put less than 20%
down, including mortgage insurance where you can purchase a home with a down
payment of 5% or less.
We cannot stress enough that the first time home buyer need to develop a
financial plan and stick to it.
6. Establish a relationship with an agent.
Any potential first time home buyer would benefit greatly by early on
establishing a relationship with a
real estate broker that specializes in
working with first time home buyers. As with any profession, the range of
expertise will vary from agent to agent. Shop around until you find one that you
are Satisfied with. Remember to inform each prospective agent that you are a
first time home buyer, as many agents have their
specialties. Some agents like to work only with real estate investors. While
some prefer to specialize in waterfront property. By declaring up front that you
are a first time home buyer, you won't be wasting time trying to develop a
working relationship with an agent that has a specialty that doesn't match your
Your agent will be your link to all the property in your area that is currently
for sale. Agents can provide a treasure trove of information on the entire
buying and selling process. As a first time home buyer, you definitely should
seek the help of a professional agent. There is a new service for finding real
estate agents that we highly recommend. Not only can you find an agent, but with
this service you can have agents compete for your business.
7. Study market values.
When buying your first home, you will not want to pay more for a house than the
house is worth. Along the same line, you will likely want to find a great deal.
The only way to find a great deal is to study the market values in your area.
Over time, you'll development a mental database of comparable properties and get
a sense for which properties are overpriced and which ones are under priced.
Your first home will likely not be your last. The average American sells her
home and moves into another every 7 years. As a first time home buyer, you will
benefit greatly if you purchase a home for less than what it is worth. This
instant equity will boost the profit and cash to you when it is time to sell.
8. Get Pre-approved for a mortgage.
Not all lenders are created equal: some will be very efficient and helpful in
dealing with the first time home buyer, and some will not. However, getting
pre-approved for a mortgage is an important step in the first time home buyer
process. With a pre-approval, your offer will carry more clout with the seller,
and you'll be in a position to close on the purchase more quickly. This is
important to many sellers. Offering a
quick closing is also a powerful tactic in negotiating a discount off the
9. Decide your needs and wants within your budget.
Builders, brokers, and bankers all know that the typical first time home buyer
has a tendency to be overly enthusiastic; they've all seen it repeatedly. As a
first time home buyer, you'll need to be aware of this temptation and really
focus on making choices that fit within your budget. Everyone would like 5
bedrooms and 5 baths in their first home, but not everyone can afford such
luxuries. When you buy your first Home, you'll be taking on a major financial
commitment. There will be lots of incidental expenditures. As a first time home
buyer, those incidental costs can really add up and strain your budget. Be
careful not to overspend on the house that you choose.
It is important to spend ample time on steps 4, 5, and 8. These steps will help
you know and understand your budget. Once you know your budget and the price
range of homes your budget will allow, you'll be able to shop for the right
home. Again, avoid the trap that most first time home buyers fall into: don't
stretch your budget beyond what it can handle.
10. Shop for the right home.
With the exception of moving in, shopping for the right home will likely be the
most exciting step for first time home buyers. By this time you should have
already established a working relationship with a real estate agent that
specializes in working with the first time home buyer. You should already know
your budget and how much you can afford to spend on your first home. You'll need
to summarize all this information for your agent to use to suggest certain homes
to visit. Start with the price range. Let your agent know how much you are
qualified to spend. Then list amenities that you desire such as number of
bedrooms, and additional items such as a deck,
fireplace, whirlpool tub, etc. If you are hoping to purchase your first home in
a certain area, or within a certain distance from work, let your agent know that
The more information that you give to your agent, the more time can be saved by
everyone. Your first home may not have everything included that you could
possibly want, so decide which items are negotiable, and which aren't. Let your
know. The more homes that you visit, the more knowledge you'll develop regarding
property values in your area, and which homes you like and which homes you don't
in your price range. However, being a first time home buyer, you'll need to
understand that your agent gets paid on commission (usually paid for by the
seller). Therefore, your agent will not want to spend the next 3 years showing
you 500 different properties without you actually making a purchase. Likewise,
you would not want the agent simply showing you one home in your price range
then pressuring you to make an offer.
An ideal world for the agent would be one sale for each time she shows a home.
On the other side of that same coin, an ideal world for the first time home
buyer would be the opportunity to look at several hundred homes or more before
ever making an offer. The ideal world doesn't exist for either the agent or the
first time home buyer. Reality will be somewhere in between. You'll want to look
at a reasonable selection of homes in your price range. That will be a good
compromise for both the agent and the first time home buyer.
11. Learn about the elements and terms of a sales contract.
As a first time home buyer, by definition you've never been a party to a real
estate purchase and sale agreement. You'll need to do some studying to learn the
elements and terms of a sales contract. Here is a short list of the basic
elements of a real estate contract:
Acceptance: How much time the seller has to either accept the offer or to
provide a counter-offer.
Closing: A future date by which time the closing will take place.
Description: A legal description of the property as well as the street
Deposit: How much initial money is included with the contract and who
will hold it.
Financing Contingency: A clause that states the entire contract is
subject to the purchaser being able to obtain a mortgage loan of X amount, by a
certain date. First time home buyers should make sure their agent includes this
clause in the contract.
Home Inspection: The contract can be contingent upon a satisfactory home
inspection to be done by a qualified professional within X number of days.
Inclusions and Exclusions: Some items in a home are not considered part
of the real estate, but are instead personal property. Refrigerators and washing
machines fit this category. This clause should state exactly what is included in
the sale, and what isn't.
Insurance: Who will insure the property until closing.
Price: The amount of money the buyer will be paying to the seller.
Possession Date: The date on which the buyer will receive possession of
Your agent knows each element of the contract in detail. She can answer any
questions that you may have in this area.
12. Choose the right neighborhood.
It seems quite ironic that you should be thinking of selling your house before
you even buy your first home. But that is exactly what every first time home
buyer should do! There will come a time when you'll want or need to sell your
home. This may come out of a desire to upgrade your home, or maybe due to a job
relocation to another city. If you choose the right neighborhood when you
purchase your first home, you'll be
rewarded with a higher value home that will be easier to sell, when that time
Some items that a first time home buyer should look for when searching for a
great neighborhood are:
A. Located in a good school district.
Is there a particular school in your area that is a recognized favorite? If
so, you'll want to buy a home within that district. If this school appeals to
you as a first time home
buyer, it will also appeal to the next first time home buyer who comes along and
wants to purchase your home from you in the future.
B. Is the area improving or in decline?
You'll want to consider that point carefully. While an area may be
acceptable to you now, if it is in a state of decline, by the time you are ready
to sell, the next buyer may not find the area acceptable.
C. Is the area close to many popular attractions?
Being located next to parks, beaches, lakes, mountains, and wilderness is
important to both the first time home buyer as well as the seasoned homeowner.
Choose an area that is convenient to popular locations.
D. Choose your neighbors carefully.
If there is an obnoxious neighbor right next door to the first home you plan
to purchase, think twice about it. Nobody wants to live next to an eyesore, nor
do they want to be kept up all night by loud, uncontrolled behavior from their
your homework. Knock on doors if you have to. Find out what the neighbors are
like. If you follow these steps, you'll be a happy first time home buyer instead
of a disappointed one.
13. Submit your offer.
After completing the first dozen steps in this guide, the first time home buyer
can confidently submit an offer. If you've followed these steps up to this
point, you are well
armed with the necessary info to purchase your first home. Making your offer is
an art, not a science. Dozens of books have been written explaining techniques
and methods of successful real estate negotiation. Here are some basic
A. Know the seller. It goes without saying that you want to purchase the
house for as little as possible, and the seller wants to sell the house for as
much as possible. Somewhere in between is the settlement range. Try to find out
what the seller wants besides a high price? A quick closing, or a delayed one?
Does the home need some work like new carpet, new siding or windows? Does the
seller want to get this work done, or would she rather not deal with the hassle?
The more info you can gather, the better position you are in to negotiate a
B. Determine what would be the best case and worst case scenarios. Once
you've done this, decide how much risk is involved. How bad do you want this
house? Are you willing to loose the deal to try to get your best case scenario?
Only you can answer that question.
C. Be professional at all times. The best negotiators remain emotionally
neutral throughout the negotiation process. By doing so, it is much easier to
remain professional. If you are insulted or upset during the negotiation
likely make decisions based upon your elevated emotions, rather than logic.
Rarely will emotional decisions be correct. Try your best to remain unemotional.
This is particularly difficult for a first time home buyer, as buying your first
home is a very, very emotional event. However, the more professional you are,
the more likely you are to succeed in your negotiations.
14. Arrange for a home inspection.
Even experienced real estate investors will depend on a qualified home
inspector. This should be doubly true for the first time home buyer. Qualified
home inspectors will examine in detail such items as roofing, heating and air
conditioning systems, structural integrity, siding, windows, plumbing and
electrical systems. Deficiencies in any of these components will be brought to
your attention in a detailed written report. We highly recommend that every
first time home buyer consult with a qualified home inspector. You should make
your offer contingent upon a satisfactory report.
15. Arrange for homeowners insurance.
All real estate owners should have homeowners insurance, and the soon-to-be
first time home buyer is included in this group. For the best rates on home
owner insurance, we suggest the free comparison services online. Get Home Insurance quotes for free.
First time home buyer
time home buyer tax extension
Congratulations! You are about to become a first time home buyer! You are now
ready to make your moving plans. The easiest, but most expensive option is to
hire a professional moving company. Your agent can probably recommend a few good
movers. However, if you want to save several thousand dollars, Gather a group of
friends and have a moving party. You and a dozen friends can really make short
work of moving.
That's it. You are now ready to enjoy the fruits of your labor and planning. We
wish you many years of enjoyment in your first new home!
Be sure to visit the First Time Home
Buyer Grants page.
See also First Time Home Buyer
Programs for other types of 1st Home Buying assistance.