Between the large financial investment and the many risks and challenges involved in the process of home buying, there is a lot to learn so that you can avoid making costly mistakes with long-term effects.

Here are the top 10 first time home buyer tips that you need to consider to help you prepare for every step of the way, from getting your financial goals in line to taking advantage of the special perks for first time entrants into the real estate market.

Getting started on the home buying process: Secure your financial health

The first step is always the hardest, but you need to lay a solid financial foundation to be able to reap the benefits later on. Before you can embark on the hunt for your dream home, you need to take a good, hard look at:

• Your savings: You will need to provide proof of savings when applying for loans, so make sure you have enough to cover the many costs related to the home buying process, and then some.
• Your expenses: Calculating your cost of living every month will help identify how much you can feasibly put towards mortgage payments.
• Credit score: Lenders will look at your credit report when considering your application for a home loan, so getting your score as high as possible is a must, especially when it comes to affording a down payment.
• Debt-to-income (DTI) ratio: You will also want to make sure that your existing debt is manageable with the added expense of mortgage fees, as lenders will consider this factor on your application.

Draw up a realistic budget and identify the costs of buying a home

For first time homebuyers, planning out your financial goals can be difficult when you don’t know what to expect. A good starting point would be to consider your possibilities based on your income while including other related costs of buying a home into your calculations. This can include insurance, taxes, homeowner’s association (HOA) fees, utility deductions, closing costs (like appraisal fees, escrow fees, any fees paid to attorneys, etc) and much more.

Put some of your savings into an emergency fund

While it can be tempting to skip this step and hope for the best, having an emergency fund in place from the very start can make or break your home buying plans. This will need to cover at least 3 or more months worth of unexpected expenses, like necessary renovations or sudden maintenance and repairs.

Compare different first time home buyer loan options in the market

The good news is that some first time home buyer loans in the United States are a lot more forgiving than conventional loans, often with lower interest rates, lower qualifying credit scores or lower down payments required.

Some options to consider applying for (if eligible) include:

• FHA loan: Offered by the Federal Housing Administration
• USDA loan: Offered by the Department of Agriculture for those looking to buy a house in rural areas
• VA loan: Offered by the Department of Veterans Affairs for veterans or active service member of the United States armed forces

Look into first time home buyers assistance programs

When it comes to qualifying for first time home buyer programs, you need to identify if you fit all the criteria for being a first time home buyer.

What is a first time home buyer?

According to the U.S. Department of Housing and Urban Development (HUD), a first time home buyer is any individual who has not owned a principal residence for three years, with further allowances made for single parents, displaced persons and much more.

HUD and other federal agencies offer many home loan programs that can benefit first time buyers, including:

• State programs
• Rural resident programs
• Section 184, a home loan guarantee program for American Indian and Alaska Native families, Alaska Villages, Tribes, or Tribally Designated Housing Entities.
• Native American Direct Loan program (NADL)

Get pre-approval for a home loan

Applying for pre-approval as a first time home buyer is almost non-negotiable; it gives you a competitive edge by showing sellers that you are a serious buyer, while also helping you stay within your budget.

Your financial information and documents are assessed by a lender to verify your income, savings, assets and so on, and you will receive a pre-approval letter that shows the amount you will receive as a loan. This can vary, so it’s a good idea to shop around and compare lenders.

Consider hiring a real estate agent

It is always advisable to talk to the experts, especially when you’re new to the process and may not know how to successfully navigate the housing market.

The best real estate agents can help you with everything from figuring out a good a time to buy, finding homes that tick all your boxes and suit your budget, and taking you through the home inspection process. Once you are ready to make an offer, they can also help with negotiating with the seller and getting documentation together, using their expert knowledge to make the process simpler for you.

Again, different agents will charge different fees or commission rates, so it’s a good idea to speak with a few candidates to see what works best for you.

Pick the right location and property type for you

Now for the most exciting part of the home buying process: choosing your future home!

Whether you’re happy to go with your real estate agent’s recommendations or prefer to browse through Zillow or other online listings, there are many factors to consider beyond your budgetary restrictions.

What is the best time to buy a home?

Your real estate agent will be able to advise you on the right time to look into home buying, by analysing the housing market and taking into account factors like season and demand.

However, the most important factor is your personal financial situation. If you are financially stable enough, have a steady income, and have enough savings to account for all the additional costs (even the unexpected ones), then you don’t need to worry about timing the real estate market to perfection.

What are the best places to buy a home?

This is where you need to put some serious thought into what you want from your home and the environment that surrounds it. Is it important to you to be close to your support system, or do you value your space? Remember, what works for some people might not work for you.

Some of the questions you need to ask yourself include:

• Is the neighbourhood right for you?
  While suburban living is ideal for families, working professionals may prefer to be close to metro areas for an easier commute.
• Does it have the amenities you need?
  It’s always worth researching local amenities, retail options, schools, public transportation, and so on, so you have everything you need within reach.
• What property type would suit your situation best?

From apartments and townhouses to single-family homes and duplexes, you should have a clear idea of the kind of space and privacy you and your family will need.

• Does it have the right features?
  Backyard or home office? Draw up a list of your must-have features so you don’t have to compromise if you don’t have to.
• Is it worth investing in a fixerupper?
  Sometimes the difference between what you can afford and what you really want is just a little TLC. That way, you can work on home improvements and renovations at your own pace.

Don’t be afraid to negotiate

Once you’ve done your research, gone through the best sites for home buyers and found the right home for you, it’s time to make that all-important offer.

Going back and forth on the purchase price is a normal part of the process. Your real estate agent will help you decide on your offer based on your budget and the local market values. They will then present it to the seller, who will either accept it or issue counteroffers until a compromise is reached.

It’s best to be 100% certain of your choice when submitting a serious offer, at the risk of losing your deposit. However, negotiations often fall through, so don’t be disheartened: just keep looking!

Invest in homeowners insurance

While investing in homeowner insurance is often required as part of the loan approval, it is a necessary expense that can save you a lot of money if disaster strikes. Your policy will cover your home and belongings against loss and damage, both interior and exterior, and provide important coverage like liability insurance against accidents within your property.

Make sure you are aware of your liability limit and scope of coverage, so you’re not faced with surprise charges after an unfortunate incident.