First-Time Homebuyers – What You Need to Know

Matthew Cook Maine

April 10, 2023

Buying your first home can be overwhelming. But there are many resources to help you get started. The first step for homebuyers is to decide which loan type is best for your situation. Some lenders offer special mortgages for borrowers with little money for a down payment or who may have lower credit scores.

Getting a Mortgage

Getting a mortgage is a critical step in the home-buying process. It enables you to purchase a home without putting down hundreds of thousands of dollars upfront.

Fortunately, several programs and products can help first-time buyers. These can include down payment assistance, tax credits, education, and closing cost assistance.

For example, Rocket Mortgage offers a Fresh Start program that helps first-time homeowners boost their credit before applying for a mortgage. This will improve your chances of securing a lower interest rate.

In addition, some lenders offer special loan programs for first-time homebuyers. These mortgages may have less stringent guidelines than traditional loans and often offer flexible down payment options.

Down Payment

Saving money for a down payment on your first home can be one of the most daunting tasks. With rents climbing, student loan and car payments still coming due, and inflation robbing your paychecks of all their buying power, it’s no wonder that a quarter of all first-time buyers say they struggle to save for a down payment, according to the National Association of Realtors(r).

However, there are options for first-time homebuyers with a small sum of cash for a down payment. Federal and state down payment assistance programs can help you achieve your dream of homeownership without breaking the bank.

Closing Costs

Closing costs are the fees you’ll need to pay to close your home loan. They can average 3% of the total purchase price and vary by state.

Your lender will provide an initial estimate of closing costs when you apply for a mortgage. These costs will be itemized in your loan disclosure a few days before closing.

Be sure to review your lender’s initial estimate with a fine-toothed comb and ask them any questions you may have about any new fees that appear on your closing disclosure. Be especially wary of a lender who adds on unnecessary “junk” fees that duplicate existing ones or haven’t been disclosed in advance.

Closing costs can be difficult for some buyers to come up with the cash to cover, but they don’t have to impede buying a home. Negotiation and comparison shopping can help reduce closing costs or eliminate them.

Home Inspections

A home inspection is an essential step that first-time buyers should not skip. It helps them remove any loopholes that may surprise them in the future and cost them thousands of dollars in maintenance.

A good home inspector will go through the entire house and check it for any potential safety hazards or structural issues that might not be visible outside. A professional inspection will provide a detailed report, including all the findings.

A home inspection will usually take a few hours, depending on the house’s size and its condition. It will also involve climbing onto the roof and testing the HVAC system, electrical outlets, and plumbing.