Key takeaways:
- Get your finances in order: Having a clear picture of your finances, including how much you have saved for a down payment, current credit score, and overall budget can help streamline the process and reduce unexpected expenses.
- Work with a trusted real estate agent: An experienced agent can offer helpful guidance through the buying process in addition to negotiating on your behalf.
- Don’t be afraid to negotiate: Buyers have the upper hand in roughly 70% of U.S. housing markets, so don’t be afraid to negotiate on price, repairs, closing costs, or timeline.
The U.S. housing market has been stuck in a slow and expensive holding pattern for years, which has kept many homebuyers on the sidelines waiting for conditions to improve. But because buyers are so hard to come by, they tend to have negotiating power in most cities. Especially in the Southern third of the country, many sellers are struggling to attract offers and are willing to give concessions to attract buyers.
Depending on the location, now may seem like an ideal opportunity for new homebuyers to step into the market and see what’s out there. In Newark, San Francisco, San Jose, and Nassau County, more than half of homes are selling above asking price. However, less than 10% of homes are selling above asking price in Florida and Texas, giving buyers a considerable leg-up on negotiation.
Whether you’re just starting out on your homebuying journey or you’ve been through the process several times, these 14 first-time homebuyer tips will give you the wisdom to navigate the homebuying process with ease.
1. Take a homeownership course
Homeownership courses can help clarify each part of the homebuying process. They cover topics like budgeting, building credit, mortgage options, house hunting, and closing.
If you’re unsure where to start, check with HUD-approved counseling agencies like BALANCE, GreenPath, or Credit.org. You can also check with non-profit organizations and local housing authorities to find available courses. Along with the expertise you’ll receive, some programs or lenders may offer incentives for completing courses such as lower interest rates and down payment assistance.
2. Look into first-time homebuyer benefits
Many first-time homebuyer programs are designed to make homeownership more accessible by reducing upfront costs, lowering monthly payments, and helping with mortgage qualification.
- State and local programs: Cities and states may offer down payment assistance, forgivable loans, or closing cost help. Check with your state’s housing finance agency for options.
- Federal loan options: Government-backed loans like FHA, VA, and USDA loans are popular among first-time buyers, offering flexible credit and down payment requirements.
- Fannie Mae’s HomePath Ready Buyer™ Program: This offers up to 3% in closing cost assistance when purchasing a HomePath property and completing a homeownership course.
- Good Neighbor Next Door: Offered by HUD, teachers, law enforcement, firefighters, and EMTs may receive a 50% discount on eligible homes in revitalization areas.
- Mortgage Credit Certificates (MCC): Some state programs offer MCCs, which provide a federal tax credit for a portion of annual mortgage interest.
While these programs can be helpful, many have eligibility rules based on income, location, or occupation. It’s best to start your research early and gather the required forms and documentation ahead of time.
3. Save up for a down payment and closing costs
It’s important to start saving early for a down payment — ideally 20%. With 20% down, you can qualify for a lower interest rate and avoid private mortgage insurance (PMI). If a 20% down payment isn’t realistic, it’s worth checking state and local first-time homebuying programs for down payment assistance.
Best practices for saving include budgeting, opening a separate savings account with automatic monthly payments, reducing major expenses, and monitoring your spending to determine where you need to cut back.
In addition to a down payment, you’ll also want to anticipate closing costs. Closing costs are fees and expenses you’ll pay when finalizing the home purchase. These typically range between 2-5% of the home’s purchase price. On a home purchased for $350,000, closing costs could run anywhere from $7,000 to $17,500.
If you’re looking to save, consider asking the seller for concessions, exploring lender credits, or looking into assistance programs that cover closing costs.
Common closing cost fees include:
- Application fee: Up to $500
- Appraisal fees: $300-$500
- Title insurance: 0.5% to 1% of the loan amount
- Escrow fees: 1% of the home sale price
- Recording fees: $125
- Property taxes: Varies
- Homeowner’s insurance premiums: Varies
4. Determine how much house you can realistically afford
Before you start browsing listings, it’s important to understand what fits comfortably within your budget. A home affordability calculator can help you estimate your price range based on your income, debts, down payment, and projected expenses. While you may have heard not to spend more than one-third of your income on housing, that may be unreasonable depending on your household income. A household earning the average U.S. income would need to spend 40% to afford a median-priced home, so take the one-third rule with a grain of salt. What’s more important is that your home doesn’t become an excessive financial burden.
You don’t need to have everything fully figured out, but start with an amount that feels realistic for your savings goals. From there, you can adjust as needed while weighing monthly mortgage payments, taxes, insurance, and other homeownership costs.
5. Factor in home maintenance costs
Every home has one thing in common: they require ongoing maintenance. When preparing your finances, be sure to budget for regular upkeep and repairs. A good rule of thumb is to set aside 1% to 4% of your home’s value in a maintenance fund. This will help you keep your home in good shape, prioritizing routine maintenance and home repairs as they occur.
“When I bought my first house, the only thing I was worried about was whether I could afford the mortgage payment. After I needed to repair my HVAC unit, replace my roof and furnish my entire home, I quickly realized that the mortgage is only one piece of the homeownership puzzle.” – Andy Hill, finance podcaster, Marriage, Kids, and Money
6. Shop around to compare lenders and loan terms
Comparing mortgage lenders and terms can save you thousands of dollars over the life of your loan, so don’t settle for the first offer. Experts generally recommend applying to several lenders before deciding.
Loan types for first-time homebuyers include:
- Conventional Loan: Offers flexible down payment options as low as 3% with private mortgage insurance (PMI). These require a higher credit score and must fall within conforming loan limits.
- FHA Loan: Designed for buyers with lower credit scores. These require just 3.5% down, but includes mortgage insurance for the life of the loan.
- VA Loan: Available to eligible veterans, active-duty service members, and family members. No down payment or mortgage insurance is needed, often with lower interest rates.
- USDA Loan: Ideal for buyers purchasing in eligible rural or suburban areas. No down payment is required, but income limits apply based on location and household size.
- Adjustable-Rate Mortgage (ARM): Starts with a lower fixed rate, then adjusts based on market trends. ARMs can help you save early on, but carry the risk of rate increases.
- Fixed-Rate Mortgage: Offers predictable monthly payments and a stable interest rate for the loan’s duration. This is ideal for buyers who plan to stay in their home long-term.
When choosing a mortgage, consider your credit score, down payment savings, income stability, and location to find the best fit for your financial needs.
7. Get preapproved before you start house hunting
Before finding your dream home, take the important step of getting preapproved for a mortgage. Preapproval will signal you’re a serious buyer and help you understand how much you can borrow.
Before getting preapproved, it’s a good idea to spend some time improving your credit score. A higher credit score leads to better mortgage interest rates, saving you thousands over time. And while you’re at it, avoid making any large purchases like a new car before buying a home as it can impact your credit.
It’s important to note that preapproval and prequalification are different: Preapproval is a conditional offer from a lender of how much they’re likely to lend you based on your financial situation, while prequalification is an estimate of how much you might be able to borrow based on provided financial information. Preapproval holds more weight than a prequalification.
What you’ll need to provide for mortgage preapproval:
- Proof of income
- Employment verification
- Recent pay stubs
- W-2 forms
- Photo ID
- Social security number
- Credit history
- Debt-to-income ratio (DTI)
8. Make a priority checklist
Before house hunting, it’s time to evaluate your preferences with a priority checklist. You’ll want to separate must-haves from nice-to-haves. For example, the number of bedrooms and location of the home might be essentials, while quartz countertops might simply be a nice addition.
When crafting your list, think long-term. Consider how your needs might change in 5 to 10 years. Will you need more space? Will a large yard feel like too much upkeep?
Also, think about practical details beyond the home itself, such as neighborhood safety, commute times, school district ratings, and parking options. These can greatly affect your daily life and future resale value.
9. Do your homework during the home search
Once you have your list, it’s research time. Be sure to consider the following when searching for homes:
- Neighborhood: Some neighborhoods are more neighborly than others, so exploring the neighborhood in-person is a great way to get a feel for the community and daily life. Take note of things like traffic flow, noise levels, and if possible, try to talk to some of the neighbors.
- Local market: It’s a good idea to check the local housing market to get a sense of pricing, competition, and how much room you have to negotiate.
- Future development: Check city planning or zoning websites for upcoming residential and commercial developments. A new park might boost property value, while a highway expansion could impact quality of life.
- School zones: Even if you don’t have children, school ratings are important for resale and property value. Use online tools and local school district sites to compare options. You can also find information about school districts directly on a listing on Redfin.com.
10. Work with a trusted real estate agent
A local real estate agent can guide you through the buying process, offering expert advice and negotiating on your behalf. It’s best to connect with at least a few agents before selecting one. Like other professionals, agents have unique skills and personalities, so it’s worth finding one who’s compatible with you.
Select an agent who:
- Has a compatible schedule to meet for showings, reviewing contracts, and discussions.
- Has a similar communication style that suits your preferences.
- Feels comfortable and trustworthy, so you feel supported during the homebuying process.
- Has local market knowledge of current trends, property value, and neighborhoods.
11. Make an offer you feel comfortable with
When you’re ready to make an offer, pay attention to more than just the list price. Recent sales, market trends, and the home’s condition should all contribute to your offer. Lean on your real estate agent to help you make an informed decision.
Include key contingencies like a home inspection, appraisal, and financing. These protect your interests and give you an out if something unexpected pops up. In a competitive market, some buyers waive contingencies to stand out, but it’s a risk worth weighing carefully.
You’ll also submit earnest money, a small deposit showing you’re serious. It’s typically applied to your down payment or closing costs if the deal moves forward.
12. Negotiate with the seller
Once your offer is submitted, don’t be afraid to negotiate. Right now, buyers have the upper hand in roughly 70% of U.S. housing markets as of July 2026. Your agent can help you understand where you have room to negotiate, but here are a few areas to focus on:
- Price: If the home is overpriced, your real estate agent can help you with a counter offer based on comparable sales. Many sellers are still overpricing, leading to stale or canceled listings.
- Repairs: Use your home inspection report to negotiate. You can request that the seller makes repairs before closing or ask for a credit so you can handle them after moving in.
- Closing costs: It’s common to ask the seller to cover some of the closing costs. This can ease upfront costs, but some lenders put a cap on how much a seller can contribute.
- Timeline: Flexibility can work in your favor. You might offer to adjust the closing date to meet the seller’s needs in exchange for other concessions.
13. Hire a home inspector and appraiser
A home inspection and appraisal are essential steps before finalizing your purchase. A licensed home inspector will evaluate the property’s condition, checking for issues like structural damage, plumbing concerns, or roofing problems.
An appraiser, on the other hand, will assess the home’s market value. This protects you and your lender from overpaying. Together, these steps help ensure you’re making a smart investment and give you a chance to renegotiate or back out if major issues arise.
14. Save physical copies of everything
Once you close, stay organized by keeping all your key documents in one place. A dedicated folder or a secure digital system should do the job.
This paperwork is essential for tax purposes, future refinancing, or if you decide to sell. Keep copies of your purchase agreement, loan documents, appraisal, inspection report, title insurance policy, and closing disclosure. Having everything on hand will save time and stress down the road.
First-time home buying tips: What comes next?
Your journey doesn’t end at closing. Stay ahead by keeping up with home maintenance, saving for unexpected repairs, and building a go-to list of local pros. Now that you have the information you need, you can feel confident and prepared for life as a new homeowner.
