Tips for First Time Home Buyers – 2025 Edition

Buying a new home can be an intimidating process, particularly if it’s your first time. It’s the largest purchase most of us will make in our lifetimes. There’s a lot to think through and a lot of preparation involved. Here are a few tips for first time home buyers.

Budget: How Much Should First Time Home Buyers Spend?

When considering how much house you can afford, a good place to start is planning on spending no more than 28% of your gross monthly income on your mortgage payment. That includes property taxes, homeowner’s insurance, and mortgage insurance (if needed). So, for example, if you earn $60,000 a year, gross, that’s $5,000 per month. 28% of that $5,000 monthly income is $1,400. If property taxes are going to be, say, $300 per month, homeowner’s insurance is going to be $100 per month, and mortgage insurance is going to be $50 per month, that leaves $950 of the $1,400 for principal and interest. Ideally, you don’t want a mortgage that will result in a principal and interest payment of $950, in order to meet the 28% rule.

This is just a good standard, though. Many buyers spend less than 28% of their gross monthly income on their monthly payment. You know your budget best, and you will have to decide how much of your monthly income you’re comfortable allocating to your mortgage.

Get Down with Your Down Payment: Amount and Mortgage Insurance

With very few exceptions, lenders will require you to put some amount of your own money into the purchase of your home. It could be as little as three percent, but there’s typically no limit. If you want to put 50% of the purchase price down, you certainly can.

If you’re able to put 20% down you may be able to avoid mortgage insurance, depending on the type of loan you get (more on this later). Mortgage insurance is generally paid as part of your monthly mortgage payment and provides the lender protection in the event that you default on the loan. The reason you can avoid this cost with a 20% down payment, at least on conventional loans, is because the lender is taking less risk when you’re putting that amount of cash down. If you’re putting less than 20% down, the loan is considered riskier.

However, if you’re unable to put 20% down, don’t worry. That’s extremely common and once you pay the loan down to a certain point the insurance will automatically be dropped, and you will no longer have to pay that premium each month.

Tips for First Time Home Buyers: Be Aware of the Types of Mortgages Available

There are different types of mortgages available to buyers. The most common are conventional loans, FHA loans, and VA loans. There are also loans offered through the USDA but those are restricted to certain geographical areas. There are also unique “niche” loan products out there, depending on the lender. While rare, these loans have all kinds of different features and qualifications.

When applying for a loan, be sure to speak with your loan officer about these different types of products to see which may be best for you.

Steps Before Applying for a Mortgage

Qualifying for a mortgage is a key component of home buying. Before applying, it’s a good idea to get a copy of your credit report and review it for accuracy. If you find anything that’s inaccurate, you’re going to want to dispute those items immediately.

Another first time home buyer tip is to pay down your lines of credit as much as possible prior to applying for a mortgage. How much of your credit limits you’re using has a direct impact on your credit score, which can impact your credit worthiness. Credit cards are the most common line of credit, but home equity lines of credit (HELOCs) count as well. Anything where you can borrow against a limit, make payments, and then can borrow against that limit again is considered a line of credit. Generally speaking, the lower your balances are, relative to the limits, the better.

A final note as it pertains to credit, make sure not to apply for, or open, any new credit until your mortgage loan has closed. Also, make sure you make all of your payments on time. Your lender will likely re-pull a credit report shortly before closing and any new credit or missed payments can jeopardize your approval.

Choosing a Mortgage Lender

Getting a mortgage can feel overwhelming. So finding a good loan officer can make a huge difference in your experience. Firefighters Community Credit Union is proud to have Beth Meyer as a resource for our members. No one will step you through the process with more personal attention. Additionally, as a member-owned institution, FFCCU works hard to make the mortgage game look easy some of the lowest rates in the area. We make the mortgage game look easy If you’re interested in applying for a mortgage, or in receiving more first time home buyer advice, contact a teammate today!

Posted In: Home Buying, Uncategorized