Financial Education

What you need to know before buying your first home

It can be scary, but buying a house can be much easier if you are prepared. This article will give tips for what to expect when purchasing your first property.


An easy guide for first-time home buyers

Beautiful home exterior in evening with glowing interior lights
Learn what you need to know to buy your first home! Source: Adobe Stock

Buying a home can be daunting, especially if it’s your first one. There are many things to think about and so much money at stake. But don’t worry, we’ve got you!

Symbol for increasing interest rates. Dice with percentage symbo

How your credit score impact your mortgage rate

Your credit score may greatly impact the interest rate you qualify for. This article covers how to improve it and what factors influence your mortgage rates.

This post will tell you everything you need to know before starting your home-buying journey. Here are 5 facts you must consider before making a decision! So read on and get ready to become a homeowner.

5 factors to consider before buying a home

stack of money and home models, home insurance ideas and insuran
Find out the best five factors to consider before buying a home! Source: Adobe Stock

For many people, buying their first home is a dream come true! And it is an important and life-changing decision involving more than choosing a house and buying it!

It is certainly the bigger financial move you’ve made so far! Therefore, understanding and analyzing the process will make this decision much easier.

Luckily we are here to help you! With knowledge and some help, you can start your homeownership journey without difficulty.

So, here are five essential factors you must consider before buying a home with confidence! Let’s get it started!

Understand your debt-to-income ratio

One of the keys to buying a home is having money. With sufficient funds, you can achieve this goal quickly.

But first, you need to understand your debt-to-income ratio; after all, you don’t want to spend more than you can afford.

For example, this ratio will determine if you can afford the monthly mortgage payments. By understanding it, you can start visualizing how much you can pay back.

Lenders usually set a ratio standard of 43% debt-to-income ratio. This means that all your regular payments, including housing-related expenses, shouldn’t be more than 43% of your monthly gross income.

Remember, buying is only the first step. You must ensure you can afford this long-term payment and avoid potential financial damages.

Consider the down payments

How much of a down payment can you afford when buying a home? Most lenders will set a minimum down payment of as little as 3%.

However, when borrowers put down less than 20% of the property price, they will pay private mortgage insurance (PMI).

The PMI is usually added to the mortgage payments. Lenders typically add up to $70 to the monthly payments for every $100,000 borrowed.

I know you might not have 20% of the home value to put down, or you don’t want to risk putting that money down. It is only a matter of choice!

You need to consider your needs and current finances to make that decision! Sometimes it is worth putting down 20%! And sometimes, having an emergency savings account is more important.

Pile of gold coins money stack in finance treasury deposit bank account saving

The different types of income

Wondering how to make more money? Check out this post for an introduction to the different types of income and their benefits and drawbacks!

Track the interest rates

The interest rates you’ll get will depend on the type of mortgage you apply for. For instance, you can choose an adjustable or a fixed-rate mortgage.

When it comes to adjustable-rate, as the term might suggest, the interest rates will fluctuate with the market. Therefore, your monthly mortgage payment can go up or down, depending on the current rates.

On the other hand, fixed-rate mortgages offer locked-in rates. So regardless of the current rate, you’ll be paying the same monthly amount. This way, your monthly payments will be predictable.

Considering the interest rates will ensure you take the best possible rates and stay on top of your monthly payments.

Check and work on your credit

creative home work space - work from home concept - girl with ca
Keep reading for the best tips on buying a new home! Source: Adobe Stock

Our credit history is a determinant factor when applying for a mortgage. It will show the lender your creditworthiness and how likely you are to pay the debt. When it comes to buying a home, it is no different.

Additionally, you can get lower interest rates and better terms and conditions by having a higher credit score. Therefore, before applying for a mortgage, check your credit score.

You can access your credit report free at the three credit bureaus: Experian, TransUnion, and Equifax. Remember to review it and look for any errors. If you find one, you can dispute it and have it corrected.

Remember that a credit score is based on your payment history, length of credit history, types of credit, the total amount you owe, and new credit!

So if your credit score isn’t that good, take your time and start working on it! Pay your bills on time and maintain low credit card balances, for example.

You’ll get a better mortgage deal and other useful financial benefits by improving your credit score.

Additional costs

Other factors in your life can determine the house you’ll choose, the amount you can spend, and more!

Therefore, besides your debt-to-income ratio, consider additional costs, such as entertainment or a hobby you might have!

Also, buying a home comes with additional expenses, such as repairs, home insurance, monthly mortgage payments, and more!

So if you don’t prepare and set your budget, you might not be able to afford the purchase in the long term. Make sure you know all the costs before making this big decision.

The Bottom Line

So, the last question is: Are you ready to buy your dream home? If you have the money, I would say it is a yes!

Remember to take your time shopping around. Find the best mortgage option and the perfect home for your needs!

And before making any decisions, compare each lender’s offers and details! This way, you can avoid any financial damage and future headaches.

Also, if you need additional help, don’t hesitate to ask! Knowledge will be a useful tool!

To help you with your home-buying journey, we have a great article about the many types of loans! It will open your mind to the multiple options you have!

So if you’re interested in learning more, read the following article! I’m sure it will guide you toward the best decision possible!

House isolated in the field

5 types of mortgage loans

A mortgage loan can be a great way to purchase a home, but there are several different types of mortgage loans available. Find out which one is best for you!

About the author  /  Beatriz Vieira

Beatriz Vieira is a producer and copywriter who is part of the finance writer team in this portal. She has a degree in Journalism and aims to improve her bilingual writing skills. Her subjects of most significant interest are culture, finances, and self-development.

Trending Topics


TD Double Up℠ Credit Card with Unlimited Cashback!

Discover financial flexibility with TD Double Up℠ Credit Card: Enjoy up to $800 credit limit, cashback rewards, and more.

Keep Reading

100 Lenders: how to apply for a loan

Interested in how to apply for 100 Lenders? This article will help you with that! Fast and easy application! Qualify with any type of credit!

Keep Reading

Veterans United Home Loans review: rates, terms, pros and cons

Find out all about this lender in this Veterans United Home Loans review. It offers rate transparency and 24/7 customer support.

Keep Reading

You may also like


Caliber Home Loans review: discover everything you need

Want multiple loan options and VA-specialized services? Read this Caliber Home Loans review. to understand how it works and more!

Keep Reading

SoFi Personal Loan: how to apply

Needing money for an emergency or consolidate debt? Learn how to apply for SoFi Personal Loan and quickly get the cash you need!

Keep Reading

How to get out of debt: a 101 guide

Wondering how to get out of debt? Then wonder no more! This 101 guide will teach you the best tips to achieve healthier finances!

Keep Reading