Buying a home for the first time

Buying your first home can be a rewarding experience. But it’s a big commitment – one that you should only make if the financial, emotional and lifestyle considerations make sense for you.

Before you start looking for your first home, ask yourself:

Are you comfortable with what you can afford?

If you can’t afford to buy in a certain neighborhood or if you’ll face a significantly longer commute, it may make more sense to wait to purchase a home.

Do you have cash saved for the down payment and closing costs?

You will need money for your down payment and may be responsible for closing costs on the loan. You’ll also face new costs in addition to your mortgage payment. If you have limited savings, it may make more sense to continue a lower cost living arrangement until you can save more.

How financially stable are you?

If there’s a chance you could be laid off soon, or if your job requires you to move to a different city in the near future, buying may not be the best choice for you right now.

Do you have good credit?

If you have recently missed payments or maxed out your credit cards, you may consider waiting to purchase a home until your credit improves so you can qualify for a lower interest rate.

Here are some tips to help first-time home buyers:

Take the advice

Your real estate agent is your partner and a valuable asset. They know the neighborhoods and schools and will help negotiate a fair price for the house you want. Your loan agent can answer questions about how much you can comfortably afford and provide guidance at every step. Get opinions from those you trust, such as your family and friends.

Understand your costs

In addition to your monthly mortgage payment, you also pay interest, taxes, private mortgage insurance (if your down payment is less than 20% on a conventional loan) and several one-time fees at closing. These closing costs typically range from 2–6% of the total amount of the mortgage loan. Make sure you know the total cost.

Know your score

A good credit score increases your chances of being approved for a mortgage and may lower your interest rate. If your score is low, try to improve it by making your payments on time, paying the monthly minimum (or more) and keeping your existing credit card accounts with zero balances open.

Estimate how much you can borrow

You can get an estimate of how much you’ll be able to borrow by being prequalified for a mortgage. You will need to provide some basic financial information and a lender determines how much you may borrow. Prequalification is simple and usually can be done in one conversation.

Get organized

You’ll need to provide various documents, such as pay stubs, bank statements and tax forms. Make sure you know what papers you need and have them readily accessible. A Home Lending Advisor can help you determine what documents are needed.

See: Understanding Credit Scores

These are freestanding dwellings that do not share a roof or common walls with any other building.

Each dwelling is on its own lot. Has private entrances and direct access to the nearest street.

These are private residences in a building or community with multiple units. Owners are responsible for taxes and upkeep of their space, while a management company maintains the exterior. Owners share maintenance costs through homeowners association (HOA) fees.

These are usually single units with multiple levels that sit in a row, and they're connected to other units on both sides. They're similar to single-family units in that you own the structure and the land, but the land is confined to the front and back yard of the home. Owners share maintenance costs through homeowners association (HOA) fees.

These can range from duplexes to multiple units – to apartment buildings, where families live side by side. 

Properties can be adjacent to each other, stacked on top of each other or both. All units may be owned by one entity, or each one may be owned separately.

Often called subdivisions – these are typically freestanding homes with yards, but there may be rules to follow on the appearance of your house and yard. You typically pay homeowners association (HOA) fees for maintenance and/or security.

These are corporations that own a building with multiple units. When you buy shares in the corporation, you buy the right to live in one of the units. The number of shares you buy correlates to the size of your apartment, and you and the other owners oversee how the corporation operates.

Buying your next home

Your life has likely changed since you bought your home. Your career may be advancing, or you may be ready to retire. You could be welcoming kids or about to become an empty nester. You may want to earn more money through an investment property or find a home with special amenities that match your lifestyle. No matter your life stage, you can use these tips to help buy your next home.

Moving to a new area

If you’re relocating for a job or want to find a new neighborhood to live in, make sure your next home is in an area you’ll enjoy. Does it have restaurants you like to frequent or walking paths for exercise? You also should research property taxes, the cost of living and how easily you can commute to work. A local real estate agent is a great resource to use to educate you about neighborhoods that interest you. He or she can also help if you’re trying to sell your current home and buy your next one at the same time.

Ready for retirement

If you’re retired or getting ready to, buying your next home isn’t much different than buying at other life stages. The same factors are involved, such as location, type of home and amount of space, especially if you’re looking to downsize. The biggest concern to consider is cost. Most retirees live on a fixed income, so it’s important to make sure you’re comfortable with the amount of your mortgage payment.

Buying a vacation home

Perhaps you want to find a second home to get away for some rest and relaxation. If you’re looking for a vacation home, be as invested in this search as you were for your primary home. Consider points of interest nearby and property amenities. Plus, you should determine how much time you plan to spend in the home and how easy or difficult it is to travel to the vacation home.

Upgrading to a larger home

You may want to move from your neighborhood to a more upscale area to reflect your lifestyle. You could be looking at properties with certain amenities, such as landscaping, a pool, more bedrooms or a finished basement. Before you buy a home with several amenities, identify your needs, such as entertaining guests, and consider how much you’ll use these amenities to justify the cost. Landscaping and pools require plenty of maintenance throughout t he year and a detached garage may need additional security features or other systems.

Buying an investment or rental property

Purchasing real estate can be a lucrative way to invest your money, but it comes with risks and benefits you need to consider, to make sure it’s right for you. Determine what your primary goal is – do you want cash flow in the short run or to make a long-term investment? One common misconception is that all you have to do is collect rent. There’s much more involved, such as regular maintenance, periodic updates to keep your property in high demand and the monthly mortgage payment, especially when you have a gap in tenancy.

See: Loan Document Checklist

Purchasing real estate can be a lucrative way to invest your money, but it comes with risks and benefits you need to consider, to make sure it’s right for you. Determine what your primary goal is – do you want cash flow in the short run or to make a long-term investment? One common misconception is that all you have to do is collect rent. There’s much more involved, such as regular maintenance, periodic updates to keep your property in high demand and the monthly mortgage payment, especially when you have a gap in tenancy.