Over the years, first-time homebuyers may have shied away from entering the housing market due to stagnant wages and debt, but times have changed. According to TD Bank’s First-Time Home Buyer Pulse, one in five consumers is actively looking to buy his or her first home. Additionally, 46% of millennials will be looking in the next 1-2 years. If you’re a first-time buyer, the mere thought of securing a mortgage may be overwhelming. For most people, a home is the largest purchase they’ll make. Very few can take on this purchase without a loan.
4 Tips for First-Time Home Buyers
1. Save for a down payment.
Most mortgage lenders require a cash down payment. Buyers today may find it difficult to save for a large down payment, especially young adults with substantial student loan debt. Historically, buyers who were unable to put 20% down had to pay an additional $100 – $200 per month for private mortgage insurance (PMI). The great news is many lenders are offering home affordability and down payment assistance programs. TD Bank offers the Right Step mortgage, which allows borrowers to put as little as 3% down.
2. Factor in home improvement costs & monthly household expenses.
With today’s low inventory of affordable homes for first-time buyers, many will find themselves settling on a home that requires renovations or upgrades. These costs should be factored in at the beginning so buyers are comfortable with their down payment and monthly payment. For buyers who have not lived on their own or rented, the added costs of running a household can be a shock. Monthly costs for utilities, homeowner’s association fees, cable, and Internet, can add up quickly. Factoring these expenses in at the beginning can help borrowers better assess their budget and a monthly mortgage payment.
3. Shop around for a mortgage.
We know the best mortgage experience for buyers occurs when they have open and ongoing communication with their lender. Finding a lender and discussing financial needs and budgeting should be the very first step in the home-buying process—even before finding a Realtor. The First-Time Home Buyer Pulse revealed saving for a down payment is a barrier to homeownership for many first-time buyers. That’s why it’s important to find a lender that helps buyers understand what they can afford and share what options are available. Mortgages are not one size fits all—to find the option that best fits their needs, buyers should discuss their financial situation with a lender they trust.
4. Get educated.
Perhaps the single most important aspect of purchasing a home is to understand the mortgage and overall home-financing process. Take advantage of educational courses offered by local financial institutions and government programs. In fact, TD Bank offers a First Time Home Buyer Seminar series that addresses all aspects of a home loan. This includes helping buyers decide if they’re truly ready to own a home. Following that, the seminars share information on the criteria lenders use to evaluate a borrower, the documentation, each portion of a mortgage payment, and the team that processes and approves the loan. These seminars are useful tools and provide valuable background for borrowers who are overwhelmed by the process. While buying a home may feel overwhelming for first-time buyers, finding a lender you can trust will guide you in the right direction.
That’s a great point you make about how not all mortgages are ideal for first time buyers, and so it’s so important to shop around to find one that fits your needs. I’ve heard, too, that it’s so important to be constantly be building a solid credit score by paying off bills on time consistently. I’ll be sure to keep this great information in mind as my wife and I try to do everything we can to be prepared to buy a home.
A friend of mine is getting ready to purchase his first home, and we were curious about how you would buy it correctly. I really like that you say to understand the mortgage process. It would be nice to know that you aren’t going in blind.
I really love that suggestion to take some time to learn about the different aspects of financing a home. That’s something my friend said she wished she had taken more time to do before investing in her house. Luckily, I was able to learn from her experience and know that it helps to educate yourself before applying or a home loan.
Shopping around fro mortgages does seem like a really smart thing to know when you are looking for a home. I have been thinking about getting my first home recently. It is good to know that I should not go with my firsts mortgage option.
It really helped when you talked about how getting educated on how buying a house and mortgage works can help you choose the best. Personally, I would want to find a real estate agent that knows how to do their job and is not afraid of helping me understand it and how I can make the best decision. My sister is looking for a good house to buy so I’m glad I found your post.
Thanks for the tips for buying a home! My wife and I really want to buy our first home this year, and we need all the information we can get. I like that you mentioned to find a lender early on so you can talk about budgets and financial needs. That seems like a good place to start, so that is what we will do!
Thanks for the home buying tips. My wife and I have been wanting to buy a home for a while now, we just haven’t done it. I guess putting extra money into our savings for a down payment is a good way to start!
I like your tip to factor in the additional costs you’ll be paying for. Most of the apartments I’ve lived in didn’t require me to pay for Internet or cable, so I’d have to start paying for those. Also, I’d have to think about buying a lawnmower for the yard.
Getting educated is a big part of the buying process, and something My husband and I recently experienced as we just bought our first home. Knowing what kind of house you want, what loans you need a have to get accepted for, there is a lot of paperwork, and it can be a time consuming process. We were fortunate enough to be working with a real estate agent who was able to guide us in the process which relieved a lot of the stress we could have had. If someone is looking in to buying a home, learning about the process is key along with going about it with a realtor to lead you all the way.
I like how you mention factoring in the cost of living in a new home before buying it so you can more accurately decide if it fits in a budget. My wife and I don’t have any home buying experience, so this is a great tip for us. We’ll be sure to do this as we start the search for our first home next month.
My husband and I are buying a home for the first time, so I’m glad I came across this article. He and I have been saving for our down payment for a few years now, so it’s good to hear that doing so can improve your chances of qualifying for a mortgage. I totally agree that being educated on the mortgage process can be very helpful in the long run. I’ll be sure to share these tips for buying a house with him!
It was helpful that you suggested familiarizing yourself with the mortgage and home-financing process. I liked that you recommended attending a few educational courses to learn more about the home buying process. My sister and her boyfriend have been considering purchasing a home together. It could be beneficial for them to learn more about this process as they search for single family homes for sale.
Yes, definitely! It can be overwhelming especially when dealing with the financial side of things. Thanks for checking out our blog! We try to keep everyone ‘in the know’ when it comes to real estate. Let us know if we can help in any way!
Thanks for the advice about factoring in renovation and upgrade costs into down payments so you know how much you’ll need. My husband and I are thinking about buying a house, but we’re not sure how much we should save up for. We’ll have to do some research so we can calculate how many expenses to factor in.
It was useful
Thank you for the suggestion that we factor in things like cable and utilities when we are mortgage financing so we know that our monthly payments cover all the costs of our new house. My husband and I are looking at buying our first home soon since we’re about to have a second child. We’ll be sure to add in any renovation costs we may need to do as well when we are looking at homes to buy.