5 Things To Consider Before Buying Your First Home

5 Things to Consider Before Buying Your First HomeWhen the idea of buying a home first came to mind, years ago, I set some conditions to meet first. I figured that I would know I was ready to buy my first house after I had completed these things. Whether or not the idea was feasible didn’t matter, since I had nothing else to go off.

Understand the Home buying process

If I was going to buy a house for the first time, I had to know what was going to happen. There is so much more to buying your first home besides picking out the house and signing the papers. If you don’t know how it all works before jumping in, then how will you really know what’s going on?

I’m not the best at doing research, yes…even with the Internet and all the information it contains. So I still haven’t looked into the home buying process even though I should, even for the sake of common knowledge.

Saving a down payment

Lots of people wouldn’t even consider buying a home unless they already had their down payment saved up. How much to save up…5%, 10%, 20% or more? I didn’t really know, which could be one of the contributing factors for not starting to save money at all.

Sometimes you can get into a house with no down payment at all, but I’m sure there has to be a catch somewhere, right?

Adjustable Rate Mortgages are the Devil

The first time I ever heard about an adjustable rate mortgage, I thought it was the scariest thing somebody could do when buying a house. What if the rate soars crazy high and you can no longer afford to keep your home? Adjustable rate mortgages are the devil, and I will never get one.

Financial Security

Going from apartment renter to a home-owner is a huge change. What different expenses might creep up? You never really know for sure how much it’s going to cost until you jump in. It’s important to have some financial security, just in case something big goes wrong.

Usually the home inspection can give you a good idea of what needs replacing and work done, but other stuff can still pop up. Bad things tend to happen to me a lot, so I always wanted to have at least $10,000 saved up to feel financially secure.

The last thing I would want is to jump in to home ownership unprepared and lose the house because we didn’t have money saved up to cover something big. Besides, a $10,000 Emergency Fund would be nice with or without a house. :-)

Credit Score and Interest Rates

It’s not a big secret that the better your credit is, the better your interest rate will be. That doesn’t just go for buying homes, but works for: credit cards, personal loans, auto loans and probably other stuff too.

Thirty years of interest and payments really adds up, so the interest rate makes a huge difference in monthly payments and the end cost of the home.

Thankfully, both my honey and myself have great credit now—at least that’s what Credit Sesame says. While they provide access to your credit score for free, they don’t give out your FICO score. Still though, it’s great for working on your credit and can be close to your FICO score. The FICO score is the one that most, if not all lenders use to determine your interest rate.


While we have made a ton of financial progress the last couple of years, we’re still light years away from meeting all these conditions. Right now, I’m 1 out 5 on my previous home buying prerequisites. Plus I know just about nothing about actually buying a home. Am I still sticking to these? Do they really matter? I’m not really sure yet. At least we already have an idea how much house we need, no need to buy more than we’ll actually use.


How did you prepare to buy your first home?

About Jen Perkins

Likes: saving money, being debt free (aside from our house), zombies, travel, getting money, blogging and dogs. Dislikes: debt, being broke, bunnies, wasting money, not having enough money to travel the world and paying interest. Facebook  ♥  Twitter  ♥  Google+  ♥  RSS


5 Things To Consider Before Buying Your First Home — 40 Comments

  1. I would definitely save up for at least a couple of months of expenses first also. You never know if something might happen.

  2. Keeping focus on paying down your mortgage is key once you are in. It would be nearly impossible to do that with an ARM. Thank G I never did that. Although my mortgage is high I still wouldn’t trade it for an ARM.

  3. I bought my first place at the age of 24, definitely the youngest of my friends. I was old school, I had 20% down, which gave me established principle. I had a great realtor that was recommended by a trusted family friend. This is definitely key.

    • One of my friends did the same thing as you, I think he might have also been 24 too. I couldn’t believe he was able to save a down payment while making min. wage.

  4. I’m not sure how it works in the US, but here in Canada if you don’t put 20% down you have to be lots of money in extra insurance. I’ve been itching to get my first mortgage, but I’ve got the problem of living in a very expensive city. So really I should be finding a more affordable city before committing to anything. It’s just so tough to leave what you’re used to and face the unknown.

    • I thinks it’s called Private Mortgage Insurance (PMI) in the US, and I’ve heard it can be really expensive.

      That’s funny, I’m dying to move away from here. I want to start over in a new place, but with my honey’s job, we’re pretty much stuck.

      • The other downside to no downpayment is that you have zero equity in your home to start, and it takes a hell of a lot longer to build from zero.

        I’m like you. I like to start over every so often. But the family is with Modest Money…we’ll be sticking around Pittsburgh for a long while. 😉

        • Starting out with no equity would really suck, but it’s still better than never being able to buy a house. 😉

          • I like this post, it is generating great conversation. I do have a couple of things I’d like to mention. For most people an adjustable rate mortgage is a bad idea. If you plan to stay in your home for an extended period of time, or an unknown period of time then stay away from them. On the other hand, the rates are typically lower for an ARM loan and they are also typically fixed for the first 3, 5, or 7 years of the loan. If you know that you do not want to own a home for more than 5 years then you can still be safe in a 5 year ARM. If plans change then there is always the option to refinance into a fixed rate loan.

            Downpayment vs. PMI: I would personally choose PMI. Sure it does increase your payment but you also are not tying up your savings that you worked so hard to accumulate. Once you put that money into your house the only way to get it back is to sell or refinance. If the market drops then that money you put into the home disappears. That is cash you could use for your emergency fund, to save for retirement, or anything else. Once it’s tied up in your home it stays there.

            As for the process of buying, there is quite a bit to it.

            There are pro’s and con’s to buying with little to no money down. Most loan programs do require PMI (private mortgage insurance) if you don’t have 20% down. The one big exception is for a VA loan for military personel and veterans. PMI ranges from about .6 – 1.25% of the total loan amount per year and it lasts until the balance of the loan is paid down to 78-80% of the original purchase price. On an FHA loan that is usually 8-10 years of scheduled payments before the PMI goes away. That is a con.

            On the other end of the spectrum, imagine you saved for years to put 20% down on your home and the property value falls. That 20% just disappears. The less you put down the less risk you have of losing that money due to a declining housing market. Personally I believe that your hard saved cash is better used in an investment account where it is relatively liquid rather than sitting in the equity of your home that you can only access by taking another loan or selling the home.

            • Awesome comment, Bill. :-)

              I’m right there with you on the down payment, it seems like a bad idea. I know that most people do it to avoid paying PMI, but what if you end up need that money. There are also many other things people could do with the money aside from locking it into a house.

              Personally, I’d rather have it either making me money or to cover unexpected emergency expenses.

  5. Jen,
    There are only a few no-down-payment options available. Both are government programs. There’s the USDA loan program which requires the property be in a city with a certain population. It was designed decades ago to help rural families purchase a home.

    The other option that offers no money down is the VA loan program, which is exclusive to veterans, service members and spouses who survive those who die in the line of duty.

    I can’t imagine you’d find a traditional mortgage without a down payment. Be prepared to put as much as 20 percent down.

    -Christian L.

    • Thanks Christian. I’ve heard of the USDA loans, which would be great for my whole ‘wanting to live in the forest’ idea. The VA loans wouldn’t apply to us.

      If we had to save a 20% down payment, it would take us decades to get into a house. Crazy stuff.

    • You can get the seller to pay your down payment, but then that is money that they would have reduced the house price instead.

      However, buying is a great decision. First of all, you get to fix part of your housing costs (one of the only expenses where you can do this and housing is the biggest category). Home price inflation is an asset to you and you avoid rent inflation, so it has a built in return on investment.

      There are obstacles, but definitely a decision worth looking into.

      • I hate rent inflation; every year, our apartment rent is increased. It would be awesome to have our housing expense stay the same year to year. :-)

  6. One thing I’d add to your list of questions: Is buying a home right for you?

    I know a lot of people that jumped into buying a home or condo because they thought it was the “next step” in their lives, and they weren’t necessarily ready for it.

    As with any major purchase, look before you leap!

    • That’s great advice, Stephanie. 😀

      I’ve known people who did just that and ended up turning around and selling their homes and going back to apartments.

  7. I am actually writing about this currently on my blog since we are looking into purchasing a home.

    (1) We have saved 20% for a down payment. Most co-ops in our area, which is what we are looking to purchase, require 20% down. Someone mentioned some options above and I also would suggest looking into FHA loans which allow for smaller down payments and are often accompanied by lower interest rates.

    (2) I agree with you about adjustable mortgages. They are a gamble and a risk. Someone who obtained a mortgage five years ago would be very happy with an adjustable rate right now. At this point in time, considering how low interest rates are, I don’t see why anyone wouldn’t pick-up a fixed interest rate when purchasing a home.

    (3) To put down 20%, we will need to put down somewhere between 64-70K. We are hoping to have at least 7-10K left after all is said and done—once we move into the place. In terms of additional expenses, it would be wise to ask to see financials of the home owner to see what they typically pay in taxes, electric, gas, water, etc.

    Good luck!

  8. I love buying and selling homes. Mortgage rates have been so low for the past 10 years and getting into a variable rate is a good move if there is a pre-caution in the loan that allows you to lock in your rate as soon as the bank rate starts to climb. That way you are protected and initially you can still enjoy the low rates. Having a downpayment of at least 20 to 25 % is ideal. Buying with zero down is possible, but risky. The housing market is so volatile and no one can predict the future, so the more you have down the better. Interestingly I was just at the bank and a young fella was speading there and telling people that the price on his mortgage was higher than the current resale value of his house. That is very odd for our city. But it can happen and that is very scarey.

    • I’ve heard about that happening to lots of people, I couldn’t even imagine how much that would suck. :-(

  9. I had a lot of savings for a downpayment which allowed us to asume their below market loan. You can no longer do that, but I had options thanks to savings.

  10. While I had saved up the full 20% for a down payment we decided to only put 10% down and just use the banks money. Given that home prices took a nose dive afterwards I am glad we kept that extra 10% in the bank.

  11. I was blown away when my wife and I bought our first home about how much money we needed to spend at the home improvement store to get it up to par. Even though we bought a brand new home, we still had to shell out money for window blinds, garage door opener, and a host of other things that we didn’t have to worry about as a renter (lawn mower, etc.). It was quite the additional shock to our wallet.

    • Yeah, a transition from renting to owing can bring on a whole mess of expenses. Just imagine how much it would cost if you bought a older house.

  12. We are not ready to buy a house. But I have seen my parents and in laws with their houses. They buy, fix, update, etc… The charges never end. Frankly it scares me! LOL

    I am not convinced a house is in the future until after 30. I know it builds equity but hmmm you are also paying interest to a bank to stay in one place.

    • Yeah, it all kinda scares me too. :-) Mostly because I don’t want to be tied down to one place, but with my husband’s job there isn’t much of a choice. Unless I could figure out some other income stream that is location independent…we’ll see.

  13. Buying a home is usually one of the best investments you can make. But, things can go belly up when the economy is on a prolonged downturn. I rent my home, happy in the knowledge I don’t have to pay for any major repairs, decorating etc.

  14. I’ll be buying my a home for myself a couple of years down the road and I’m saving a significant part of my income to be paid as a down payment since I would like to take as little debt as possible.