12 Rules for First-Time Homebuyers Making Under $100,000

INVESTING - REAL ESTATE INVESTING
Buying a home is exciting, but it’s important to follow some key rules that can help you stay within budget.
Updated April 3, 2023
couple carrying boxes and moving into their new home

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Buying your first home can be thrilling, but the process also includes financial challenges, particularly if you're on a tight budget. The key to making things work is to follow some well-established rules that will keep you out of trouble.

Before you sign the closing papers, here are some things to consider so you don’t waste money or end up regretting your purchase.

Consider the things you can’t change

arinahabich/Adobe residential neighborhood

You may walk through a house and think about redesigning the kitchen or moving walls. But remember there are also things you can’t change.

For example, you're stuck with the location of your home, city ordinances, and homeowners association regulations. So pay close attention to these details before you make a purchase.

Account for property taxes or HOA fees

Kittiphan/Adobe young woman checking bills

Check with your local city office or homeowners associations to get an idea of how much you'll have to pay in taxes and fees for particular homes in specific neighborhoods. These can easily add thousands of dollars to your annual housing costs.

Also, look into what those fees cover, such as amenities that may make a home or neighborhood more appealing.

Check on home insurance estimates

Shisu_ka/Adobe insurance with hands protect a house

Home insurance costs can add up. Living in some places may come with higher insurance costs than others, so it’s important to factor those expenses into your buying decision.

Pro tip: If you’re trying to eliminate money stress, ask about adding an escrow account to your mortgage. Your mortgage holder will take some of your monthly payment and put it in escrow to pay your taxes and insurance dues.

Ask the listing agent for a history of utility bills

golibtolibov/Adobe monthly utility bills

Remember to account for utility bills when you put together an estimated monthly budget for your home. A bigger home costs more to heat and cool and uses more electricity than a smaller house.

And if you want additional property, consider the extra costs of keeping more land well-maintained.

Be aware of upcoming repairs

Volodymyr Shevchuk/Adobe master roofer covers the roof

Some home repairs or updates can cost you big money, so it’s important to consider them when weighing the overall cost of owning a home.

Ask your agent to find out the age of the furnace, roof, appliances, and other things that may cost you extra cash. And make sure to have the home inspected before you buy it.

Look before you’re ready to buy

WavebreakmediaMicro/Adobe real estate agent showing new house to couple

Buying a home is a big decision: Do you know what kind of home you want to buy?

Start looking for a real estate agent now who can help you navigate different homes or neighborhoods. Check out local open houses or model homes. You may be surprised by what you like or don’t like once you walk through different options.

Get approved for a loan now

Krakenimages.com/Adobe Couple sign mortgage loan contract

You don’t have to be ready to put an offer down on a house to get approved for a loan. Instead, check with local lenders to see if they can pre-approve you for a loan for a specific maximum amount.

This gives you a good idea of how much you can afford and will allow you to move quickly once you’re ready to put an offer in on your new home. 

Remember, you don’t have to borrow the maximum amount a lender is willing to loan you. Keep your budget and financial goals in mind so you don’t become house poor.

Save for a down payment

naowarat/Adobe red roof house on the stacking coins around with the dollar bills

You don’t necessarily have to put 20% down for a new home, but doing so is often a good idea. A larger down payment can reduce your monthly payments, and some lenders may require you to pay a fee or get additional insurance coverage if your down payment is small.

Pro tip: Saving for a down payment is difficult if you are deeply in the red. So, before you consider a home purchase, make a plan to crush some or all of your debts.

Maintain a good credit score

peshkov/Adobe Checking credit score

Your credit score can have a big impact on the type and size of loan for which you will qualify. Keep your score high by paying your bills on time and in full.

Don’t open a new credit card account or purchase a car or other big-ticket item with a loan in the time leading up to buying your home. Such activity can weaken your credit profile and make lenders less likely to give you the best terms.

Factor in closing costs

wichayada/Adobe state agent gives pen and documents agreement

Don’t forget the closing costs you will owe when buying your home. Factor in potential expenses such as title insurance, escrow fees, attorney fees, and real estate agent fees when estimating how much you will owe.

Pay for an inspection

Shisu_ka/Adobe engineer is checking the building structure

During the recent red-hot housing market, some buyers waived home inspections in order to enhance the chances that their offer would be accepted. But a home inspection can be vital to uncovering major issues that can turn your dream home into a money pit.

Set aside some money for a home inspector and go through the inspector’s findings to see if you will need to request the seller to make fixes before you sign on the dotted line.

Stick to your budget

Syda Productions/Adobe couple with blueprint and calculator counting money for repair costs

The sad reality is that sometimes, the perfect home comes with a less-than-perfect price. Or perhaps you find that utilities, fees, and other costs associated with a home push it out of the realm of what you can afford.

Yes, it can be heartbreaking to walk away from your dream home. But if you push through and make the purchase anyway, the home could become a financial disaster for you.

Instead, try to save up more money for a down payment to help offset your monthly mortgage bill, or look for another home that’s within your budget.

Bottom line

Konstantin Yuganov/Adobe housing for family

Doing some extra work before you sign on the dotted line can help you find success as a new homeowner. Remember to create a budget of estimated expenses so you aren’t surprised when bills arrive.

Also, consider building up an emergency fund that can cover unexpected costs or repairs. If you don’t have that type of extra money available, consider the many ways you can earn extra cash and build up your savings.

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Author Details

Jenny Cohen Jenny Cohen is a freelance writer who has covered a bit of everything, from finance to sports to her favorite TV shows. Her work has been featured in The Wall Street Journal, USA Today, and FoxSports.com.