First Home

How Do I Buy My First Home?
And First-Time Buyer Mistakes to Avoid

Congratulations – you’re ready to buy your first home! As a first-time home buyer this can be an intimidating task because your first home purchase will likely be the largest investment you will make. That’s a big deal! And it’s important to take this decision seriously.

So how should you prepare before taking the plunge into your first purchase? With over 500 sales under our belts, we know exactly how to ready you and make the home buying process a smooth one. 

Here is a guide to help equip you for closing your first deal with confidence:

  1. Prepare your Finances

Having your financial standing in order before talking to a bank, mortgage broker or realtor is crucial. These institutions need assurance that your money is where your mouth is so that they can confidently lend you a large sum of money.

a. Start Saving for a Down Payment & Closing CostsDepending on the loan you choose, you could pay anywhere between 3.5-20% of the purchase price. As you save, don’t underestimate how much money you’ll need – you might be surprised at how much cash is required for closing in addition to the down payment. You should expect to pay 2-3% of the purchase price in closing costs, plus cash reserve requirements on your mortgage payment and prepaid expenses like taxes and homeowner’s insurance. 

b. Check Your Credit – Getting approved for a mortgage requires a good credit score. If your score is sub-par, it could take up to 6 months for your score to improve – so get started now!

c. Get Your Documents In OrderPaperwork is the heart of the pre-qualification process. Here are the common recommended items to have ready:

i. Social Security Number
ii. Proof of Employment
Proof of Income
iv. Tax Documents from the previous 2 years
v. Place of Residence
vi. Bank Account Information
vii. Credit Information
viii. Gift Letter

  1. Get Pre-Approved for A Mortgage

Before you start shopping around for a loan or home, it’s important to know how much home you can afford. The lender can pre-approve you for a mortgage up to a specified amount after reviewing your finances from the documents listed above.

  1. Compare Down Payment Options and Loan Offers

As a first-time home buyer, you may be surprised to learn that different down payment and loan options are available to you. 

There are many down payment assistance programs. For example:

a. HUD First-Time Home Buyer Program
b. FHA Home Loan Program
c. National Homebuyers Fund
d. USDA Loans
e. VA Loans
f. 203k Rehab Loans
g. Good Neighbor Next Door Program
h. HomeReady Homepath Mortgage

Do your due diligence to investigate what option is right for you! A good mortgage broker should have information about different first-time home buyer grants in your area. They can also help you determine your eligibility and set you on the right track for finding a program that can get you in your first home much sooner.

  1. Hire a Realtor

Hint: That’s where we come in!

Before hiring a real estate agent to work with you should make sure they’re a good fit. Interview the real estate agent and come prepared with a list of questions to ensure they can meet your needs.

If you are outside Orange County and need a recommendation, consult Dave Ramsey’s ELP (Endorsed Local Provider) program to find the best real estate agent in your area. Asking family and friends who have had a positive home-buying experience for their referral is also a great option.

  1. Find your home and make an offer!

This is the fun part! Make a list of desired amenities you want in your home, as well as a list of deal-breakers, and start shopping. For up-to-date listings, search our website here.

At this point, you should be in a prime position to make an offer on your dream home right when you find it!

Once you have an official loan approval, and especially when you are in escrow, avoid:

  1. Making any large purchases on credit or from cash reserves
  2. Changing jobs
  3. Applying for a new credit card or change banking institutions
  4. Allowing credit inquiries after your loan approval
  5. Over-extending yourself on your purchase price

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