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3 Steps Every First-Time Home Buyer Should Take

by Christy Bieber | Feb. 2, 2021

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

A young couple walking through an empty living room on a house tour.

Image source: Getty Images

Be sure to check these items off your to-do list before you make an offer on a home.

When you're buying a home for the first time, it's imperative you make smart decisions so you don't end up regretting your investment. After all, you'll be spending a lot -- and likely borrowing a lot -- to buy your home. And it can be hard to know how to do this wisely if you've never made such a large purchase before.

The good news is that checking a few simple tasks off your to-do list can maximize the chances your home purchase will provide you with a nice place to live and help you build wealth over the long term. Here are three things you should be sure to do.

1. Decide how much to spend

When you apply for a mortgage loan, the bank will let you know the maximum loan amount you're approved for -- but you don't want to let your lender decide your housing budget. Instead, consider the cost of homes in your area, your monthly budget, and your other financial goals.

By balancing the cost of the kind of house you want with the impact the purchase will have on your monthly expenses and ability to accomplish your objectives, you can make the best choice about how much home you can really afford. If it happens to be less than the bank approves you for, stick to your guns and let your needs determine how much you'll spend.

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2. Shop around for loan options

There's a lot of variation in interest rates, fees, and other loan terms from one mortgage lender to the next. You don't want to pay more to borrow than necessary, so be sure to get quotes from multiple lenders. By comparing rates, you could save yourself tens of thousand of dollars in interest over the life of the loan.

It's really easy to get multiple mortgage rate quotes now, and lenders will let you compare rates without it affecting your credit score, so there's no reason not to shop around.

3. Get pre-approved for a loan

When you've found a lender offering you competitive terms, get pre-approved before you start shopping for a home. Pre-approval means submitting your financial documents and letting the lender decide in advance if they're willing to allow you to borrow. You may even have the option to lock in your interest rate during this process.

A mortgage pre-approval isn't an absolute guarantee that you can borrow -- things could change between pre-approval and closing that disqualify you. But pre-approval does involve a thorough review of your finances, and in most situations you'll end up getting the loan you've been pre-approved for unless your situation has changed drastically in the interim.

Pre-approval will help you get a clear idea of how much you can borrow and what rate you'll likely pay. But the biggest reason to do it is because many home sellers won't accept an offer on their property without pre-approval. And you don't want to lose out on the home of your dreams because you're unable to provide proof that a bank will lend you the funds.

By taking these three steps, you can find the right loan, maximize your chances of being able to buy a home, and ensure you get the most affordable rate. Don't skip out on any of them if you want to make sure your first home purchase isn't one you regret.

A historic opportunity to potentially save thousands on your mortgage

Chances are, interest rates won't stay put at multi-decade lows for much longer. That's why taking action today is crucial, whether you're wanting to refinance and cut your mortgage payment or you're ready to pull the trigger on a new home purchase. 

Our expert recommends this company to find a low rate - and in fact he used them himself to refi (twice!). Click here to learn more and see your rate. While it doesn't influence our opinions of products, we do receive compensation from partners whose offers appear here. We're on your side, always. See our full advertiser disclosure here.

About the Author

Christy Bieber
Christy Bieber icon-button-linkedin-2x

Christy Bieber is a personal finance and legal writer with more than a decade of experience. Her work has been featured on major outlets including MSN Money, CNBC, and USA Today.

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We’re firm believers in the Golden Rule, which is why editorial opinions are ours alone and have not been previously reviewed, approved, or endorsed by included advertisers. The Ascent does not cover all offers on the market. Editorial content from The Ascent is separate from The Motley Fool editorial content and is created by a different analyst team.

The Motley Fool has a Disclosure Policy. The Author and/or The Motley Fool may have an interest in companies mentioned.

The Ascent is reader-supported: we may earn a commission from offers on this page. It’s how we make money. But our editorial integrity ensures our experts’ opinions aren’t influenced by compensation.

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