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First-Time Homebuyers

Resources to help everyone walk through the entire homebuying process, from understanding key terms and finding a mortgage lender, to closing and moving into your first home.

Frequently Asked Questions

  • How much should I save before buying a house?

The main factors to save for when buying a house are earnest money—the deposit you make when putting an offer on a home—the rest of your down payment, and closing costs. Most earnest money deposits average between 1% and 3% of the home price, and closing costs average about 2% to 5% of the purchase price of the home. As for the down payment, experts suggest saving at least 20% of the price of the home, but depending on your situation, less than 20% may work too.

Learn More: How Much Should You Save Before Buying a House?

  • What are the prepaid costs when buying a home?

Prepaid costs—also referred to as prepaids—are upfront cash payments that you make in addition to your down payment, in order to obtain a mortgage. These can include property taxes, hazard insurance, private mortgage insurance, and special assessments. They are paid at closing and placed into an escrow account to later cover the expenses related to a mortgage.

Learn More: Your Guide to Prepaid Expenses and Escrow in the Homebuying Process

  • What costs are involved in buying your first home?

The biggest costs to plan for when buying your first home include the down payment and the monthly mortgage payments. You will also pay various one-time fees, including those related to closing costs, mortgage application, home inspection and appraisal, and more. Before finalizing your purchase, speak with your real estate agent, lender, or attorney in order to understand all costs involved.

Learn More: Fees You Need To Know About Before Buying a Home

  • What questions should you ask when buying a home?

Before making an offer on a house, a buyer should ask specific questions about three main things: price, home condition, and location. When asking about location, for example, you may ask about where the nearest schools are located or whether or not the house is in a flood zone.

Learn More: Questions To Ask When Buying a House

  • How much money do you need to put a down payment on a house?

When it comes to the down payment, most experts suggest that you should be willing to put down 20% of the purchase price of a home. While putting 20% down is not the only way to achieve homeownership, when you put that much down, you’ll avoid paying for private mortgage insurance. To calculate the amount you would need for a 20% down payment, multiply your home’s purchase price by 20% (or 0.20).

Learn More: How Much Do You Need for a Down Payment to Buy a Home?

  • When is the appraisal done when buying a home?

An appraisal is a process, solidified by a written document, that shows an opinion of how much a property is worth. Typically, the appraisal happens after an offer has been made and the home in question has been inspected. It’s not always required, but recommended. The buyer usually has to pay for and arrange the appraisal, and once it is complete, the final report is sent directly to the lender.

Learn More: Home Appraisals: What They Are and How the Process Works

  • What are the tax deductions associated with buying your first home?

The IRS offers deductions to those who qualify for the prepaid mortgage interest. For instance, the IRS allows certain first-time homebuyers to avoid a specific tax penalty if they withdraw money from an IRA to help pay for their home. In order to qualify, though, you must meet the specific definition that the IRS uses for “first-time homebuyer.”

Learn More: What Is a First-Time Homebuyer?