9 Tips for First-Time Homebuyers: A Guide to Securing Your Dream Home

first time homebuyers at an open house

The end of your lease is approaching, and you’ve decided you do not want to sign for another year – you’re ready to buy a home.

Buying your first home is a big milestone, but as exciting as it is, the homebuying process can feel tricky and overwhelming to navigate. Before you start house-hunting, there are a few key steps you should proactively take to prepare yourself for the best homebuying experience possible.

1. Check Your Credit Score

Your credit score plays a crucial role in obtaining a mortgage. It's essential to review your credit report and credit score to ensure accuracy and identify any potential issues. If your score needs improvement, take steps to improve it by paying bills on time, reducing credit card balances, and avoiding new credit inquiries.

2. Determine How Much House You Can Afford

Before you start shopping around for homes, you should determine a realistic budget. A preapproval letter is a professional estimation for how much you could obtain for a mortgage loan based on your current financial situation. By getting preapproved first, you’ll have a realistic expectation for the price range of homes you can afford. In addition to helping determine your budget and narrow down your search, getting preapproved for a mortgage before house hunting can give you an advantage over other buyers. It shows sellers that you're a serious buyer and are financially capable of purchasing the home.

If you’re not ready to get preapproved but you’re curious to see estimate how much house you can afford, use our affordability calculator.

3. Save for a Down Payment

Save as much as you can for a down payment – this can set you up for financial stability in the long run. Ideally, you want to have saved at least 20% of the purchase price to put down; however, you may have other options available to you.

A larger down payment will result in a lower mortgage payment and potentially save you thousands of dollars in interest over the life of the loan. If you put down less than 20% of the home’s value as a down payment, you can be required to pay Private Mortgage Insurance (PMI) until you’ve reached 20% equity in your home. This can add hundreds of dollars to your monthly mortgage payment.

Lastly, saving for a down payment can show lenders you’re a financially responsible borrower, and it gives you equity in your home from the start.

4. Take Advantage of Programs Available to First-Time Homebuyers

For many first-time homebuyers, the prospect of purchasing a home feels impossible, especially when it comes to gathering the funds for a down payment. This is where down-payment assistance programs can be a game-changer. These programs offer financial support and incentives specifically designed to help individuals and families achieve homeownership.

By alleviating the burden of a large down payment, these programs make homeownership more accessible and affordable. They provide a steppingstone for first-time buyers who may be struggling to save up enough money or facing barriers to enter into the housing market. With down-payment assistance, aspiring homeowners can take that crucial first step onto the property ladder, giving them the opportunity to build equity, stabilize their housing costs, and establish a foundation for their future.

5. Budget for Closing Costs

Closing costs can add up quickly, so it's essential to budget for them. Closing costs are typically calculated as a percentage of the purchase price of the home and can range from 2% to 5% of the home's value. For example, on a $300,000 home, closing costs could be between $6,000 and $15,000. In some cases, closing costs may be negotiated with the seller, but it is important to have the funds available just in case.

6. Avoid Big Purchases or Job Changes

Lenders look at your debt-to-income ratio when approving a mortgage. Avoid making any significant purchases or changing jobs before applying for a mortgage as it could affect your debt-to-income ratio and potentially hurt your chances of getting approved.

7. Gather Your Financial Documents

When applying for a mortgage, you'll need to provide financial documents, such as bank statements, tax returns, and pay stubs. Gather these documents beforehand to speed up the application process.

8. Don't Make Late Payments

It is important to avoid making late payments on credit cards, car loans, or other bills can hurt your credit score and affect your ability to obtain a mortgage. A history of late payments can show lenders you are a risky borrower and make it more difficult to receive favorable loan terms. Make sure to pay all bills on time.

9. Work with a Trusted Mortgage Banker

Not all mortgages are created equal. Working with a trusted mortgage banker can be the difference between a smooth, stress-free home buying experience and a headache scenario that could cost you time, money, and peace of mind. They can help you navigate the various loan programs available, explain the different types of mortgage products, and help you avoid common pitfalls that could lead to costly mistakes.

At SouthState, our bankers are committed to your success and will work tirelessly to help you achieve your dream of homeownership. With their expertise and guidance, you can make informed decisions and feel confident that you are getting the best possible mortgage deal.

Being proactive is essential when it comes to obtaining a mortgage and purchasing your dream home. By following these ten tips, you'll be on the right track towards homeownership. So, don't wait – start preparing today.

About the Author, Steve House: Steve currently serves as a Division Manager for the SouthState Mortgage group. He has worked more than 40 years in the mortgage industry.

  • This content is general in nature and provided for informational use only. Content may be used in connection with the advertising and marketing of products and services offered by SouthState Bank, N.A. and its subsidiaries and affiliates. This is not to be considered legal, tax, accounting, financial or investment advice. You should seek individualized advice from personal financial, legal, tax and/or other professionals, as appropriate depending on the specific facts of your situation. We do not make any warranties as to the completeness or accuracy of this information and have no liability for your use of this information.

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