Finding your dream home is something we’re passionate about helping you accomplish here at Compass Realty. It’s part of what helped us become the Top Rated Local® realtors in Greenwood, IN because we take the time and care to aid your journey when searching for homes for sale in Indianapolis and the surrounding area.

Buying your first house is a fantastic place to start when it comes to investing in property and selling after some years to make a profit and use that towards buying your dream home. However, there’s plenty to learn and understand for a first-time home buyer as they’ve never gone through it before. We love helping people buy their first homes just as much as their dream house, so we’ve put together some tips for first-time home buyers as you look for homes for sale in Indianapolis, organizing them by the main steps throughout the process and in chronological order.

And you don’t have to go through buying a house for the first time all by yourself! Compass Realty has some of the most experienced and dedicated realtors who have the connections and knowledge of Indianapolis real estate so that you can get the most for your money when it comes to buying your first home!

Mortgage Down Payment Tips

This first step in the home-buying process is critically important because it sets the stage for everything else. Let’s dive in!

  1. Start Saving Early

As you’ve likely heard, it’s fairly common to put 20 percent of the house’s cost down, but many lenders allow much less, especially in first-time home buyer programs, which could accept as little as 3 percent down. However, keep in mind that putting less down means higher costs and paying for mortgage insurance. Even a small down payment is a large sum of money. Just 5 percent of a $300,000 home, for example, is $15,000. Here’s a helpful down payment calculator to help you get a sense of what you need or can put down. Set aside tax refunds, work bonuses, and set up an automatic savings plan to help save for the down payment.

  1. Explore Your Options

You’re never locked into one mortgage option. There are plenty of choices for you to consider, each possessing its pros and cons. Some common loans include:

  • Conventional mortgages: These conform to standards set by government-sponsored entities Fannie Mae and Freddie Mac, requiring as little as 3 percent down
  • FHA loans: These loans are insured by the Federal Housing Administration and allow for down payments as low as 3.5 percent
  • VA loans: These loans are afforded to military veterans by the Department of Veteran Affairs and sometimes require no down payment at all

A higher down payment results in lower mortgage payments every month, depending on the length of the loan. A 30-year fixed mortgage spreads the payments out longer, so smaller payments, but a shorter loan term (20- or 15-year mortgages) will get you lower interest rates, saving money in the long run. An adjustable-rate mortgage is riskier but guarantees a lower interest rate for the first number of years of your mortgage.

  1. Research Assistance Programs

There are also state assistance programs that are designed to aid first-time home buyers and provide you perks such as down payment assistance, closing cost aid, tax credits, and discounted interest rates. This is also true of the county or municipality you’re looking to live in, so do some research because it’s definitely worth it.

Mortgage Application Tips

Once you’ve gone through the important work of figuring out what kind of mortgage you would like, finding any assistance available to you as a first-time home buyer, and have saved the money you’ll need when buying a house, you’re ready for the next step: applying for a mortgage!

  1. Determine Your Budget

Just like it is for any large expense, you need to understand how much you can realistically afford. This includes the down payment and monthly mortgage payments. This will give you a price range to shop within. Stick to your budget, even if you are approved for a loan limit that’s higher than your budget.

  1. Check Your Credit

Your credit score will be important to qualify for a loan and strong interest rate, so it’s important to know what your credit is and take measures to improve it if necessary. This is a key factor in approval, interest rate, and possibly even loan terms. Settle outstanding debt, dispute errors, and avoid opening any new lines of credit when applying for a loan.

  1. Compare Rates

Don’t leave money on the table and get a loan quote from one lender. Shop around and see what quotes you get because it could mean large savings down the road. Receiving quotes from at least three lenders is advised and can save you as much as $3,500 in the first five years of your loan, according to the Consumer Financial Protection Bureau.

  1. Get A Pre-Approval Letter

Getting pre-qualified for a mortgage just means you have an estimate on how much a lender is willing to give you based on your income and debt. But as you get closer to purchasing a home, it’s best to get pre-approved, which is when a lender does a deeper analysis of your financials and confirms in writing the amount they’re willing to lend you and under what terms. This makes you look far more serious to sellers and may just give you the upper hand over other buyers who don’t have pre-approval.

House Shopping Tips

You saved money, secured a loan and interest rate, and hopefully received a pre-approval letter to indicate to sellers how serious you are. Now you need to shop around and find the perfect house for your needs, which fits within your budget. Now what?

  1. Hire the Right Realtor

Hiring a realtor is always a fantastic idea because they are your expert ally in the home-searching and home-buying process. They can help find homes for sale in Indianapolis that fit your needs, many of which you wouldn’t find on your own. A great realtor should be motivated, skilled, and knowledgeable about Indianapolis real estate.

  1. Pick the Right House/Neighborhood

This is a serious investment, so it’s well worth your time to make sure you will like the house and the neighborhood for years to come. A single-family home will provide space and a yard, but less maintenance and more amenities could come with buying a condo or townhouse if you don’t mind paying a homeowners association fee. Consider the neighborhood and if it has good schools, seems safe, and is convenient for commuting to work. Be sure to: 

  • Research the schools nearby, even if you don’t have or plan to have kids, because they affect the home’s value
  • Look up crime statistics and local safety measures
  • Check to see how far a hospital, grocery store, or other frequent/important locations for you are to the house
  • Drive around and see how the traffic is, what the noise level is, and how much general activity exists
  1. Remain Within Your Budget

Remember that your pre-approval loan amount is really the ceiling of what you can afford. It’s best to shop for homes for sale in Indianapolis that are below you max loan because it will stress your monthly budget. Plus, there are likely going to be unforeseen expenses such as repairs or home-improvement projects. This also helps when the time arrives to make an offer. Indianapolis real estate is competitive and offering the asking price won’t always mean you get the house. Shopping below your loan amount provides some wiggle room on your offer, which should be competitive but logical and without emotion.

  1. Visit Open Houses

Looking at photos is definitely not enough. You should go to as many open houses as you can to get a sense of what you truly like, need, and can ultimately live without. For serious prospects, this allows you to inspect things up close. Run the water for pressure and heat, flip on and off lights, look for stains, or potential repairs. You want to see the home’s overall condition, so ask lots of questions like when it was built, if there were upgrades or replacements and how old the air conditioning or heating is.

First-Time Buyer Mistakes to Avoid

There are plenty of mistakes people make and they can have serious, long-term consequences. Don’t be one of those people. Here are some common mistakes first-time home buyers make so you can identify and avoid them.

  1. Not Accounting for Closing Costs

In addition to the down payment, there are fees for closing your mortgage, which can be significant sums of money. Closing costs typically come in at 2 or 5 percent of your loan amount. You should shop around and compare prices for closing expenses like homeowners insurance, home inspections, and title searches. You could even ask the seller to pay some of the closing costs in the negotiation.

  1. Not Saving Enough for Expenses

After you finish buying a house in Indianapolis, there are additional expenses when it comes to moving, purchasing furniture or appliances, and any paint or general improvements you’d like to make, so don’t forget about those.

  1. Buying for Today and Not Tomorrow

Purchasing a home for today’s needs is tempting because you don’t know what you’ll need in five, 10 or 15 years. But a smart home buyer plans ahead and at least guesses at what they’ll need in the future, so buying a house that can accommodate those requirements is important. If you plan to have kids, buy something with enough space. If you want a dog, make sure you have a yard which works for a pet.

  1. Not Negotiating

Most everything is up for some level of negotiation in the home-buying process, so don’t waste the chance to save money in multiple areas to keep the costs as low as possible. Can you get the seller to cover some major repairs? Are they willing to cover a portion of the closing costs? If you’re lucky enough to be in a buyer’s market, the seller is likely to be very willing to negotiate in order to close the deal and get the house off the market.

  1. Expecting Too Much From the Inspection

After the deal is agreed upon, it still pends an inspection of the house. This process examines the property to ensure it holds up to standards, both inside and outside. But it can only tell you so much. Some things an inspection might not look for or tell you could be: 

  • Radon, mold, or pests
  • The roof and crawl spaces
  • Attend the inspection
  • Ask the inspector to look for specific things — or take a closer look
  1. Inadequate Homeowners Insurance

Before closing on your new house, your lender requires that you purchase homeowners insurance. Make sure to shop around for rates and find the best price. Pay attention to what’s covered in the policies and where you’ll shoulder the liability. Less-expensive policies generally mean you carry more financial risk. Flood damage isn’t covered by homeowners insurance, so you may want to purchase separate flood insurance if your area is prone to flooding. Homeowners insurance claims can be extremely expensive, so don’t find yourself in a tough financial position if the worst were to happen and you had inadequate coverage.

Contact Us Today!

Follow these tips and avoid common mistakes and there’s no doubt you’ll find an amazing first house here in the Indianapolis area. When you do everything you can to ensure a smooth, stress-free time finding homes for sale in Indianapolis, and then buy one, you set the stage for an even better experience when it comes time to purchase your next home. Who knows, that second purchase could be your dream house! Contact us today and let Compass Realty help you find the perfect first home for you and your family!