The Ultimate ​Guide for ​First-Time ​Homebuyers

Assess Your Financial Readiness

BUDGETING FOR YOUR FIRST HOME PURCHASE

One of the first—and most critical—steps for first-time homebuyers is determining how much home you can afford. To do this, you’ll need to look at your current financial situation, including income, debts, savings, and credit score.

• Lenders often use your DTI ratio to determine how much mortgage you can qualify for. Ideally, your DTI should be below 36%, but different lenders may have varying requirements.

• For most first-time buyers, saving for a down payment is one of the biggest hurdles. Aim to save at least 20% of the home’s purchase price to avoid private mortgage insurance (PMI). However, some first-time homebuyer programs offer lower down payment options.

• Don’t use all your savings on the down payment—ensure you have enough money set aside for unexpected repairs and maintenance once you own the home.

Understand Mortgage Options & Get Pre-Approved

KNOWING YOUR MORTGAGE TYPES
Before diving into the home search, it’s essential to understand your mortgage options. Not all loans are created equal, and the right one for you will depend on your financial situation and future plans.
 

• These are the most common types of mortgages, typically requiring a 20% down payment. However, some conventional loans allow for smaller down payments, as low as 3% for first-time buyers.

• These are government-backed loans that are popular among first-time homebuyers due to lower credit score requirements and a down payment as low as 3.5%.

• If you’re a veteran, service member, or qualifying military spouse, a VA loan allows you to buy a home with no down payment and favorable interest rates.

• These loans are available for rural and suburban homebuyers and require no down payment.

Research Your Desired Location

FINDING THE RIGHT NEIGHBORHOOD

When buying your first home, location is just as important as the house itself. Take time to research neighborhoods based on your lifestyle, commuting needs, and long-term plans.

• Consider your commute to work, as well as proximity to schools, shopping centers, parks, and healthcare facilities.

• Use online resources to check crime rates and safety statistics in different areas.

• Look for neighborhoods with rising property values and potential for development. This could mean a higher return on investment (ROI) when you eventually sell.

Start House Hunting with Realistic Expectations

HOW TO PRIORITIZE YOUR NEEDS VS. WANTS

It’s easy to get carried away when you start browsing listings, but it’s important to distinguish between your must-haves and your nice-to-haves. Creating a list of both will keep you focused and help you avoid falling for a home that isn’t a good fit.

• Consider how much space you need now and in the future. Think about the number of bedrooms, bathrooms, and any extra space for home offices or guests.

• Older homes may come with charm but could also need costly repairs. Weigh the pros and cons based on your budget and willingness to renovate.

• Even though this is your first home, you should consider how easy it will be to sell down the road. Homes in desirable neighborhoods or with modern upgrades typically sell faster.

Don’t Skip the Home Inspection

WHY A HOME INSPECTION IS CRITICAL FOR FIRST-TIME BUYERS

A home inspection is a crucial part of the home-buying process, especially for first-time buyers. Skipping this step can result in costly surprises down the road. The inspection will provide an in-depth analysis of the home’s condition, allowing you to make an informed decision.

• The inspector will check the foundation, roof, walls, and windows for any major structural problems.

• Ensure that the plumbing is in good condition and that electrical systems are up to code.

• Be on the lookout for infestations or mold growth, which could affect your health and the home’s value.

Be Prepared for Closing Costs and Hidden Expenses

UNDERSTANDING THE TRUE COST OF BUYING A HOME

First-time homebuyers are often surprised by the additional costs associated with closing a real estate transaction. Beyond the down payment, you’ll need to budget for closing costs, which typically range from 2% to 5% of the home’s purchase price.

• Lenders require an official appraisal of the home’s value.

• This protects you and the lender from any future legal disputes over the ownership of the property.

• Depending on when you close, you may be responsible for a portion of the year’s property taxes upfront.

• Most lenders require proof of insurance before closing.

Take Advantage of First-Time Homebuyer Programs

FINANCIAL ASSISTANCE AND GRANTS FOR FIRST-TIME BUYERS

Many first-time homebuyers are eligible for special programs that make buying a home more affordable. These programs often offer grants, low-interest loans, or tax breaks, which can reduce your upfront costs or lower your monthly payments.

• FHA loans are available nationwide, including Southern California. They are popular for first-time buyers across the state due to their lower credit score requirements and smaller down payment.

• California offers several programs to assist first-time homebuyers, such as the California Housing Finance Agency (CalHFA), which provides down payment and closing cost assistance. Additionally, local municipalities in Southern California may offer their own grants or incentives.

• This is a national program available to eligible buyers, including in Southern California. Teachers, law enforcement officers, firefighters, and EMTs can receive discounts when purchasing homes in designated areas.

Secure Homeowners Insurance

PROTECTING YOUR INVESTMENT
Before you can close on your new home, you’ll need to purchase homeowners insurance. This coverage protects your investment by covering damage to the property, personal liability, and theft.

• Compare Insurance Quotes: Shop around to find the best rates and coverage options. Don’t just choose the first policy you come across—comparing quotes could save you hundreds of dollars.
• Bundle with Other Insurance: Many insurance companies offer discounts if you bundle your homeowners insurance with other policies, like auto insurance.

Make sure your coverage limits match the value of your home and personal belongings.

Plan for the Future with Long-Term Maintenance

MAINTAINING AND IMPROVING YOUR FIRST HOME

Owning a home comes with ongoing responsibilities. Creating a maintenance plan will help you avoid expensive repairs and keep your property in good