Real Estate Experts Want You To Know These 5 Things Before Buying Your First Home

Young Americans are wondering how to buy a house for the first time considering today’s market. Interest rates and selling prices are making the process more challenging for many. What do you need to know before buying your first home? We asked real estate professionals for expert advice on this process. Here’s what you need to know about being a first-time buyer.  

How to Buy a House for the First Time: 5 Must-Know Tips

How do home buyers succeed when it’s their first time on the market? Follow these five tips from real estate experts. 

1. Mortgage Rates

What’s keeping prospective homeowners from purchasing a unit? Interest rates have been a significant hindrance. The national average for mortgage rates is 7.2% if you get a 30-year loan. How does this compare to the past? Buyers haven’t seen mortgage rates this high since 2000, when they exceeded 8%. 

Jon Molek — owner of Best Offer REI — says understanding mortgage rates is crucial for first-time buyers. You don’t have to be a real estate expert, but knowing the trends and history of the market can save money. 

“For instance, a slight difference in these rates can significantly impact monthly payments,” he said. A 1% increase on a $300,000 loan adds roughly $150 to payments.

“Therefore, keeping an eye on the current rate and exploring multiple financing options is non-negotiable. This knowledge holds significant importance as it directly influences affordability, feasibility and the analysis of favorable financing options for you.” 

2. Financial Readiness

Buying a home is more complicated now than it was before the pandemic. With the rapid change, your financial readiness is under the microscope. Getting your financial ducks in a row is crucial when making offers and finding out how to buy a house for the first time. 

Dennis Shirshikov — Head of Growth at Awning.com — says you must have a holistic view when buying your first home. While the down payment is necessary, Shirshikov says to look at your credit score, debt-to-income ratio and emergency fund.

“A less conventional piece of advice is to look beyond the numbers and assess the emotional readiness for homeownership, as the responsibilities and commitments are significant and often underestimated,” he said. 

What else should you consider when searching for your first house? Shirshikov says to think about long-term growth. 

“For instance, investing in areas with growing employment opportunities or those in the path of urban expansion can yield long-term benefits,” he said.

3. Saving Money

How else can you improve your financial preparedness? It could be as simple as saving money longer. Home prices are still high post-pandemic, meaning buyers have no choice but to stay put. You’ll need to save for a bigger down payment to buy a home in today’s market. 

In the old days, young people bought starter homes because they were more affordable. However, the supply of these houses is a far cry from what it used to be. Martin Orefice — CEO of Rent To Own Labs — says real estate investors are buying starter homes and converting them to rental properties. Therefore, first-time buyers today have a lesser chance of getting their foot in the real estate door. 

“All of this means that first-time homebuyers will need to save for longer to build their down payments if they want to be able to afford the homes that are on the market at current interest rates,” he says.

How can you save money for a large purchase? Consider high-yield savings accounts to help your money grow over time. Your gains from this passive income strategy could be significant when learning how to buy a house for the first time.

4. Mortgage Preapproval

Are you ready to enter the market as a buyer? While looking ahead to closing day is tempting, consider what you need to do before your first house tour. Mariusz Falkiewicz — mortgage broker at Expert Mortgage Chicago — says to get a solid mortgage preapproval. 

“This shows sellers you’re serious and ready to move quickly,” he said. “Plus, knowing the numbers ahead of time helps you manage your expectations and focus.

“If possible, try to aim for 20% down to avoid paying private mortgage insurance (PMI).”

PMI is insurance you pay if your down payment is under 20% of the purchase price. Most people pay this cost through a monthly fee added to their mortgage payments. This insurance fee is in place to protect the lender if the borrower can no longer make payments. Ask your local real estate expert if avoiding PMI is the best route for your financial situation.

5. Zoning Laws

Garrett Ham — CEO of Weekender Management — says how to buy your first house requires knowing zoning laws. These regulations determine where developers can build single-family homes, multi-family complexes and businesses. Your property is an investment, so Ham says you should consider purchasing a home where you can leverage passive income in the future. 

“Many first-time buyers are unaware of how zoning laws can impact their ability to alter their property or conduct business activities from home,” he said. “Additionally, considering the property’s potential for short-term rental income is crucial in today’s market.

“Many investors overlook properties with excellent potential as short-term rentals due to not fully understanding the market or regulatory landscape.”

How to Buy Your First House in 2024

The market in 2024 is much different than it was a few years ago. What else will help you when buying your first home? Here are a few more tips for getting ahead in modern real estate. 

Use Financial Assistance Programs

If you want to buy a house this year, you don’t have to do it alone. Check out financial assistance programs from the federal and state governments to make the process easier. For example, Federal Housing Administration (FHA) loans are helpful for low down payments and those with low credit scores. You’ll get a government-backed loan and an easier time buying a house. 

Check for Low-Price Markets

Some markets have seen steadily increasing housing costs, but not every area is created equal. Find cities with declining selling prices to get a better deal. For example, San Antonio, Texas, saw a 4.3% decline in the median home prices last year. You can also find declining costs in Naples, Florida, and Provo, Utah.  

Confer With a Real Estate Expert

Once you find a market, speak with local real estate professionals to learn the ins and outs of the area. These experts will help you find the best neighborhoods and the most bang for your buck. You’ll also get a better chance at finding the city’s hidden gems, the houses that aren’t yet on public listings. This knowledge gives you a head start on making offers and courting the sellers. 

How to Buy a House for the First Time

The housing market is tough for first-time buyers. However, there is a path to getting a fresh pair of keys in your hand. Use advice from a real estate expert to make smart financial decisions. These five tips are a great starting point in your home-buying journey.

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