1st Time Home Buying Tips

Before delving into this guide, please remember to always do your research. Everyone’s home buying situation is different and you should always do what is best for you! This guide is from my own experience and my own research online and is catered to others making an average income and not receiving down payment assistance from friends/family.

It’s Never Too Early To Start

Start young and save whenever possible - After speaking with your parents and determining if you can take on the workload, get a job, or even two, as a teen. The same way you pinched pennies for your first vehicle, do the same for your first down payment.

Give up vices, membership and other nonessentials - I am not a smoker so my numbers are more of an estimated guess than personal experience, but assume you go through 2 packs of cigarettes every two days at $6 per pack, you could save $1,095 a year by quitting. Swap out that hundreds of dollars a year gym membership for working out a home. There are thousands of free YouTube workout videos with many of them focusing on body weight only, although a one time investment in some dumbbells would still cost much less than a gym membership. Research shows eating out can be, on average, anywhere from 3-5 times more expensive than cooking at home. Plus, cooking at home comes with the added benefits of making healthier meals and portion control. Trade brunch and shopping on the weekends for a hike or a day at the beach. I’m very much a “don’t knock it till you try it” kind of person so try to keep an open mind when it comes to trying new hobbies. On top of saving you money, you may find a new passion.

Get Preapproved

Shop around for lenders - Make sure to find a lender that fits your needs, whether that be the best rates or even one that does not charge a fee for extra payments or a percentage for paying off your mortgage early.

Don’t buy as much as you are approved for - My ex had a friend that was very much a Keeping Up With the Joneses type. His advice, to my ex who is an artist (not yet a highly successful one/one that at the time had to trade artwork for rent etc), was to buy a house at the top dollar you’re approved for by a bank. DON’T DO THIS! This leaves zero room for error. What happens when you have to have thousands of work done on your vehicle, lose a job or any one of the million other costly things that can and do go wrong in life?

Research PMI before deciding on a loan - I won’t go into it too much here, but make sure to do your research on Private Mortgage Insurance if you do not have a 20% down payment. Some conventional loans will allow you to have less, let’s say 10%, and you will only carry the PMI until the point you have paid off enough of your mortgage (when you break the 20% threshold). While others, let’s say at the 3% down payment mark, may require you to carry PMI for the entirety of your mortgage. Assuming the PMI is 1% of your mortgage that could be hundreds extra a month which equals thousands extra a year.

The Search Is On

Be realistic - Unless you are rich, you will need to make sacrifices when buying your first home. Ask yourself what are your MUSTS and what are your WANTS. Many of the things we want in a house are not necessities. Remember, it’s called a starter home for a reason. You do not have to live there forever. In addition to giving up that extra spare bedroom or garage do your research on neighborhoods. Is there one that is a little rough around the edges but, like the house, has potential? Maybe it’s worth considering. Don’t shy away from a house because it has an outdated kitchen. As long as it is functional you can always save up and remodel it to your liking down the road.

Before Closing

Inspection and appraisal - Keep in mind inspection and appraisal costs are not part of your closing costs. Every home you decide to have inspected will be an additional cost unless you are lucky enough to know someone in the business that is willing to give you some freebies. Also worth noting, inspections do not cover everything. Make sure to do your research so you know what isn’t covered; asbestos, mold, well and septic systems to name a few.

Your monthly payment can change - Even with a fixed rate mortgage, your monthly payment is not guaranteed. Insurance rates may skyrocket and taxes can change which means your escrow can change. It doesn’t sound like a big deal until you have a situation like recent history where home prices and inflation are through the roof. This can lead to hundreds more a month out of your pocket. This should be considered for HOAs as well. That $250 per month right now could be $400 a month in a couple years. You just never know.

Be sure - Buying your first home is something to be proud of, but it’s not a decision to be taken lightly. Things will inevitably go wrong and it will require work and responsibility. Not just in the beginning, but always. Be sure it’s right for you.

Keys in Hand

Make biweekly payments - Take your monthly mortgage, split it in half, and make that payment every 2 weeks. (If your mortgage is $1,000, you’d be paying $500 biweekly) This will ultimately mean you end up making 1 extra payment a year which could shave years off your mortgage.

Round up - Let’s say your mortgage is a random number; $835.93. Now lets also say you took my advise and didn’t buy a house at the very top of your budget so you aren’t struggling every month to meet your payments. Set up auto pay, but round up. Maybe you can round all the way up to the next $100 making a $900 payment or maybe you can round up to $850. Every bit counts in the long run and will save you on interest.

Use Your Bonuses - If you are fortunate enough to work at a company that gives out Christmas bonuses put it towards your mortgage. I think it was Spanx, if memory serves me right, that made headlines for giving each of their employees $10,000 one year. Imagine putting a chunk of change that large toward your mortgage. While most of us can only dream of a bonus that hefty, any bit counts!

Take your time - Don’t feel like you have to have your entire home showroom ready right after you move in. Take your time on furnishing the place. Find good deals or save for special pieces you’ll keep for years.