First Time Home Buying: The Ultimate Guide will help you put together a plan. First time home buying can be exhilarating, exhausting, and scary and will be fun if you prepare and lay out a plan.

If you have a plan then all you will need to do is to go through your plan step by step. This ultimate guide will help you in constructing that plan. Having a plan will take much of the uncertainty out of the process.

Buying a home is the biggest investment many will make in their lifetime. As you go through this guide there will be certain dos and don’ts. You decide what works for you.

As we step through each section from pre-buying to house hunting ultimately ending in your new home purchase and moving in the following information is meant to be a guide. Do your homework, being prepared will eliminate the scary part of being a first time home owner.

So let’s get started!

First Time Home Buying preparing for the buy:

Check credit reports

Check your credit report make sure it is clean and free of errors. You can check it here.

Make sure your credit score is over 730. You can check that here.

Once you make the decision to move forward to home ownership do not, I repeat do not borrow any more. Don’t go buy a car, sign a personal loan, and open up a new credit card. This will have a negative impact on your credit rating.

Save a sufficient down payment

This is a question as to what is the right amount for you to have? Some will say go zero down not a good plan in my opinion. Others will say pay cash. Yes 100% cash it is an option.

The best will be as much as you can afford. A minimum of 10% certainly more will be advantageous. Over 20% will save you PMI insurance. (PMI is private mortgage insurance and will cost you an extra $100 – $300 per month depending on the size of your mortgage). So set your goal for 20% and save.

How much can you afford?

While owning a home is a goal you certainly do not want to get yourself into a situation where you are unable to pay your bills. The mortgage company will allow between 30-33% of your gross income.

A strong recommendation is not to exceed 25% of your take home pay. This will include the principle and interest as well as property taxes and homeowners insurance.

Have a reserve

This is as important as the down payment perhaps more important. First make sure you have an emergency fund. If you think you don’t need one think again, issues will come up. Read my story.  It saved me and gave me peace of mind.

Second you will need extra cash for other unexpected expenses that come up with getting this deal done. Then there will be other things you will want.

What must you have?

Now that we have put some of the more difficult steps behind us we can now turn our attention to the more fun stuff. What does your dream house look like? How many bedrooms, bathrooms, basement, garage, family room, kitchen. One floor, two floors. I think you get the idea.

Decide what you must have!

What would be nice to have?

Now decide what would be nice to have but you can live without. A picket fence would be nice but not necessary. A central air conditioning system would be nice but window air conditioning also cools.

I think you get the idea.

Will you shop for new or re-sales?

This is perhaps one of the bigger questions. Depending where you live re-sales may be the best course. In other parts of the country new construction may work best.

In some other parts of the country you may be able to choose. Either direction will work. It is up to you and what you prefer.

I will tell you that if you think new will be less expensive after you move in because you may not have certain repairs both come with added expense. Just make sure you evaluate what they could be.

What location is best for your lifestyle?

Location, where will you buy? Check out the neighborhood, what kind do you want? Do you want to be in the city or in the suburbs? What is the school system like? Is the neighborhood declining or rising? What are the values of the re-sales compared to a couple of years ago?

What about resale or do you intend to live here for the long haul?

First off you should only buy if you intend to stay at least 3 years preferable 5. As discussed above what does the re-sales sell for are they increasing in value?

Get a Mortgage Pre-qualification or Pre-approval

Getting a pre-qualification or pre-approval will give you more credibility in your search. With this in hand you can shop with confidence.

Learn about this process here.

Does the mortgage payment fit you budget?

Making sure that you can afford the mortgage payment is essential. If you buy too much house and take out a larger than you can afford mortgage you will find yourself in financial trouble.

Take a look at your budget make sure the payment fits. Need a budget find out how to create one here.

Grab our free budget tools to help you in the process.

Time to shop:

Find a good real estate agent that will work for you

Finding a good real estate agent will benefit you beyond anything you can image. They will help you with the process. Remember they do this for a living. You do not buy a house every day.

They can have some insight on various properties. They will also have the information you need to evaluate the location and the re-sale.

A good agent will have lenders for you to contact as well as contractors to do inspections.

But the real estate agent works for the seller. Well yes and no. You could one day be a seller and a good one will want to maintain their reputation.  

Research the neighborhoods, schools any other amenities you may want

Gather as much information as you need. We discussed schools and neighborhoods already. You will certainly want to ride around and scope things out. Look at the surrounding properties what do you see? If they are not maintained may be this is not a good neighborhood.

Take your time there is a home for you

Do not be in a rush and make an offer on the first house you see. There is a place for you. You will find it. Be patient the right property will come your way.

Don’t fall in love with a home

This is perhaps the most important tip. If you fall in love with the place you will over pay. Remember it is just a house. And there is no such thing as a forever home. So once again be patient you will find that special place.

Here is another little piece of information most people stay in their home an average of seven years.

Make an offer:

Negotiate

So you found your dream home what next? Well make an offer! You know what you can afford so make absolutely certain you do not exceed your guidelines.

Don’t be afraid to negotiate. It never hurts to ask for something such as asking the seller to pay closing costs or some portion. Remember the price is always negotiable.

Home inspections

This is an important step and one you will want to pursue. You never owned a home before so don’t consider yourself an expert. Get expert opinions. And make absolutely certain that you are there for the inspection.

It something needs fixing ask the seller. Often the seller will agree to correct issues especially small ones.

What is the right type of mortgage?

If you have gone through the pre-qualification or pre-approval process this will be a formality. You will have already shopped with more than one lender. If not now is a good time.

Always look for the best rates and the lowest closing costs. If you need some tips you can find out about them here.

Homeowners Insurance

Make sure you purchase an adequate amount. The mortgage company will require you to purchase enough to cover the mortgage amount but this is not enough. You will also want to protect yourself so get replacement value.

Move in and live happily ever after

Make sure you have extra reserves for closing, moving expense, and potential maintenance and repairs and furniture. These are just a few of the potential post close expenses that will pop up. There may be landscaping and certainly something will need to be changed perhaps a light fixture or two.

So it will be an excellent idea to have extra savings beyond the down payment.

First time home buying: the ultimate guide is just that a guide. While this is meant to give you as much guidance as possible there will be other things that will come up. Get them included in your plan. The better you prepare the less likely you will have a surprise.

I hope this has been helpful, please let me know in the comments below what you think.

Remember sharing is caring, please pass this along.

Our popular Money Matters Wealth Tip series can be found HERE.

Other articles of interest:

10 Easy Steps to Creating a Budget that will put you on the path to Financial Independence

How to get out of Debt: Three popular Plans

4 Payoff Credit Card Debt Strategies

So what are you waiting for? Need help getting started, Grab our FREE budget tools to help you along on this very important journey.

Thank you for following along, Remember caring is sharing. Please pass this along.