First-Time Home Buying Tips: How to Afford a House

Buying a house is expensive, and first-time homebuyers quickly learn that it’s not just the price of the home itself! Between inspections, closing costs, and moving companies, the total can quickly add up to more than you have in the bank.

In fact, many first-time home buyers find themselves emptying their savings apps and their piggy banks.

Don’t have a mountain of cash stowed away somewhere? Don’t despair. There are plenty of resources that make it possible for first-time homebuyers at every income level to invest in real estate and plan for their futures.

In this short guide, we’ll cover our top tips for affording your first home.

Take Stock of Your Finances

There’s one important thing you need to ask about every prospective home: is it in your budget?

While it’s possible to pay for a home by cashing out stocks and even dipping into your 401K, the best strategy is to set a realistic budget based on your income and savings.

You’ll need to figure out two things:

  • What down payment can you afford? This is the maximum amount of cash you’d be able to put towards your home’s purchase price. Don’t forget that you’ll need to keep some savings aside for other costs associated with moving.
  • What can you afford monthly? Be sure to factor in all monthly housing costs, including:
    • Mortgage payments
    • Homeowner’s insurance
    • Mortgage insurance
    • Utilities
    • Parking fees
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Unsure what you can afford? Use a home affordability calculator to find the ideal price range for your income level.

Factor in the Cost of Improvements

Once you start looking at real estate, be realistic about whether a home is move-in ready.

If a house has obvious defects, you can put in an offer under the asking price. If there are changes you want to make, include them in your budget:

  • If you can’t stand the kitchen without adding a kitchen island, make sure you have enough savings for a renovation.
  • Likewise, if you plan to mulch and plant the garden shortly after moving, set aside enough cash for a trip (or twelve) to the garden center.

Research Programs for First-Time Home Buyers

If you feel like you’ll never be able to afford a home with your cash-on-hand, look into state and federal programs for first-time homebuyers.

You may be eligible for the following kinds of loans:

  • Rural Housing loans – If you’re buying a home in a federally designated rural area, you may be eligible for a mortgage loan with a 0% down payment. All you’ll need to worry about are your closing and moving costs.
  • Veterans Affairs Loans – Likewise, veterans may be eligible for 0% down payment loans if they meet certain VA loan income requirements.
  • FHA loans – Other first-time buyers can qualify for low down payments totaling as little as 3.5% of their home’s purchase price.

Beyond these federally sponsored programs, many states have additional resources for first-time buyers.

Consult your state’s housing authority to find opportunities, including free homebuyer education courses, individual counseling, grants, and loans.

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Seek Assistance for Your Down Payment and Closing Costs

Even if you qualify for state and federal programs, you may be responsible for some portion of your down payment—not to mention closing costs.

What are closing costs? These are the costs associated with purchasing a home, which include the following:

  • Taxes on your purchase
  • Administrative and banking costs
  • Attorney’s fees
  • Title transfer costs
  • Title insurance
  • Appraiser’s fee

Closing costs can amount to 2-5% of your home’s total purchase price. That means that buying a $150,000 home could cost an additional $3,000 to $7,500—and that’s in a lump sum payment, too.

Luckily, many states have grant and loan programs that can help you cover your down payment and closing costs without depleting your retirement fund.

Research your state’s programs and dramatically lower the cash you spend upfront!

Making a House Your Home

Buying a home can be a stressful process. From the whirlwind search to the lengthy closing process, it’s a brand-new experience for first-time homebuyers.

Getting financially prepared can help soothe your nerves and lower your future costs.

First, set your budget. Then, take advantage of free resources, including home buyer’s education. Then, seek out fair, affordable financing and assistance.

Before you know it, you’ll be past the worry and into your new house. From there, you can start making memories that will turn your house into a home.