How Do First-Time Homebuyers Get Started? A Step-by-Step Guide to Buying Your First Home

Buying your first home is exciting, but it can also feel overwhelming. Between mortgage rates, down payments, closing costs, credit scores, and unfamiliar real estate terms, it's easy to wonder where you should even begin.

The good news is that you don't have to understand everything on day one. A little preparation can make the homebuying process much easier and help you make decisions with confidence.

Start With a Mortgage Professional

Before spending weekends touring homes, one of your first conversations should be with a qualified mortgage professional.

A lender can review your finances, explain available loan programs, estimate what you may qualify for, and help you determine a comfortable price range. Getting preapproved also helps you understand approximately what your monthly payment could look like before you fall in love with a home.

Remember, though: the amount you're approved to borrow and the amount you're comfortable spending don't have to be the same.

How Much Does It Really Cost to Own a Home?

Your mortgage payment is only part of the cost of homeownership.

Your monthly and annual expenses may also include property taxes, homeowners insurance, HOA fees, utilities, maintenance and unexpected repairs. Depending on your loan, mortgage insurance may also be part of your payment.

For Arizona buyers, it's especially important to consider expenses such as air-conditioning costs, HVAC maintenance, landscaping, pool maintenance and HOA fees when applicable.

A useful exercise is to estimate what your future housing expenses might be and start setting aside the difference between that amount and what you're currently spending. You'll get a better sense of how the new budget feels while building additional savings.

What Do Mortgage Lenders Look At?

While every buyer's situation is different, lenders typically consider several financial factors, including your income, employment, credit history, existing debt and available funds.

Two terms you'll hear frequently are credit score and debt-to-income ratio (DTI).

Your DTI compares your monthly debt obligations with your gross monthly income. Your credit profile can also affect which mortgage programs are available to you and the interest rate and borrowing costs you may receive.

Before buying, avoid making major financial changes—such as taking out a new car loan or opening new credit accounts—without first discussing them with your lender.

What Types of Home Loans Are Available to First-Time Buyers?

A conventional mortgage isn't your only option.

Depending on your qualifications and circumstances, you may want to ask your lender about conventional, FHA and VA loans, as well as fixed-rate and adjustable-rate mortgages. There may also be down-payment or homebuyer-assistance programs available to qualified buyers.

Don't worry about becoming a mortgage expert. Your goal is to understand enough to ask good questions and compare your options.

Do First-Time Homebuyers Need 20% Down?

This is one of the biggest misconceptions about buying a first home.

You don't necessarily need a 20% down payment.

Some qualified buyers may be able to purchase a home with considerably less. The right down payment depends on your loan program, finances, monthly-payment goals and how much cash you'd like to keep available after closing.

Putting every dollar you've saved into the down payment isn't always the best strategy. You'll still need money for moving, furnishings, maintenance and life's unexpected expenses.

Don't Forget About Closing Costs

Your down payment isn't the only upfront expense.

Buyers may also encounter closing costs associated with their loan and transaction. Depending on the market and individual property, it may sometimes be possible to negotiate for the seller to contribute toward certain allowable closing costs.

That's one reason working with your lender and real estate agent early can be so valuable—you can develop a strategy based on the total amount of money you'll need, rather than focusing only on the down payment.

Build a Budget for After You Get the Keys

Buying the home is only the beginning.

Before making an offer, ask yourself a simple question:

Will I still be comfortable with my monthly budget after I own this home?

Leave room for maintenance, repairs, utilities, savings, travel and everything else that's important to you. Having money left over after your housing expenses can be just as important as qualifying for the mortgage.

When Should You Talk to a Real Estate Agent?

You don't have to wait until you're ready to buy next week.

A local real estate agent can help you understand neighborhoods, home prices, HOA costs, property taxes and what your budget can realistically purchase. Your agent and lender can then work together to help you build a plan.

If you're buying your first home in Peoria, Vistancia, the Phoenix Metro area or elsewhere in Arizona, starting the conversation early can help you avoid surprises later.

Ready to Start Your First Home Search?

Buying your first home doesn't have to begin with scrolling through listings. It begins with understanding your finances, learning your options and creating a plan.

Even if you're six months or a year away from buying, getting started now can put you in a much stronger position when the right home comes along.

At The JAY PATEL Group at RETHINK Real Estate, we're happy to help first-time buyers understand the process, connect with lending resources and determine what their budget can buy in today's Arizona housing market.

Your first home starts with a plan—and we're here to help you create one.

*FHA loans require an up-front mortgage insurance premium (UFMIP), which may be fi nanced, or paid at closing, and an FHA annual mortgage insurance premium (MIP) paid monthly will also apply.**Veterans, Service members, and members of the National Guard or Reserve may be eligible for a loan guaranteed by the U.S. Department of Veterans Affairs (VA). A Certifi cate of Eligibility (COE) from the VA is required to document eligibility. Restrictions and limitations apply. You may be required to pay a funding fee unless the VA determines you are exempt. Exempt status is determined by the VA and confi rmed through a COE. This one-time fee may be fi nanced into your loan in most
cases and is paid directly to the VA. ***Estimated payments do not include amounts for taxes, homeowners insurance, or mortgage insurance (if applicable). Actual payments will be higher. For informational/educational purposes only: Views and strategies described in this article or provided via links may not be appropriate for everyone and are not intended as specifi c advice/recommendation for any business. Information has been obtained from sources believed to be reliable, but
JPMorgan Chase & Co. or its affi liates and/or subsidiaries do not warrant its completeness or accuracy. The material is not intended to provide legal, tax, or fi nancial advice or to indicate the availability or suitability of any JPMorgan Chase Bank,N.A. product or service. You should carefully consider your needs and objectives before making any decisions and consult the appropriate professional(s). Outlooks and past performance are not guarantees of future results. JPMorgan Chase & Co.and its affi liates are not responsible for, and do not provide or endorse third party products, services, or other content. See full disclosures at Chase.com/afford. Home lending products provided by JPMorgan Chase Bank, N.A. Member FDIC.