Now might feel like a daunting time to buy. But there are ways to prepare—and stay within your means once you’re ready to become a homeowner.
Buying your first home is a big move—and always has been. It opens up a new world of costs, responsibilities and planning. Today the picture is particularly complicated, as first-time buyers must contend with interest rates that are higher than in recent years, on top of high inflation.
Yet owning a home remains one of the most important objectives for people at all stages of life. “The bottom line for any buyer is to understand your priorities, and make sure you make choices that reflect those priorities,” says Haley Starks, Regions Mortgage Loan Officer based in Arkansas. Here’s an insider’s guide to getting that first-time home purchase right.
Calculate How Much Home You Can Afford
“Every homebuying journey starts with the question of cost, and it’s a particularly important one for first timers,” says Starks.
That’s because there’s an art and a science to parsing out the amount you’re qualified to spend on paper—and what you can personally afford. “You may qualify for a mortgage that’s $2,400 a month, but that doesn’t mean you want to spend that much,” she notes. “You still want to be able to buy a new shirt or go out with friends.”
Start by looking at your current income and expenses and consider how your mortgage payment might change that picture. As a renter, utility bills might be bundled, but they won’t be when you’re paying for water, gas, electric, property taxes and so on. Get a handle on what your monthly bills are likely to be as a homeowner, as that can help you choose a loan amount that makes sense for you.
Borrow Based on Your Present Means
The decision to buy a home might come on the heels of another life change: a raise, a new job or a windfall such as an inheritance. While a change can be great news, it’s wise to focus on what you can afford to borrow now—not what life will look like after your next raise or promotion.
“It’s always best to make choices about what you can actually do, not what you can potentially do,” Starks says. No one can predict what the future will hold, and events that look certain from where you stand today could easily change down the line. Better to make a conservative choice now, and upgrade later.
Find a Lender You Like
Pro tip for first-time buyers: The mortgage process is really about finding the right lender, and embarking on a conversation with a mortgage professional that takes your unique situation into account—not just the numbers. “Relationships can make a big difference,” says Starks.
Even a diligent web search can only deliver options based on your income, credit score and down payment amount. “There are so many loan programs out there,” Starks says. It’s much better to shop around, talk to different lenders and find someone who understands your goals and can work with you.
Learn About Homebuying Costs
Many homebuyers—including experienced buyers—might want to familiarize themselves with the rising costs of today’s market before they start house-hunting. Everything from construction costs to home insurance costs more today, and it all adds up.
To avoid sticker shock, be sure to ask about the cost of the appraisal, the inspection, the title search and all the closing costs. And be ready for the scrutiny that comes with being in a higher-price environment. “This can be a paperwork-heavy process,” Starks says.
Control the Things You Can
It’s true that today’s market is quite different compared to the way things looked a few years ago, when interest rates were low and inventory was higher (and pandemic-related supply chain issues hadn’t fully played out). And while there’s plenty that’s out of your hands, there are factors in your control that might put the home of your dreams within reach. You can think about different locations and consider all types of properties. You can be proactive about your credit score (healthier credit typically gets you a better deal). Your best defense is a good game plan.
Three Things to Do
- Get an idea of how much you can afford with this calculator.
- Bookmark this useful collection of advice to help guide you through buying a home.
- Learn about 5 surprises for first-time homebuyers.
