How to Buy a Home, First Time Buyer

Updated: Jun 30, 2020

Being a first time home buyer is an exciting but also overwhelming time. The tips below will help you get to know the process of purchasing your first home and help you avoid some of the common first time buyer mistakes.


Front of House

The steps to move into your first home!

1. Start Saving for a Down Payment

2. Start Working on your Credit Score

3. Explore Home Loan Options and Mortgage Lenders

4. Get Preapproved!

5. Find the Best Real Estate Agent

6. Find What you are Looking For

7. Make an Offer!

8. Inspection

9. House Closing!


1. Start Saving for a Down Payment

It is important to have some money upfront to use as a down payment, but a little extra helps with closing costs, furnishing the home, and an emergency fund. An FHA loan can get you into a house for only 3.5% down, however the average purchase price in Denver is $460,000. That means with 3.5% down, that is still $16,100. Many conventional loans require 3% or more down. There is also something called PMI (Private Mortgage Insurance) that you will need to pay additionally each month until you get to a 20% debt to equity. The higher the down payment you can provide the lower interest rate you can receive from a lender.


The IRS allows you to withdraw up to $10,000 from your IRA without paying a 10% penalty. If you are a married couple and both of you are first time home buyers than you can withdraw $10,000 each so $20,000 total! It is important to remember that you must enter a contract with 120 days of withdrawing the money or else the IRS will want their penalty money. This will also lower your retirement savings so it might be worth talking with a financial planner before making this decision.

2. Start Working on your Credit Score

Having a good credit score 740+ is ideal to get the best interest rate terms however don't be too afraid if your credit score is below that. As you are saving up for a down payment you can help work on your credit score. First, check what your score is, most credit cards offer this service for free. If you don't have any credit at all, opening a no annual fee credit card is an option to start building credit and establishing a payment history. Make sure that you don't miss any payments, this is a large factor in calculating credit score. Third, if your budget allows, try to pay off some of your current debt. Credit utilization makes up 30% of your credit score. You can also pull your full credit report once per year from one of the three credit bureaus to ensure that it is accurate and dispute anything that is incorrect.


3. Explore Home Loan Options and Mortgage Lenders

The first step is to identify what type of loan program you want. If you have a military background, a VA loan (Veterans Affairs) can let you purchase a home with 0% down payment. a FHA loan through the federal housing administration can provide individuals with only 3% down. Conventional loans can also typically start with only 3% down.

It is also important to search for closing cost assistance programs or other similar things provided by HUD (Department of housing and urban development). Good Neighbor Next Door Program (GNND). This provides housing for federal/state employed teachers, police, firefighters, EMT's and more. There are also a variety of state specific closing cost assistance programs and down payment assistance programs out there.

There are also fixed rate mortgages vs adjustable rate mortgages. The difference between these are that with a fixed rate you will know exactly how much you owe for up to 30 years. An adjustable rate mortgage will change the interest rate after a set period of time. These could be ideal for those who don't plan on staying in their home for a long period of time and know that they will either sell or refinance in the future.

It is very important to shop around for a mortgage as interest rates, origination fee's and more vary lender to lender. I always recommend that people start with their current bank as they can help walk you through the process since you already have a relationship with them. However, don't forget to check that same rate with online options and other local lenders.

4. Get Preapproved!

Preapproval allows you to go out and shop knowing that a lender will back you. It allows your offer to stand out and ensures that you are aware and comfortable with the monthly mortgage payment. This means that your lender has already verified your debt to income ratio and credit score. It is also important that your lender includes the approximate property taxes and homeowners insurance.

5. Find the Best Real Estate Agent

Finding a real estate agent to help you with your home purchase is very important and there are several factors to consider. Make sure that your agent is aware of the first time home buyer programs as helping you guide through the process is vital. Secondly make sure that they know the area, when it comes to real estate just a neighborhood away can make a large difference. Third, make sure that you have an agent who really cares about you and won't push you into the wrong house. Luckily you can find a great Denver Realtor® right here!