First-Time Homebuyers: Steps to Successfully Buying a Home | Axos Bank

First-Time Homebuyers Steps to Success


For first-time homebuyers, the process of buying a home may be a bit of a mystery. After all, it’s difficult to understand the lay of the land until you set foot on it. When taking on any new endeavor, it’s helpful to do your research, identify challenges, and make a plan for success. This holds especially true when it comes to purchasing your first house.

Here are some steps that can be helpful in your journey to home ownership:

1. Check Your Credit

Your first step in the home purchase process is to check your credit reports, not just your credit scores. Although your credit scores do play a major role in the loan process, it’s the details in your credit reports that frequently delay the loan approval process. Starting early gives you time to correct reporting errors, repair minor credit issues, or gather documentation to explain negative events, such as past due accounts, debt settlements, or bankruptcies.

You can get a free credit report from Equifax, Experian, and TransUnion annually. The Federal Trade Commission (FTC) is an excellent resource for information. Their Get My Free Credit Report page provides options for ordering your credit reports. If needed, you can find the process for disputing errors on their Free Credit Reports page. To learn more about how your credit history is used to qualify you for a loan, visit Home Loan Basics: Credit Considerations.

2. Review Your Budget

It’s important to know what you can afford, and that begins with a review of your current budget. Determine your monthly take-home pay and then make a list of your monthly expenses: rent, utilities, car payments, student loans, credit card minimum payments, etc. Don’t forget to break down any annual, semi-annual, or quarterly bills into monthly amounts. Next, you need to estimate the amount you pay for food, entertainment, gas, trips, and other expenses. Once you subtract your monthly expenses from your income, you will have a good idea what you can afford.

As a general rule, you can expect to be qualified for a loan amount with a total monthly home payment between 36% to 42% of your gross monthly income. Your total monthly home payment includes the loan principal, interest, property taxes, homeowner's insurance, and mortgage insurance, if applicable. You can use our mortgage calculator to estimate your monthly mortgage payments based on the home price and your down payment amount.

3. Speak With a Number of Mortgage Lenders

After reviewing your budget, it’s time to speak with a few mortgage lenders. Interest rates are important, but so is the amount you pay in closing costs and fees. Get mortgage quotes from the lenders you like and compare the loan terms, interest rates, and fees. Be sure to ask each lender about any discount programs available to reduce the cost of your loan.

It’s important that you feel comfortable with your lender. Are they willing to explain the process to you? Did they take time to review a number of options that would fit your needs? Were they responsive when you called or emailed them? Having a lender you are confident in can be just as important as getting good loan terms.

4. Get a Mortgage Pre-Approval

Once you settle on a lender, your next step is to get a pre-approval. Your lender will determine the loan amount you qualify for based on the income and expense information you provide. This amount may be different from the amount you thought you could afford after a review of your budget. If you have concerns, discuss them with your lender to see what options you may have to increase the loan amount.

Once you complete the process, you will receive a pre-approval letter you can show to real estate agents and sellers. A pre-approval letter can give you an advantage in a competitive market. It proves that you are a serious buyer who has gone through the loan qualification process and is well on the way to purchasing a home.

5. Pick a Real Estate Agent

Real estate agents play vital roles in the home-buying process on behalf of both buyers and sellers. You want to be confident that the real estate agent you work with understands your needs, responds in a timely manner, and will have time to answer your questions. Get referrals from family and friends who have purchased a home. Your lender may also be able to recommend someone they have successfully worked with in the past. Don’t be afraid to talk to a number of real estate agents before settling on one. It’s okay to shop around until you find a real estate agent who’s the right fit for you.

6. Understand the Market

Even when you’ve done your own research, you will still want to discuss the current housing market with your real estate agent. They will be the most familiar with the market conditions in your specific search area and can advise you whether it’s a buyer’s market or a seller’s market.

Buyer's Market

A buyer’s market favors the homebuyer. Generally, this will mean that home prices are relatively low or stable and there are many homes available for sale. It may take a number of months for a home to sell. In addition to having plenty of homes to look at, you may also be in a better position to bargain.

Buyer's Advantages:

  • There are opportunities to negotiate lower sales prices.
  • Concessions, repair requests, and terms are easier to negotiate.
  • Buyers have time on their side when submitting offers.

Seller's Market

On the flip side, the seller has the advantage in a seller’s market. In this type of market, buyers far outnumber the homes for sale. As a result of the demand, homes sell quickly and often at inflated prices.

Buyer's Disadvantage:

  • Bidding wards are common with few deals to be found.
  • Buyers have to move quickly to submit offers.
  • Negotiating is at a minimum for concessions, repairs, etc.

7. Know Your Deal Breakers

Make a list of the features you are looking for in your new home. Split the list into “preferences” and “deal breakers.” Deal breakers are features that are essential to you and your happiness. A house seldom has everything on your wish list. However, it should have your deal breakers or you are likely to regret the purchase. Discuss your deal breakers with your real estate agent so they can fine tune their search efforts and show you only the houses that are right for you.

Location is a common deal breaker and can hold a lot of weight in your decision to buy a house. You may only be interested in certain neighborhoods based on commuting distance to work, school districts, proximity to shopping and entertainment, or even resale values.

Although there are times your real estate agent may urge you to act quickly, you should never feel pressured to make a deal. Be as objective as possible as you consider the features of the homes you view. If something doesn’t feel right to you, trust your instincts and discuss your concerns with your real estate agent.

8. Visit the Property More Than Once

There is so much to see when your real estate agent shows you a house. It’s nearly impossible to take in everything. Try to visit the house a few times before submitting an offer. This will be easier in a buyer’s market than in a seller’s market. A second visit to the property can give you more time to view the exterior of the home and judge the noise levels in the area. If you visit during high traffic hours, you can get a better sense of your commuting experience.

9. Fall in Love With a Home When It's Yours

Wait to fall in love with a house until after you have purchased it. If you become too attached to a property during the house-hunting process, you may ignore red flags and the sound advice of your real estate agent. Making an emotional decision when it involves signing a legally binding, life-changing contract is something that you will want to avoid. Plus, showing too much interest can hurt your real estate agent’s negotiating strategy. In addition to helping you find a property, your real estate agent will also help you negotiate the price of the property.

10. Get a Home Inspection

A professional home inspection is essential — whether done before you make an offer or as a contingency in the purchase contract. It’s a critical step in protecting you from major problems that could turn a “good deal” into a financial burden. A home inspection will also reveal minor repairs that can often be fixed before you take possession of the home.

An inspection can find mold, plumbing issues, electrical trouble, structural concerns, and other major problems. Discuss any issues with your real estate agent. In most cases, you will ask the seller to correct the problem before you move into the house. Another option is to have the cost of the repairs deducted from the price of the home. It would then be up to you to fix the problems after you take possession of the house.

11. Don't Wait Too Long to Make an Offer

Once you find a house you want, don’t wait too long to make an offer. How long is too long? It will depend on the market and how much interest is being shown by other buyers. In a seller’s market, you will likely work quickly with your real estate agent to make an offer. In a buyer’s market, you will often have more time to evaluate properties before making an offer on your favorite one.

Regardless of the market, your real estate agent will research recently sold homes in the neighborhood, evaluate trends, and help you make a competitive offer for the house. Expect some back-and-forth negotiations. Offers are often countered once or twice before being accepted.

12. Be Patient and Persistent

Buying a home is a process. As you’ve learned, there are quite a few steps in the process and a lot of moving parts. Patience is important. Finding the right home for you will often take longer than you expect. However, because buying a home is a major commitment, you don’t want to rush the process.

It’s also important to be persistent. You may have to look at numerous properties before you find one within your budget and with the right features. Being open to exploring new neighborhoods and viewing different styles of homes could also provide more opportunities.

It’s important to be patient and persistent when buying a home because the goal is to find a home you can fall in love with.

Buying your first home can be a challenge. Doing your research, getting pre-approved for a home loan, and working with a responsive real estate agent can help set you up for success. Knowing what you want in a home and what you can afford are steps in the process that can make it easier for your real estate agent to target your search. The home-buying process often requires patience and persistence, but the reward is an investment in your future and a home you can love.

If you are a first-time homebuyer, you can rely on the mortgage professionals at Axos Bank to provide valuable information to help you in the home-buying process. Call 1-888-546-2634 to speak with an experienced mortgage specialist today.

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First-Time Homebuyers Steps to Success