First-time home buyer guide

If you are getting ready to buy your first home then it is natural to be experiencing a range of emotions. Most people buying their first home find themselves extremely excited and quite scared at the same time. While investing in a home is a massive undertaking, knowing what to expect will make the journey less scary. The most effective way to overcome your fears is to research the home buying process. This first-time home buyer guide will help you navigate each step of the process and give you insight into the common mistakes to avoid.

There is more to buying a home than merely searching for listing online and making offers. There are numerous steps to take before scrolling through photographs and listing descriptions. Here is a breakdown of the steps involved in the home buying process.

Review your credit score

Before you jump headfirst into searching for a home to buy, assess your finances to ensure that you can afford to buy a home. A credit score is one of the most important indicators of your readiness to buy a home. After all, your credit score is the first thing that mortgage lenders use to ascertain if you qualify for a home loan. With this in mind, the higher your credit score the better your chances of accessing a home loan. Moreover, buyers with higher credit scores tend to get better mortgage terms and rates. With this in mind, ensure that your credit score is sufficient to meet lenders’ requirements.

Your savings should cover the down payment

Secondly, ensure that your savings will sufficiently cover the down payment as well as all relevant closing costs. Although you are getting a home loan, there are still some costs that are not covered by the mortgage. You will need to pay a down payment upfront to buy a home. The down payment you pay will be a specific percentage of the purchasing price of the home. One important thing to keep in mind is that the larger the down payment you make the lower your monthly mortgage payments. Besides this, borrowers who make larger down payments are viewed as less risky and tend to get lower interest rates. As you make your down payment remember to keep enough funds to sufficiently meet closing costs. Simply put, closing costs are the fees for processing and servicing your home loan. Similar to down payments, closings cost are calculated as a percentage of the purchasing price.

Figure out how much house you can afford

After checking your savings you also need to critically calculate just how much house you can afford. Your mortgage lender will advise just how much of a loan you qualify for, but experts advise that you should not borrow the full amount. Once you know the loan amount that you qualify for you can then ascertain the size and type of house you can afford to buy. By figuring out your budget ahead of time you can avoid overextending yourself by borrowing more than you can afford to pay back. The best approach to calculate the amount of house you can afford is that your housing expenses should not exceed 28% of your gross monthly income. Moreover, your monthly debt payments should not be greater than 36%. But what exactly goes into your monthly mortgage payments?

1. Principal

The principal is simply the amount of money that you borrow to purchase your home.

2. Interest

You will also have to pay interest on the amount of money that you borrow. The interest is a charge for the privilege of borrowing the money.

3. Taxes

You will also be required to pay Government taxes based on the appraised value of your home.

4. Insurance

Another cost that you will have to account for is insurance. You will have to pay insurance to get cover for your home against potential damage.

Find a lender

There are various mortgage lenders that you can choose from, so take some time to research and learn more about their products. You should pay particular attention to their mortgage options, interest rates, and the closing costs they are offering borrowers. Insist on getting a mortgage estimate from each lender to help you make a thorough and informed comparison. Identify a lender with the best terms, lowest rates as well as great customer service. Another equally important consideration is to find a lender offering you a simple and seamless home financing process.

Acquire preapproval for a mortgage

You must know the amount of money you qualify to borrow before you can determine the price range of homes to look for. As such, you need to get preapproved for a home loan. Besides this, a preapproval letter can make your offer stand out in a competitive market. This means is there are multiple offers on a home, sellers are apt to choose buyers with preapproval. After all, preapproval minimises the risk of your financing falling through. Keep in mind that there is a distinct difference between being preapproved and prequalified. Prequalification does not guarantee that you will receive financing when you require it. This is because prequalification is merely an estimate of your finances. To get preapproval, a mortgage lender will require proof of income and assets. Moreover, you will need to provide your lender with your personal information and verification of your employment.

Pick an ideal real estate agent

While it is possible to go it alone, most experts generally agree that first-time homebuyers should find representation when buying a home. As such you should choose a real estate agent who will identify available properties as well as schedule showings for you. Also, your real estate agent must advocate for you, ask the necessary questions and receive the relevant disclosures. Moreover, your agent should come up with competitive offers and appropriately negotiate transactions. There is so much that real estate agents bring to the table and the experience, as well as the skills they provide, are invaluable. However, the are disparities in what real estate agents offer. Therefore you must spend some time researching and identifying the right real estate agent to represent your particular needs. As you sit down to interview possible candidates, evaluate their experience and ascertain how well you can communicate with them.

Search for your new home

When you have picked a real estate agent to represent you it is time to work out the qualities you are looking for in your new home. Some of the key considerations include the location, size, number of bedrooms and bathrooms, age and condition of the home, as well as the amenities. By defining your specific priorities you can effectively communicate your needs to your real estate agent. That way you will not waste time looking at properties that are not ideal for you. However, as you list your priorities you should also identify the things you are willing to sacrifice. Very rarely do you find a property that ticks every box on your checklist. As such, finding the right home is likely to require a few compromises.

Your agent will identify and send you listings based on your preferences. You are also free to compliment your real estate agent’s efforts by searching for properties on the various platforms at your disposal. If you identify any property of interest then communicate with your agent so they can arrange a viewing for you. Make sure that both the home as well as the neighbourhood meet your needs. As you view properties be careful to identify any problems a home might have. Communicate your impressions to your real estate agent, this will help them refine your search parameters.

Make an offer

When you identify a home that meets your needs it is time to make an offer. By undertaking comparable market analysis, your real estate agent can help determine the amount to offer a seller. This means your agent will look at similar properties that have sold recently in the same area. This will help your real estate agent determine the real market value of the home you are interested in. Your competitive offer will be greatly influenced by the real market value of the home and the amount of time it has spent on the market. However, keep in mind that your negotiating power is also influenced by the current strength od the market. If there are certain conditions that you require to be met before you purchase the home then add these contingencies to your offer. This will mean the sale of the home is dependent on the contingencies being met. Moreover, you can walk away from the contract without any financial repercussions.

Earnest money deposit

Once your offer is accepted, you will be required to make an earnest money deposit into an escrow account. This deposit will highlight the seriousness of your offer and will prompt the seller to remove the home from the market. In most cases, the earnest money deposit is anywhere between 1% – 3% of the purchase price. The earnest money deposit will be kept in an escrow account until closing. At this point, the money is applied to your down payment as well as closing costs. If you have not included contingencies in your offer then you will forfeit this amount if you back out of a purchasing agreement.

Inspection and appraisal

Take the necessary precautions of having the home inspected and appraised before you close. This will ensure that you know the true value and condition of the home before the sale is final. Engage the sellers of an unbiased third-party home inspector to ensure that there aren’t any undisclosed issues. If the inspection discloses any major issues then negotiate with the seller to either have them attended to before closing or deduct the funds from the purchase price. If you have included contingencies you can withdraw your offer without losing your earnest money deposit.

Besides an inspection, your mortgage lender will require that the home be appraised. An appraisal will help estimate the true value of the home by examining comparable sales, market trends and public records. The appraisal acts as a protective measure that ensures you are not paying more than the true value of the home. Besides this, an appraisal also reduces the risk for your mortgage lender. An appraisal makes sure that your lender is not loaning you more money than you need and can ultimately afford to pay back.

In addition to an appraisal, your mortgage lender will also insist on you getting homeowners insurance. Your insurance policy should cover the cost of rebuilding the home from the ground up. Take time to shop around for the best insurance provider. Pay attention to customer reviews, coverage and price.


Now comes the time to close. Closing is the day that you sign all the paperwork thereby finalising the sale and officially becoming a homeowner. Ensure that you inspect the property again before closing to determine if requested repairs were carried out. If major repairs were not carried out communicate your agent to inform the seller to make amends. Some of the documents that you will be signing at the closing include the closing disclosure, promissory note, deed of trust and certificate of occupancy. At this point, you will also have to pay the closing costs including your mortgage application, appraisal, survey and title search. After the signing and disbursement of funds, the property title will be transferred into your name and you will be handed the keys to your new home.

Compare listings