Buying your first home is an exciting milestone, but it can also be a daunting experience for first-time borrowers. Understanding the process and making informed decisions are essential for a smooth home-buying journey.

This article provides first-time homebuyers with valuable tips and insights to make the best choices possible. By following these recommendations, we hope you can confidently navigate the world of mortgages, budgeting, and house hunting while enjoying the rewards of responsible sharing and spending with your VITAL Card.

Why do people buy homes?

There are several reasons why people may choose to buy a house rather than rent.

Firstly, owning a home provides a sense of stability and security. When you own a property, you have complete control over it, and you don’t have to worry about a landlord selling the property or increasing rent prices. Home ownership may be especially attractive to families who want to establish roots, create a stable living environment, and eventually pass a home down to their children.

Additionally, owning a home can be seen as a smart investment in the long term. As you pay off your mortgage, you build equity in your home, which can be used for other investments or as a form of savings. In contrast, when you rent, you are essentially paying someone else’s mortgage and not building any equity.

Another advantage of owning a home is the freedom to customize and make changes to the property as you see fit. When renting, there may be restrictions on what changes you can make, which can limit your ability to create a space that truly feels like home.

Overall, while renting may be a good short-term option for some, owning a home offers many benefits in terms of stability, investment potential, and personalization.

What should you know before buying a home?

We know it’s easy to get swept away by the thought of finally settling into your dream home. But before you make an offer, there are a few steps you should take to help you find the right property.

Step 1: Assess your financial health

Before diving into the home-buying process, it’s crucial to evaluate your financial situation. Start by checking your credit score and credit report from reputable sources like Experian, Equifax, Transunion, FICO, or VantageScore. A higher credit score can result in better mortgage rates and terms, saving you money in the long run.

Budgeting is another essential aspect of your financial health. Determine how much you can afford for a down payment and monthly mortgage payments by considering your debt-to-income ratio, expenses, and future financial goals. Remember that a larger down payment can help you secure a lower interest rate and reduce your overall loan amount.

Your Vital Card usage can also impact your credit health. By developing good spending habits and responsibly using your credit card, you can help improve your credit score.

Plus, when you refer friends and grow a higher Vital Score, you’ll receive a bigger share of Vital's referral rewards each month. These rewards, along with cashback from your card’s spending, can help you save for a down payment and other home-buying expenses.

Step 2: Research mortgage options

Once you have a clear understanding of your financial health, it’s time to explore your mortgage options. There are various types of mortgages available, including fixed-rate, adjustable-rate, and government-backed loans. Each option has its pros and cons, so it’s essential to compare them and determine which one suits your needs and financial situation best.

Shop around for the most competitive interest rates and terms by contacting multiple lenders. This can be a time-consuming process, but it’s worth the effort to find the best deal.

Don’t forget to consider federal programs specifically designed for first-time homebuyers, such as Federal Housing Administration loans (FHA loans), VA loans, and USDA loans. These programs often offer lower down payment requirements and more lenient credit score criteria, making homeownership more accessible for many first-time buyers.

You might also find some first-time homebuyer programs, which are tailored to those who are new to the housing market. If you’re unsure whether you will qualify, talk to your loan officer. It’s possible you may qualify for down payment assistance programs as well.

Step 3: Assemble your home buying team

A team of experienced professionals can make your home-buying experience smoother and less stressful.

Begin by selecting a real estate agent who understands your needs and can guide you through the entire process. Look for an agent with a strong track record, excellent communication skills, and a deep knowledge of the local market.

Next, find a reliable mortgage lender to help you secure the best loan option for your financial situation. Remember to compare interest rates, fees, and loan terms from multiple lenders before making a decision. Your realtor can also recommend trusted mortgage professionals in your area.

Lastly, enlist the services of a reputable real estate attorney to review your purchase agreement and other legal documents. While this may not be required in every state, having a lawyer on your side can offer added protection and peace of mind during the home-buying process.

Step 4: Create your home wish list

Before diving into the house hunting process, create a wish list of features and amenities you want in your first home. Prioritize your list into “must-haves” and “nice-to-haves,” allowing for flexibility and realistic expectations.

Consider factors such as:

  • Location: Think about your ideal neighborhood — proximity to work, schools, shopping, and public transportation can be dealbreakers. Also, consider if the house is part of a Homeowners Association (HOA), which can mean additional requirements such as neighborhood quiet hours or having standard colored siding.
  • Type of Home: Decide on your preferred property type, such as a single-family home, townhouse, or condominium.
  • Size: Consider the number of bedrooms and bathrooms, square footage, and the layout that best suits your lifestyle.
  • Yard and Outdoor Space: Determine if you want a yard, patio, or balcony, and consider any maintenance requirements, such as how often you’ll need to mow.
  • Amenities and Features: Make a list of specific features and amenities, such as a garage, central air conditioning, or energy-efficient appliances.

Keep in mind that your first home may not have everything on your wish list, but it’s essential to strike a balance between your desires and practicality. Your Vital Card can also contribute to your home-buying goals by helping you earn cash rewards and improve your credit health. A higher credit score could make it easier to qualify for better mortgage rates and terms.

Step 5: Set realistic expectations

As a first-time homebuyer, it’s crucial to set realistic expectations about the home-buying process and your budget. Understand that finding the perfect home may take time and patience. Be prepared to encounter bidding wars, especially in competitive markets, and have a strategy in place to handle such situations.

This may mean that your bid will end up being above the listed home price. If this is the case, just make sure that the total price is still in your price range and that you’ll still be able to make your monthly payments on time.

It’s also essential to remember that homeownership comes with additional costs beyond the purchase price, such as property taxes, homeowner’s insurance, and maintenance. Factor these expenses into your budget to ensure you can comfortably afford your new home in the long run.

By setting realistic expectations and preparing for potential challenges, you’ll be better equipped to navigate the home-buying process with confidence.

Step 6: Secure mortgage pre-approval

Obtaining a mortgage pre-approval is a vital step in the home-buying process. It demonstrates to sellers that you’re a serious buyer with the financial means to purchase their property. Moreover, it provides you with a better understanding of how much you can afford, helping you narrow down your home search.

To secure a mortgage pre-approval, reach out to your chosen lender and provide them with the required financial documentation, such as income statements, tax returns, and bank statements. Your lender will assess your financial standing and credit health, giving you an estimated loan amount and interest rate.

Step 7: Conduct thorough home inspections

Once you’ve found a property you’re interested in purchasing, it’s crucial to conduct a thorough home inspection. A professional home inspector can identify potential issues and costly repairs that may not be visible during a casual walk-through.

Some common areas of concern include:

  • Structural issues
  • Roofing problems
  • Plumbing or electrical concerns
  • Pest infestations
  • Heating, ventilation, and air conditioning (HVAC) system issues

Depending on the results of the inspection, you may decide to renegotiate the home purchase price, request repairs, or walk away from the property entirely. Investing in a comprehensive home inspection can save you from expensive surprises down the line and ensure you’re making an informed decision.

Step 8: Close the deal and move in

Once you’ve found the right home, secured financing, and completed the necessary inspections, it’s time to close the deal. Your real estate attorney will review the closing documents and ensure that all terms and conditions are met. Upon signing the final paperwork, you’ll pay any required closing costs, and the property will officially become yours.

While you’re still in the closing process, you may want to avoid taking out any other large loans. This could affect your credit score and potentially interfere with your closing process.

How can credit help you buy a home?

Credit plays a critical role in the home-buying process. When you apply for a mortgage, lenders will review your credit score and credit history to determine if you are eligible for a loan. A good credit score can increase your chances of getting approved for a mortgage and can also help you secure a lower interest rate.

In addition to helping you qualify for a mortgage, good credit can also impact the type of loan you can get. For example, if you have a high credit score, you may qualify for a conventional loan with a lower down payment requirement. On the other hand, if your credit score is lower, you may need to consider an FHA loan, which typically has more lenient credit requirements but requires a higher down payment.

In short, having good credit is essential when it comes to buying a home. It can help you qualify for a mortgage, secure a lower interest rate, and potentially save you thousands of dollars over the life of your loan.

The bottom line

As a first-time homebuyer, navigating the home-buying process may seem daunting, but with careful planning, a reliable team, and realistic expectations, you can successfully find and purchase your dream home.

Embrace the journey, learn from the experience, and leverage tools like your Vital Card to help you reach your financial goals. Welcome to homeownership — your future awaits!


What Type of Mortgage Loan Is Best | Experian

Types of FHA Loans | Experian

VA Home Loans | Veterans Affairs

Get a prequalification or preapproval letter | Consumer Financial Protection Bureau

Vital Card blog posts are intended for informational purposes only and should not be considered financial or any other type of advice.