Tips for First-Time Home Buyers

Published | Written by Liz Kaye

In a time of low inventory and high demand, buying a home at any stage of life can be overwhelming. Add the limitations of what you can afford with being a first-time home buyer and trying to do things the "right" way? It's easy to feel defeated. That's where we come in. Of course, we always recommend first reaching out to a local realtor with all your wants and needs so they can begin keeping an eye on homes before they hit the market and utilizing inside information and connections. That's just the first step, however. Today we bring to you 10 tips you can already start doing to kickstart your first home buying success.


Owning a home is expensive and while it's a great investment for your future and will save you money in the long run, initial upfront costs differ greatly from the renting lifestyle you may have been experiencing prior. You're now responsible for all maintenance and upkeep costs-- which can add up fast! Paying off credit card debts and any IOU's should be of upmost importance. While monthly payments add up (electric, car, insurance), your credit card bills shouldn't! After you accomplish this, you'll then be able to start building your emergency fund. This should be money you've set aside in a special account or safe that will set you up with 3-6 months of expenses in place. The best tactic to ensure you're keeping off debt and not re-racking up those credit card expenses is to set a budget after payoff! There are an abundance of apps and tools you can use right from your phone to manage your income vs spending habits and necessities. Figure in the amount going straight to your emergency fund each month and TA-DA minimal math included. Changing our habits isn't always as easy said as done, you may consider additionally picking up a hardback or e-book to first understand why your bad habits exist in the first place and how to figure out where your money mindset comes from.


Ok, so we lied. There's a little math to be done here. Your monthly budget will help you determine this cost prior to falling in love with homes outside of your price range, but there's also some formulas to keep on hand that will help you determine what's best for your lifestyle. Your monthly housing costs shouldn't be more than your 25% of your monthly pay. This includes any HOA fees, insurance, etc. A great example taken from the king of finances, Dave Ramsey, goes as follows:

Assuming you bring home $5,000/month. Multiply that by your 25% to establish your maximum monthly house payment ($1,250). Let's say you've got a 15-year mortgage with a 4% fixed interest rate, this may be a good list of homes within your price range (not including insurance and other taxes)

> 188,000 home with a 10% down payment ($18,800)

> 211,000 home with a 20% down payment ($42,000)

> 241,400 home with a 30% down payment ($72,400)

> 281,600 home with a 40% down payment ($112,640)

Please remember that these are ballpark numbers and you should always check with a financial advisor and calculate property taxes and homeowner's insurance into this balance as they will affect your monthly payment as well.


While it's recommended to have a down payment saved of 20% or more, if that's not in your family's financial timeline, it doesn't have to be. There are loan programs you can consider that allow you to buy a home with a significantly less percentage down. You'll want to ask your mortgage lender what your first-time home buyer options are and the programs set in place within your state. Of course, a bigger down payment will get you a lower mortgage rate and allow for more affordable monthly payments. Saving for a bigger down payment also takes more time and depending on your family's needs at that very moment, waiting may not be in your best interest. Additionally, rates are constantly changing and the housing market is fluctuating. Waiting could ultimately mean you're paying more money elsewhere in the process as well. All in all, you just want to be sure you're securing a payment you feel financially comfortable to pay each month. Your closing costs on average consist of 3-4% of the purchase price of your home. Your lender will give you this exact cost prior to closing but this is what it covers:

> Appraisal

> Home Inspection

> Credit Report

> Attorney

> Homeowner's Insurance


This topic is so important that we recently dedicated an entire blog post strictly to how to find up and coming neighborhoods. You can find that post here. Size and condition of the home should not compromise the school districts and quality of the neighborhood it's in. Ultimately, these two factors are what will drive up resale costs in the long run and you always want to be making money, not losing it. Our best tip for finding a quality neighborhood within your budget would be to look right outside the "hot" neighborhoods in your area. Prices will be lower, but you won't lose that same access to school districts and the likelihood that those neighborhoods will then overflow into yours, driving up home resell values, is strong.


Read this one twice. If you takeaway one thing from this post, please let it be this. Before you even begin viewing houses online and in person, having a preapproval letter in hand from your mortgage lender is going to put you that much further ahead-- especially as a first timer. This shows the sellers you encounter that you're not only prepared, but that you're a serious buyer who won't be wasting their time. Regardless of the experiences competition looking at the same home, having a preapproval letter they don't could ultimately be a deciding factor on who the seller chooses to move forward with. Your lender will tell you what documents you'll specifically need for preapproval, but we also have a post breaking down what preapproval is and how to prepare for that visit.

Ready to take the leap? Buying a home is a BIG purchase and maybe the biggest one you'll make. Comment your favorite takeaway below and then give us a call so we can start assisting you with your search and professional connections -- 573.746.2532!

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