First time home buyer guide

For prospective first-time home buyers, the process can feel daunting. Maybe you’ve even asked yourself, "what do I need to know when buying my first home?" While the process is far from simple, there are a few key things you can expect no matter where or when you buy your first home. A home-buying guide can go a long way in helping you buy the right home for you. Take a look at some of these steps so you can put yourself in the best possible position when you’re ready for this exciting endeavor.

1. Identify your needs and wants in a new home

Before you buy that dream home, you first need to determine what that dream home looks like. That means creating a wish list of must-haves and nice-to-haves. There are many things to consider and many details to ponder. Here are some of the big things you will want to consider right off the bat:

Type of home

If your dreams include a backyard and all the joys that come with it, then a traditional single-family home is for you. If, however, you’re looking in a more populated area or just don’t want the hassle of maintenance issues, then buying a condo or a townhouse could be the way to go. Co-ops are also an option in some cities and while they can be less expensive than a condo, they’re also a bit harder to finance. [1]

Location

If you know the general area you want to live in, the next thing to consider is the neighborhood. When choosing a neighborhood, it’s good to think about a few key factors like safety and amenities, i.e., green spaces, walkability, coffee shops, and restaurants. You’ll also want to consider cost, which can include things like property taxes and HOA fees if it’s part of a homeowner association. Another smart consideration is the school district because even if you don’t have or aren’t planning on having children, school quality still affects the home’s value and will either boost or drop the resell value if and when you choose to sell. [1]

Are you looking to buy a fixer-upper or move-in ready home?

The easiest option is to buy a house that’s ready for you to move into right away. However, if you’re looking in a pricey neighborhood or a competitive market, taking on a home that needs some improvements might be the trick to affording a larger house or moving to a more expensive neighborhood. Remember though, fixer-uppers require work and cash to make it a livable home so be sure you’re ready to take that on. [1]

2. Analyze your finances

Before you can even think of putting a down payment on a home, you’ll have to make sure that your finances are in order. That starts with checking your credit score. This will determine your pricing options as lenders use it as a key factor in setting your loan rates. A better credit history means a better chance of securing financing with the best rates. Next, you’ll need to create a housing budget. By setting a realistic budget, you’ll know what you can afford and what your all-in costs will be. All-in costs are important because the purchase price isn’t the only number to be mindful of, and you’ll want to factor in other expenses to determine what you can realistically afford.

First, determine the maximum loan amount you qualify for. Then, decide how much you want to set aside for a down payment plus a buffer fund to handle any ongoing or unexpected maintenance costs. You’ll be making monthly mortgage payments, so check that your monthly budget can cover the mortgage payment along with other bills and expenses.

Buying a home requires making a down payment, so make sure you save up for that hefty chunk of change. Be sure to research the down payment requirements for the loan you want so you know how much you’ll need to save. You’ll need to save 20 percent of the home’s purchase price for the down payment if you want to avoid private mortgage insurance (PMI). Some lenders offer mortgages without the PMI, but the interest rates will be higher.

3. Find a mortgage lender to learn about mortgage options and get mortgage preapproval

Now that you’ve set your homebuying budget, you’ll need to shop for a mortgage lender to get a mortgage preapproval. Work with an experienced mortgage lender who will walk you through your options and overall costs, and be sure to ask what first-time homebuyer programs and other incentives they have on offer.

Getting a mortgage preapproval will give you real numbers since the lender will have detailed information about your finances and include a hard inquiry that will show up on your credit report. It’s best to shop around to find the lowest rate, and if you apply with multiple lenders around the same time, it will only count as one hard pull on your credit report. [1] [2]

4. Work with a real estate agent

Once you’ve been preapproved, you’re ready to work with a real estate agent who knows exactly how to buy a home. An experienced agent can make all the difference, from knowing the ins and outs of local markets to showing you quality listings in your target area or adjacent ones you hadn’t considered and helping you negotiate with a seller. It’s smart business to interview at least three agents and ask friends and family who’ve recently bought a home if they would recommend their agent. [1] [2]

5. Hunt for your new home and make an offer

When hunting for your new home tell your real estate agent what specific kinds of homes you want to see. You can get a sense of those homes by searching online yourself. Have your agent create a profile for you in the local multiple listing service (MLS), a database of homes currently for sale, and set up automatic searches for the ones that meet your criteria.

Take a drive through the neighborhoods you’re considering to see what’s for sale and keep your schedule open and flexible so you can attend open houses and pounce as soon as a home of interest hits the market. It’s smart to keep notes on each home you visit because after a few visits you’ll forget which homes you liked and what you liked about them.

Once you find the home that’s perfect for you it’s time to make an offer. Your real estate agent will help you put together a complete offer package and can also provide you with comparable sales information as well as any intel about the sellers gleaned from the sellers’ agents (like if they’ve closed on a new place of their own and are motivated to sell).

The seller may accept your price or make a counteroffer. Discuss the counter with your agent to determine if you accept or make a counteroffer of your own. The negotiation period is where your real estate agent can come through for you in a big way. Once your offer is accepted, you’re just a few steps away from settling into your new home. [1] [2]

6. Get home insurance

You’re going to need homeowner’s insurance, as almost every lender will want to ensure that your home is covered. Homeowner’s insurance pays for damages and loss to your property if the unexpected happens like a burglary or a fire. You’re going to want enough homeowners insurance coverage to fully replace the home, which may or may not be the same as the purchase price or appraised value. [1] [3] Luckily, Nationwide is on your side with coverage to protect your home and property.

7. Have the new home inspected

Getting a home inspection is a crucial next step as it will give you an overall sense of the property’s structural and mechanical integrity and will help you determine how to proceed with the closing process. You might need to have the seller make repairs or even walk away from the deal if you have that contingency in your contract.

A basic home inspection is a visual assessment that covers all aspects of the house and its systems from the roof down to the foundation. If you have concerns or if the home has features like a pool, septic system, or retaining walls, you may want to get those looked at with a specialized inspection.

Depending on the state you’ll reside in, you’ll need to complete a home inspection within 10 to 14 days after signing the purchase agreement. You’re responsible as the buyer to pay for the home inspection. Do your homework to make sure to get an experienced home inspector, and while the fees can vary, expect to pay at least a few hundred dollars. [1] [2]

8. Complete a home appraisal with the lender

Your lender will require a home appraisal through an appraiser of their choosing. This is separate from the home inspection, as the appraisal is for the lender which will not want to lend you more money than the home is worth. An appraisal takes a close look at the home as well as comparable recently sold homes to determine its market value. [1]

9. Negotiate with the seller

Your home inspection will reveal minor or major issues. If there are major issues like structural damage or improper electrical wiring, those issues will need to be handled before your lender approves the loan. Additionally, you might not have the budget or desire to handle extensive repairs. Some sellers won’t agree to extensive repairs which is why a home inspection contingency is a good idea so that you have an out if the home isn’t up to scratch.

Your ability to negotiate will depend on the strength of the market. In a strong seller’s market, the seller might not be willing to make concessions and just move on to their next offer. If there are issues that would get flagged by any home inspector, you have leverage to get them to make repairs. If it’s a buyer’s market then almost everything is negotiable, including having the seller cover some of your closing costs or loan points. [1] [2]

10. Time to close on your home

What your home inspection reveals can affect closing and the costs associated with closing. Enlist your agent to negotiate on your behalf with the seller and ask the seller to either make the repairs or give you a credit at closing. Remember that the nature of the market (a buyer’s or seller’s market) will go a long way in determining what costs and closing fees you may or may not be able to get covered based on what the home inspection reveals. [1] [2]

11. Move in

Congratulations, you’ve secured your new home and are now ready to prepare for your move-in. The prospect of a new home is exciting but the packing up and moving your stuff part? Less so. The trick is to plan ahead and be specific. Start by determining how much it may cost to move and then start packing! Taking time on the front end of the move to get organized will save you stress and anxiety.

12. Bundle your home and auto insurance to save

Nationwide makes it easy to save time and money when you combine two or more insurance policies together like your home and auto insurance. Be sure to get a free quote from Nationwide and find out how much you could save when you bundle your home and auto insurance.