How to Buy a House for the First Time: 10 Expert Tips
Buying a house for the first time can be exciting, nerve-wracking, and downright wild. Your thoughts will churn constantly around what questions you should ask your real estate agent, how high your credit score should be, and how much money you really need to buy a house for the first time. It’s a lot to manage at once. But with the right approach, you can navigate your first home purchase like a pro.
Here are ten expert tips on how to buy a house for the first time so you can slow down and avoid common first-time homebuyer mistakes:
1. Partner with a good real estate agent who offers a rebate.
2. Check your credit report for accuracy.
3. Get your paperwork in order.
4. Know the difference between pre-qualifications and pre-approvals.
6. Seek out a first-time homebuyer program.
8. Get an estimate of closing costs.
9. Make an offer with contingencies.
10. Ask the seller about their home insurance costs.
🏡 Need a realtor? Try Clever Real Estate’s free agent-matching service. Match with top local buyer’s agents nationwide, qualify for cash back after closing. Find top agents near you. |
Jump to section: How to prep your finances | How to pick the right mortgage | How to buy the right home
Buying a house for the first time: How to prep your finances
1. Partner with a good real estate agent who offers a rebate
When it comes to buying a house for the first time, your real estate agent is your main ally. A good agent will help you understand the mortgage process, guide you through home buying and negotiations, and parse out the details in the final sale contract. They can analyze market trends, help you make a competitive offer, and identify “red flags” in certain houses.
Many first-time homebuyers don’t realize you can work with an agent who offers a cash back rebate, which can be up to .5% of your new home’s price. While you can certainly try to negotiate rebates with agents on your own, it’s a lot easier to use a service that offers pre-negotiated rebates with top agents.
Best home buyer rebates for first time buyers
How much cash back? | How do you get the rebate? | What can you spend it on? | Are you always guaranteed the full rebate? | |
|---|---|---|---|---|
$250 | Buy a home with a Clever agent in an eligible state. | Anything you want. | Yes, as long as you live in an eligible state and you buy a home. | |
Up to .5% but actual amount depends on a multitude of factors | Sell and buy a home with a Redfin agent within 12 months. | Only closing costs. | No, Redfin calculates your refund based on location, so it could be lower than .5% or not available at all. |
Do you live in one of these states? Alaska, Kansas, Louisiana, Mississippi, Missouri, Oklahoma, Oregon, and Tennessee all prohibit home buyer rebates. If that’s the case for you, look into qualifying for first-time home buyer grants.
2. Check your credit report for accuracy
Your credit has a major impact on what kinds of loans you can get and the interest rate a lender will offer you. While these reports are usually accurate, it’s not uncommon to find errors. In fact, according to a 2021 survey by Consumer Reports, around 34% of Americans found an error in their credit report in 2020.
You can get a free credit report every 12 months from the three major crediting bureaus: Equifax, Experian, and TransUnion. If you’ve already requested a free credit report from these bureaus, you’ll have to pay a small fee for another (by law, no more than $13.50).
Even if you have a good idea of your credit score, you should still inspect your credit report for accuracy: one nasty mistake could mean the difference between a great score and a fair one, which could cost you thousands in terms of what types of rates and mortgages you’ll be eligible for. If you find incorrect information on your report (even if it's the wrong address), contact the credit bureau immediately, using one of the numbers below. Federal law requires credit bureaus to examine a dispute within 30 days.
| EquifaxP.O. Box 740241 Atlanta, GA 30374-0241 (800) 685-1111 | TransUnionP.O. Box 2000 Chester, PA 19022 (800) 888-4213 | ExperianP.O. Box 2002 Allen, TX 75013-0036 (888) 397-3742 |
📚How is your credit score calculated?
Your credit score is calculated using five primary factors: amount of debt (30%), payment history (35%), the age of your accounts (15%), new credit (10%), and credit mix (10%). When you’re applying for a mortgage, try not to open or close any accounts, as that can lower your credit rating. You should also calculate your debt-to-income ratio to see if you need to pay down debt before buying a home.
3. Get your paperwork in order
To get a mortgage, you’re going to need to present a lot of documents. Before you start the mortgage process, you should have the following organized and ready:
- W-2s and income tax returns from the last 2 years
- Pay stubs for the previous 1–2 months
- Bank statements of your checking and savings accounts
- Statements of your assets (retirement accounts, stocks, rental income)
- Gift letters (if part of your down payment is gifted to you)
Keep these documents somewhere safe, ideally in both physical and digital form.
Buying a house for the first time: How to pick the right mortgage
4. Know the difference between pre-approvals and pre-qualifications
Pre-qualifications and pre-approvals are not synonymous, they don’t hold the same weight, and only one can truly help you in the home buying process (a pre-approval), while the other is just a guesstimate.
A pre-qualification means that someone has looked through your finances (assets, income, and debt) and determined that you are qualified to buy a property in a wide price range. Often, lenders won’t even ask for income or bank statements, letting you handwrite your finances without any proof. This is why most sellers consider pre-qualifications nothing more than a "gut feeling," as it involves no vigorous inspection of your finances.
A pre-approval is a much heftier examination of your income, debt, and credit score. A lender will look at your paystubs, W-2s, bank statements, and credit report to decide how much mortgage you can reasonably afford.
Having a pre-approval may provide you with an advantage over other home buyers when you make an offer. While it doesn’t guarantee you’ll get a mortgage, it has more weight than a pre-qualification. Obtaining proof of funds is also often required before your real estate agent will start showing you houses.
5. Examine your loan options
The loan program that’s right for you will depend on your down payment, credit score, and the type of house you’re looking to buy. Use your first-time homebuyer mortgage calculatorto run the numbers. Generally for first-time homebuyers, there are four major loan programs you can choose from:
FHA Loan (Federal Housing Administration)
The FHA loan is a government-backed mortgage that offers a low down payment of 3.5% and credit score of 580. These loans are ideal for first-time homebuyers who don’t have a substantial down payment or a lower-than-average credit score. Learn more about FHA loan qualifications.
VA Loan (Veterans Affairs)
VA loans are mortgages available to veterans and military servicemen. They have no minimum down payment requirement, no credit score requirement, and a “recommended” debt-to-income ratio of 41%. To qualify for a VA loan, you have to serve 90 continuous days during wartime, 181 days during peacetime, or more than 6 six years in the National Guard or reservists. Learn more about VA loan qualifications.
USDA (United States Department of Agriculture)
The USDA home loan is another government-backed mortgage that helps home buyers in rural areas purchase homes. The USDA mortgage is a zero-down payment mortgage. To be eligible, you must buy property in certain approved rural areas. The house must also meet certain HUD property standards, meaning its safe, secure, and sound. Learn more about USDA loans.
Conventional mortgage
Conventional loans are mortgages that are not backed by the federal government. These loans are ideal if you have a good credit score, low debt, and a hefty down payment, as you can get a very low interest rate with good finances. Learn more about conventional loan requirements.
FHA | VA | USDA | Conventional | |
|---|---|---|---|---|
Min. down payment | 3.5% | No minimum | No minimum | 3% |
Min. credit score | 580 (500 with a 10% down payment) | Varies by lender | 640 | 620 |
Max DTI | 43% | 41% (recommended) | 41% | 43% |
Income limits? | No | No | Max of 115% of area median income | No |
Loan limits for a single-family home | $420,690 | $647,200 | None | $647,200 |
6. Seek out a first-time home buyer program
Many states have first-time home buyer programs that offer down payment and closing cost assistance. This money is often granted to you, with no strings attached. You just need to apply, and you’ll get a certain amount of money to put toward closing costs or your down payment. Some programs might even match your savings.
Buying a house for the first time: How to buy the right home
7. Be aware of your emotions
Buying a home for the first time involves almost every emotion on the scale: excitement, nervousness, anxiety, sadness, stress, sometimes rejection, and often overwhelming joy. But the emotion you want to watch out for is falling in love too fast.
To be sure, there’s nothing wrong with loving a house. But if it clouds your judgment, it can get you into trouble. You might buy a more expensive house than you can truly afford, just to have “the one.” Or you might forego the home inspection to seem more competitive to sellers.
If you feel like you’re obsessing too quickly, it’s okay to take a step back. Our recent research on home buyersshows that 30% of home buyers believed they rushed to make a decision and overspent. Make decisions based on your needs and budget, not solely on your emotions. If the house is too expensive or has too many contingencies, don’t be afraid to walk away: you’ll fall in love plenty of times before you actually buy a house.
8. Get an estimate of closing costs before making an offer
Closing costs for buyers typically fall between 3% and 6% of your loan amount, or roughly $9,000 to $18,000 for a $300,000 mortgage.
» TRY CLEVER: Buy with top local agents, get cash back after closing (learn more)
The majority of your costs are related to the mortgage itself (sellers cover realtor commissions and other costs associated with the house). To get a good estimate of your closing costs, request a loan estimate from your lender (or lenders) before applying for a loan. A loan estimate will list out all the costs associated with purchasing a home, and it can help you compare different lenders through the APR (annual percentage rate) of each loan.
9. Make an offer with contingencies
A contingency is basically a clause in your contract that requires an action or condition before the contract becomes “binding,” meaning you can’t exit without consequences. There are several contingencies that should be included with your offer. Here are some examples of contingencies you can include:
- Mortgage contingency: The mortgage contingency basically says,"If I can't get a mortgage, then there's no sale.”
- Inspection contingency (or “due diligence”): This gives you the right to inspect the home within a period of time. If you find more costly repairs than you were expecting, you can cancel the contract without penalties.
- Termite inspection contingency: Just as it sounds, a termite inspection allows you to cancel a contract if you find termites.
10. Ask the seller about the cost of their homeowners insurance policy before making an offer
By now, you probably know you’ll need homeowners insurance after you buy a home. But here’s a fact many homebuyers don’t know: a prior owner's insurance claims can affect the cost of homeowners insurance for you.
If the seller has filed a claim with their homeowners insurance company, you may have to pay a higher rate as a result. This isn’t always the case, and you might want to compare quotes from different companies before choosing a policy. But it’s good to keep in mind, as many mortgage estimates may overlook it.
⚡Find out if the house requires flood insurance. Flood insurance policies can cost around $750 per year. Before making an offer on a home, take a few minutes to research if it’s in a region that requires flood insurance. Learn more about flood insurance.