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Aug 6, 2021 | 6 minute read

How to buy a house for the first time

These tips for first-time homebuyers will help you navigate the home buying process and could help make your home-ownership dream come true. 

Buying your first home is exciting — and a little scary. Millions of people have navigated the first-time home buying process successfully, and so can you. This buying-a-house checklist will guide you through the key steps to find, finance, and buy your first home.

Understand your financial situation

First, evaluate your budget. Add up all your regular monthly income and subtract from it your monthly expenses, as well as any monthly savings contributions. 

If you're renting, that’s money that you’ll be able to use for a monthly mortgage payment. This will help you understand how much you can afford for a monthly mortgage payment.

Tip: Use our mortgage payment calculator to figure out how much house you can afford.

This is also a good time to check your credit report at annualcreditreport.com to make sure it’s correct. Errors on your credit report can lead to a lower credit score, which can affect your mortgage application.

Save for a down payment

As a first-time home buyer, the down payment you need depends on the price of the home, what type of mortgage you apply for, and other factors. Even if you expect to receive money for a down payment from a relative as a gift, it’s still a good idea to put aside some extra savings.

Get pre-approved for a mortgage

Your mortgage loan officer can help you get pre-approved for a mortgage.. Doing so shows a home seller that you’re serious when you make an offer and that you have the ability to complete the transaction. Pre-approval also increases your chances of getting the home you want if you end up in a multi-offer situation, where others are also making offers on the house at the same time.

It’s important to understand the difference between pre-approval and pre-qualification.

A pre-qualification is an estimate from a mortgage loan officer of how big of a mortgage you might qualify for. It is based on financial information — including your income, expenses, debts and assets — that you provide, however none of this information is verified, and you will still have to apply for a mortgage when you’re ready to make an offer on a house.

In pre-approval, however, the lender goes through extra steps to review and verify the information you provide. You’ll have to fill out a formal mortgage application and provide documents. Pre-approvals typically last 60-90 days. With one in hand you’re ready to make and offer and buy a home.

Hire a real estate agent

A real estate agent can help you find a home that fits your budget and needs, and will help you navigate the home buying process. 

Real estate agents are generally licensed by the state. Some real estate agents are also REALTORS, meaning they are members of the National Association of REALTORS and have agreed to follow that organization’s code of ethics. 

When searching for a real estate agent, you may also want to ask friends and families for suggestions. Your credit union may also be able to refer you to local real estate agents.

People

Look at homes

Looking at houses is one of the most exciting parts of the home buying process.

You’ll want to consider several factors, including:

  • The home’s location 
  • How big it is 
  • Whether it’s a single-family home, townhome, condo, or duplex
  • The home’s age 
  • Other factors related to your needs

Your real estate agent can help guide you through many of these considerations. As 
you look at homes, imagine what it would be like to live in that house.

Make an offer

Once you’ve found a home, it’s time to make an offer. 

Your real estate agent can help you understand the market, make a smart offer, and negotiate a final home purchase agreement.

Home purchase agreements are usually contingent upon having financing. A mortgage pre-approval from your credit union can streamline the home-buying process. It’s important to tell your mortgage loan officer as soon as you sign a purchase agreement.

Get a home inspection

Once you’ve made an offer that’s been accepted, there are several steps to complete before you can finalize the transaction and take possession of your new home. A home inspection can help you avoid unpleasant surprises after moving in.

A home inspector is a professional who will assess the home’s condition. Home buyers and sellers typically negotiate over any problems the inspector finds, deciding if the seller will repair them at their own cost, leave them to the buyer to handle, or reduce the home’s selling price.

Lenders will require an appraisal, which determines the home’s value and confirms there are no major issues.

Set-up insurance and utilities

As the closing day for your home purchase approaches, you’ll want to set-up utilities and homeowner’s insurance. 

This usually requires contacting utility providers to make sure electrical power, gas, water and sewer, and the like will be switched over to your name once you’ve completed your purchase. You’ll want to do this before the seller cancels, so that you avoid reconnection fees.

Homeowner’s insurance is also important. Having insurance is usually required for your mortgage to be approved for the house purchase.

Complete the purchase

Completing a new home purchase is usually called “closing.” At closing you’ll sign various documents, provide any additional funds needed to finalize the transaction, and become a homeowner. Congratulations!

Ready to get started? Contact your mortgage loan officer to learn more about getting a mortgage.

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