The Lowdown for the First-Time Home Buyer: Best Advice We’ve Heard 

Hindsight is 20/20. That’s why we can learn so much from people who’ve already acquired their deeds. What key piece of wisdom would they have loved to hear at the start?

So here it is. A collection of the best thoughts we’ve heard from seasoned homeowners.

1. Don’t Let ‘Em Discourage You.

Some deed holders recall the days they were just starting out. People said:

Don’t buy ‘til you save up for a 20% down payment!

Don’t buy while interest rates are high!

And so on.

Words of caution are worth a listen. And yet there’s something to be said for getting “on the ladder” early in life.

Now, it’s true that putting down less than 20% and grabbing an FHA loan (often the easiest path for first-timers) means you’ll be paying for mortgage insurance for the life of the loan. With the Federal Housing Administration, you can’t get out of paying that extra monthly cost unless you refinance later. (With a conventional loan, you can shake off that extra cost once you build up equity amounting to 20% of the loan.)

And yes, it’s absolutely true that you shouldn’t pour everything you have into a home purchase.

That said, working hard for the income you need is far easier when you’re young than it is later in life.

So, should you wait and keep saving up for 20%? Wait for a better interest rate? Or act as soon as you reasonably can? Maybe interest rates will drop at some point later. But just as likely, they’ll rise. So, waiting comes with its own risks, just as buying does. Risk is part of investing in a large asset. It’s also part of not investing when you could. One thing an adviser might say that’s almost certainly right? You’ll never be at a better age to buy a home than you are now.  

2. Bigger ≠ Better.

The bigger the home, the more it costs to pay property taxes on it, take care of it, furnish it, paint it, heat and cool it, redo the floors or the roof… You get the picture. Utility costs are much easier on the owner of a modest-sized home. Yard work is much, much easier.

Consider this, too. By getting a small home, you might just have something that works as a rental property eight or ten years from now, if you do decide you need more house.

All that said, one and half bathrooms make a huge difference compared to one bathroom. (You might be happier for longer in your home if you can have guests or family stay overnight comfortably!)

Generally speaking, big homes aren’t in high demand. Modest homes are. Walkability, a good school district… Those might well be more valuable than size.

Check with the home’s county (not the real estate websites) to learn about the real amount of property taxes you can expect to pay. And keep this in mind. Property taxes do rise from time to time.

3. Embrace First-Timer Status.

Are you a first-timer, or someone who’s not been a homeowner for 3+ years? Look for first-timer programs. Some cut thousands of dollars off the price of a home.

Some first-time buyer programs require home buyer courses. Don’t let that put you off. Taking a home buyer course is a lot like taking safe-driver courses. Each one offers a wealth of information. Everyone ought to take them.  

Lenders can tell you about first-time buyer discounts. Local banks may have better rates and more accessible service. Check your state for first-time buyer funding opportunities. These might spare you from having to touch a 401(k) or other sources of funds. And you’ll want to hold onto a cash reserve. Things break. And never at handy times. You’ll need the funds there when those times come.

From the moment you first consider acquiring a deed, monitor your credit profile with care. With high interest levels and high home prices, you’ll need a solid credit profile to qualify for the necessary funds and a manageable rate. That, in turn, gives you more leeway to direct the optimal amount to your mortgage lender. It’s best to pay under a third of your income on your mortgage. Steadily paying off a 30-year mortgage can be the key to handling the financial burden of monthly payments.

4. Set a Spell.

More than an investment, a home is a place to live. Pick your location carefully and be ready to make it yours for a while.

The old advice was to expect to keep a home five years just to break even. After those early years, you’d start building substantial equity. In this economy, with both home prices and interest rates elevated, it will take a few years longer than that.

Remember, you pay mostly interest when you make loan payments in the early years of a mortgage loan. Years later, you really start chipping away at the principal.

Plus, it will take a good deal of financial preparation to sell a home, get another mortgage, and make a move. So, if you find a nice home in a nice place and you can afford it, think of the neighborhood as home.

If you’re ready to put down roots, think in terms of a place you’d be comfortable in a decade’s time. Set a spell.

5. Find a Mighty Home Inspector.

Your agent, a local lender, or knowledgeable homeowners can point you to a good inspection company. Getting a good one, and getting the fixes made, will greatly support your investment in your new home.

Preferably, you and your agent will follow along as the inspector works, learning. Taking notes. (To get in the mood for this, learn about inspections and have a chuckle while you’re at it.)

And read the inspection report with care. Ask your seller to make the necessary fixes, or negotiate the price in light of the needed repair work. Repairs and renovations do not come cheap these days. Actual costs may be two to three times more than your seller anticipates. Handle this part of the bargain with due diligence. 

Ask about exterior things, too: What about the slope of the ground? Where will rainwater flow? What kind of shape is the sewer system in? Neighbors can also clue you in on important aspects of the home’s surroundings.

Once the deal is made, plan to reserve one percent of the home’s value for upkeep. Buying a home that’s more than 30 years old? Make that 4%. Consider the advice from Fannie Mae on this.

Go Forth and Conquer!

There’s a running theme here. Did you spot it? Yes, sign up for something that makes you comfortable. People will offer advice. Listen. But you’re the one who must feel you’ve picked the place that truly supports your flourishing.  

There will always be “bigger, better” homes, but acquiring a deed to a nice home at a fair price may just be the best deal you ever make.