Let’s be honest: 2020 (and the bulk of 2021) have been pretty intense for all of us, and in many regions, the real estate market seems to reflect that stress. Housing shortages, bidding wars, and fast-moving sales abound, coupled with historically low interest rates. Houses are getting snatched up quickly, and sellers know they have their pick of buyers; while things seem to be settling slightly by the last quarter of 2021, it certainly doesn’t appear to be turning into a buyer’s market anytime soon. All of these factors have made buying a home in 2021 very competitive, and if you’re a first-time buyer, it can seem downright daunting! But even if all that competition leaves you feeling like your homeownership dream is an impossible one, there are still plenty of ways you can make it happen. Like a list of first time home buyer tips that really work, sourced from people who’ve done it themselves.

We’ve rounded up advice from top real estate agents, plus talked to a few first time buyers who shared how they turned that impossible dream into a reality. Take a look at these tips and insight into finding your way to homeownership as a first time buyer, as well as some things that you really shouldn’t do in today’s market.

First time home buyer tips that work

While you won’t necessarily need a 20% down payment to get into your first home, you might be surprised at some of the expenses that crop up both before and after closing.

First-time buyers Ben and Olivia decided to look into buying a home when their lease was up on their rental house, and they saw how their market in Boise, Idaho, was starting to move faster and faster. “The market here, which was already hot, was just getting hotter,” says Olivia. “We’d been saving for a house and knew we wanted to buy within the next year, so we decided to get into something now before prices went up even more.”

Olivia says that one thing they wish they’d done differently was to save a bit more money.

“Once you buy a house and see your now-depleted bank account, that’s shocking,” she says. “I would’ve better prepared myself financially.”

So, how much do you need to save?

Well, you’ll need a down payment — which, depending on the loan program you go with, could be as low as 3% (or even 0% with certain government-backed programs). Then you’ll have to pay closing costs, including appraisal and inspection costs (and don’t expect the seller to chip in — more on that later!). Plus, there’s the cost to move, furnish, and customize your new home.

You also want to make sure you still have some money left over. Your lender wants to see that you aren’t wiping yourself out financially to buy a house, and they usually require about two months’ worth of mortgage payments in your bank account as a financial cushion.

2. Figure out a budget and stick to it

When you’re trying to save up to buy a house, making a budget is imperative. If you know you can safely put 10% to 15% of your monthly income away, consider setting up an automatic transfer each payday that goes directly into your savings — if you never see that money, you probably won’t miss it!

If your budget is really tight but you still want to save, consider a side hustle. You can go through your household items and sell them on various sites like eBay, or set up shop on one of the many used clothing sites, such as Poshmark or Tradesy (think of that designer outfit you bought and wore exactly once…).

You could also pick up a part-time job for a period of time if your schedule allows and put everything you make from it into your house fund.

First-time buyer Hayden, who lives in Anchorage, Alaska, says he was able to save up a large amount of money by renting a room from a family member as opposed to paying high rent on an apartment by himself.

“I was only paying like $400 a month, renting a room from my sister,” he says. Although he wasn’t originally saving specifically to buy a house, he realized that it might be a good time to make the investment.

“I started looking at real estate prices, then when I saw how low interest rates were, it made sense to buy my first home,” he says. Being able to pay lower rent gave Hayden an edge, and he was able to save fairly quickly for his purchase.

3. Clean up that credit

One of the first things any potential lender is going to look at is your credit rating. If you have any lingering credit issues, now is the time to take care of them.

Your credit score, commonly referred to as a FICO score, is all-important when lenders calculate what kind of loan you can qualify for, how much you’ll need to put down for your down payment, and your mortgage interest rate.

You are entitled to one free credit report per year from each of the three credit bureaus (TransUnion, Equifax, and Experion), which can be obtained through the site annualcreditreport.com and provides information on all your accounts. Review it carefully, making sure that there aren’t any errors or outstanding collections.

Once you figure out where you need to be credit-wise, set up any recurring bills on autopay so there is no chance of forgetting to make a payment. If you have any high-interest credit cards, pay those down first — but don’t close the accounts, as that can actually have a negative impact on your score.

Starting this process early is always good, as it may take a few months to push your score up if it’s too low.

4. Determine how much house you can afford

It’s easy to get excited about the idea of buying your first home, but you also don’t want to overextend yourself. Being house poor is no fun, not to mention stressful if you have any kind of unexpected financial troubles at some point in the future.

There are plenty of mortgage loan calculators to be found online, and generally speaking, lenders don’t want to see your total debt, including your mortgage payment, exceed 45% of your income; some borrowers can go up to 50%. This is known as your debt-to-income ratio (DTI).

The acceptable DTI can vary somewhat by loan programs, and the DTI a lender will accept can also be affected by your credit score, so while it’s fine to use an online calculator to get an idea of what you can afford, you will want to consult a mortgage lender for the most accurate information.

5. Find a reputable and experienced agent

Purchasing a house isn’t just about finding and making an offer on a place you love. It also comes with lots of paperwork, hoops to jump through, financial considerations, and occasional problems or contingencies to navigate.

Working with an agent who really understands the ins and outs of the first-time homebuying process can mean the difference between a smooth transaction and one that doesn’t go the way you want or expect.

San Francisco agent Anthony Navarro, who has more than 16 years of experience in the industry, says his primary goal is to make sure that his clients get the home they want, at the price they want, with the terms they want. With that, however, comes some advice and education.

“I make sure they understand where the market is, and what to expect when they put in an offer,” he says. “You have to recognize the different pricing strategies and know how to navigate what can often be multiple offers that are over asking price.”

Navarro says that an agent who has a good reputation can also help buyers stand out to sellers and their agents.

“When I go look at properties with prospective buyers, I run into a lot of agents I know,” he says. “There’s an advantage to that familiarity, and if the seller’s agent knows my business acumen and professionalism, it could potentially give us an edge when putting in an offer.”

He further explains that in a situation where buyers might need a second chance to amend their offer, having a reputable agent can make a difference to the seller because the seller and their agent will know that the buyers are fully vetted and therefore problems are less likely to crop up.

6. Shop around for a mortgage

All lenders are not created equal, and in the same way you shop around for a good agent, you’ll also want to take the time to find the best lender for your situation. It might feel easy to just go through whatever bank you use for your regular accounts, but it’s important that your lender is as knowledgeable as the agent you choose.

Make sure you find a lender who knows what kind of programs are available for first-time buyers and can help you qualify. Look closely at their fees — does the lender charge an origination fee, or other fees? Are they able to fully explain the loan programs in a way you can understand? How quickly can closing take place once you find a home?

Talk to them about interest rates and fees upfront, ask the frontrunners for a Loan Estimate to give you an easy way to compare loans, and then go with the one who will offer you the most competitive deal.

7. Explore first-time buyer programs

One of the perks that comes with being a first-time buyer is that there are a wide range of programs that can help you get into a home:

FHA loans

With a down payment requirement of just 3.5%, the Federal Housing Administration (FHA) is a very popular program for first-time buyers — although anyone who hasn’t owned a home in three years can qualify.

You will have to get mortgage insurance (MI) for the loan, which will make for a higher monthly payment, but the low down payment means you aren’t having to come up with as much money all at once. The FHA also offers down payment assistance to qualifying first-time buyers and allows for monetary gifts from family members to go toward the down payment.

VA loans

If you’re a service member or veteran, you probably qualify for a VA loan, which means you can take advantage of a loan with a 0% down payment. With VA loans, you get to skip paying mortgage insurance, so that’s a big plus and a big savings on your monthly payment.

USDA loans

Is country life for you? If so, the U.S. Department of Agriculture has loans available, the bulk of which encompass rural areas and farmland (though some suburbs might still qualify!).

In addition to location restrictions, the home must meet other requirements, such as not being over 2,000 square feet, but interest rates on USDA loans can be as low as 1%.

In addition to government-backed loan programs, there are also grants, special programs for fixer-upper houses, and “good neighbor” programs for those who work in fields that serve their communities, such as firefighters, teachers, and law enforcement.

8. Get preapproved before you start actually looking for a house

Both your agent and the seller are going to want you to be preapproved for a mortgage loan before you start house hunting.

Most sellers aren’t going to even consider your offer unless you can provide a preapproval letter from your lender, and it’s a waste of time to put in offers on a house you aren’t even sure you can afford.

Once you decide on a mortgage lender, you’ll need to fill out a preapproval application and provide documentation that, among other things, will include pay stubs, bank statements, and tax returns. A lender should be able to provide a preapproval letter to your agent, who will in turn share that with the seller’s agent when you make your offer.

9. Try to stay under budget when house hunting

After you’ve gotten your finances in order, found a great agent, and lined up a mortgage lender, you can begin house hunting in earnest. It’s an exciting time, and the current market makes it even more exciting, because in 2021, things move fast.

Right now, many homes are selling for more than their asking price, so staying below your maximum price point can make it easier if you need to make a higher-than-anticipated offer on a house. If you’re looking at homes that are already at the high end of what you can afford, you aren’t going to have a lot of wiggle room in a competitive market.

10. Consider shopping different neighborhoods

You might have your heart set on living in a specific location, but opening yourself up to the idea of different areas can give you more options on available homes.

Attend some open houses in neighborhoods you might not have previously considered, or even rent an Airbnb for a couple of nights in a particular neighborhood to see what the vibe is like and whether it might be a fit for you. Many parts of the country are dealing with lower numbers of homes for sale than usual, so if you can expand your search to a wider range of communities, you can make the most of the inventory available in your price range.

11. Consider shopping different types of houses

You may be able to find a townhome or condo that meets your needs, or you might even find a deal on a multi-unit home like a duplex, where you can have a tenant on-site to help cover that mortgage payment.

Hayden says he was pretty set on a single-family home when he started house-hunting, but he ended up purchasing a condominium.

“I really wanted that house and yard, but I found a condo, and I love it,” he says. He urges first-time buyers to not be too rigid about what kind of home will work for them.

“Your first home probably isn’t going to be your forever home,” he explains. “My condo has everything I want or need right now.”

12. Assess your buying power on various homes

Did you come across a house that has been on the market for a long time, or looks to need a lot of repairs? If so, you might actually have some room to negotiate!

It’s worth discussing with your agent to find out just how motivated the sellers might be and whether or not they will consider concessions. If you’re handy and are willing to put in some sweat equity on a house that needs work, that could be a big plus and give you an edge over buyers who can’t or won’t do the same.

On the flip side of that, if you find a house and your agent knows there are multiple offers, and it’s already at the top of your budget, you could be getting yourself into a situation that will end up costing you a lot more money and time than you can afford. So make sure you talk to your agent about the home’s condition, how long it’s been on the market and why, and what the current status is in regards to competing bids.

13. Make your best offer first

It was only a few years ago that buyers had at least some room to negotiate with sellers. Whether it was asking for closing costs, requiring repairs after the home inspection, or putting in a lower offer than the list price on the property, buyers had a lot more leverage than they do today.

Navarro suggests that if a first-time buyer wants to stand out, they should make their best possible offer right off the bat.

“You want to put your best foot forward when you put in your offer,” says Navarro. “In this super-competitive market, you’re going to be up against cash offers, non-contingent offers, and offers that are much higher than the asking price. Buyers need to bring their best offer right away, because they might not get another opportunity to do so.”

14. Be prepared for bidding wars

As much as you might want to avoid the stress of competing against multiple offers with your first home purchase, an aggressive market makes them more likely than ever.

“You might see a property that is priced below market value,” says Navarro, “but that house is also likely to get multiple offers that can go 20% to 30% over asking price. Buyers need to understand that upfront.”

Your agent can help you curate your best offer and can educate you on how multiple-bid situations work. You can also talk to your agent about adding an escalation clause to your offer, which means you will pay a certain amount above the highest competing offer on the house, up to a certain amount. (That highest competing offer could be pretty high, so be careful not go too far outside of your financial comfort zone).

15. And be prepared to not get the first house you want

It can feel devastating when you put in what you and your agent feel is a good offer … and someone outbids you. If this does happen, know that it’s a common occurrence in the 2021 market, and you aren’t alone!

“We put a bid in on one other house before we found our current home,” says Olivia. “We didn’t get that one, which was disappointing. But then we found a second house, and there wasn’t as much interest in it for some reason. We came in with an offer that was $5,000 over the asking price, and the seller accepted it.”

“It’s hard to go into it knowing you might not get it,” says Navarro. “Maybe you don’t get the first few homes you want, and that’s okay. Even when you put that best foot forward, you could get outbid.”

Avoid getting too discouraged in these situations, and keep looking, because the right house is out there. “We love the house we got,” says Olivia. “It feels really good.”

16. Have a plan for a lower appraisal

Traditionally, home appraisals have just been a normal part of the buying process, and they would usually come in right at or slightly above the selling price. But with home prices skyrocketing and many people making offers that are well over the seller’s asking price, some agents are seeing appraisals come in lower than the sales price.

If the appraisal comes in lower than the sales price, it might be on you as the buyer to come up with the difference, or walk away from the deal. You also have the choice of negotiating with the seller for a reduction in price, but if there are multiple offers on the property, they may not be amenable to that option.

Before you make your offer, talk to your agent about this possibility and see what your options are, and whether or not your agent feels confident about the house appraising at the offer price. “Your agent should be able to show you comparable properties in that price range, as well as other recently sold or pending houses,” says Navarro.

17. Limit contingencies (or skip them altogether!)

Contingencies are conditions that a buyer puts into their offer. These might include contingencies for inspection, appraisal, and financing — or, for non-first time buyers, the sale of their current home before the deal can close on the new home.

If you want to go in with the strongest offer possible, you could limit adding contingencies. “A contingency means if something goes wrong, you can cancel and not lose your earnest money,” says Navarro. “Sellers don’t like that.”

Because it’s likely that you’ll be up against other, non-contingent offers, it may be challenging to get an offer accepted with certain contingencies. You might not have a choice on all of them, that said — if you’re getting a mortgage loan, a financing contingency is a must.

Keep in mind also that contingencies are meant to protect you as a buyer, so make sure to consult with your agent and a trusted attorney before waiving them.

18. But still get a home inspection!

Even if you waive the inspection contingency, you should still get your own home inspection. That way, you’ll have a better idea of what you’re buying and will be able to navigate any potential issues.

Navarro says he always recommends his buyers get an inspection. “Here in San Francisco, the seller usually provides a contractor’s inspection and a termite inspection up front,” he says. “But buyers can and should get their own inspections.”

19. And talk to your agent about additional inspections you should consider

Depending on the property, Navarro suggests that buyers think about getting inspections for mold, moisture, and sewers. If you’re buying an older home and you aren’t sure about the roof condition, you can have a specialist come out and look at it. The same goes for issues like electrical or plumbing.

“You can get a good understanding from the contractor’s home inspection, but there will always be some unknowns,” he says. “A good real estate agent can help you understand what the risks could be and provide a value on getting them inspected.”

20. Look at alternative financing options

Another unusual aspect of the 2021 market is the number of cash buyers. According to a report from the National Association of Realtors (NAR) all-cash sales have surged from 26.3% in 2019 to 33.5% in 2021.

This can make the buying process even more competitive for first-time buyers. Luckily, there are ways to become a cash buyer without having to come up with hundreds of thousands out of pocket, such as utilizing HomeLight’s Cash Offer program.

Under this program, HomeLight buys the home (in cash!) for pre-qualified buyers, and then sells it back to them after closing for the same purchase price, plus a small program fee.

Navarro says he often steers his clients toward HomeLight’s program, as cash is a big incentive for sellers. “There can be a tremendous advantage with an all-cash offer,” he says. “I had a buyer who was in a bidding war with 10 other offers, and because we were able to go in with an all-cash offer, we actually got the property over other, higher offers.”

21. Consider a higher down payment if you can swing it

A higher down payment not only helps you stand out as a buyer; it also means less risk for both the seller and your mortgage lender.

Many first-time buyers will want to go with the lowest possible down payment, but if you’ve been saving and feel like you have enough extra to pay more, a higher down payment will not only help you stand out to sellers, but it will also lower your overall monthly payment and could mean a lower interest rate.

22. Expect last-minute paperwork and requests for information from your lender

When you complete your initial loan paperwork, you’ll probably feel like you’ve given your lender more information than they could ever need … but don’t be surprised when you get requests for updated information on things like your bank accounts and credit.

“I was surprised by the amount of information needed,” says Hayden. “I mean, you can walk into a car dealership and buy a nearly $100,000 car in a matter of hours, but my $200,000 condo felt like it took forever, and I had to verify and re-verify everything.”

Your bank will want to know where any large deposits come from, so if any family members gift you with money for your down payment, or you sell any larger ticket items, be sure to document that. And if the sales process takes longer than anticipated, your lender may need to pull another credit report or get new verifications of employment.

23. Try to lock in at the lowest interest rate possible

Interest rates fluctuate, and sometimes, that means you might be able to lock into a lower mortgage rate than you expected.

Hayden says that when it came time to finalize his loan, he received a call from his lender at the last minute. “They had all my paperwork done, then my lender called and said interest rates had dropped by almost 1%, and we needed to re-do everything,” he says.

“I initially balked at having to re-sign all that paperwork, but then she explained that a 1% reduction in my interest rate was worth something like $10,000. It was worth it to go with that lower rate, even if I had to sign more paperwork.”

24. Start comparing home insurance policies sooner than later

Once you’ve had your offer accepted, gotten your inspections and appraisals, it’s time to start preparing for your closing. One big thing you’ll need to take care of is getting your homeowners insurance policy set up.

You could just call the insurance agent you use for your auto insurance and bundle the policies, but you won’t always get the best coverage or the best deal that way. Take the time to research different agencies in your area, look at reviews online, and see who gives the best customer service and responds in a timely manner. Find out if your new home needs any additional coverage, like flood insurance, and see if the policy covers additional items like a shed, pool, or your personal belongings.

25. Consider title insurance for your new home

When you buy a home, the lender is going to require a title review, which verifies that there aren’t any liens, missing heirs, or filing errors associated with the property. And while most of the time title reviews are thorough and accurate, title issues sometimes do crop up after closing.

As protection against these kinds of issues, buyers are required to purchase title insurance for their lender. But buyers themselves aren’t protected unless they purchase their own policy.

You should probably go ahead and buy title insurance for yourself. This will protect you if something comes up with the title after closing such as unrecorded easements, judgements, or other claims against the property.

26. And consider a home warranty

A home warranty, sometimes referred to as home repair insurance, provides coverage against unforeseen repairs on a house. This can include items like furnaces, air conditioning, or plumbing, and buyers pay a yearly fee (plus a deductible if you need something fixed) for the policy.

It used to be fairly common for sellers to offer to pay for the first year of a home warranty for buyers, especially on older homes that might potentially have maintenance issues down the road. But in a seller’s market, it’s unlikely.

If you buy a home that you know has an older furnace, or you’re just concerned that something might go wrong right after you close, purchasing a home warranty might be worth the money — especially if you don’t have a lot of residual savings left after closing and aren’t sure you can pay out of pocket for repairs.

“Things are going to break, or go wrong,” says Hayden. “If you can get a home warranty, do it.”

And first-time home buyer tips to avoid or ignore

It can be a little scary to put out a big offer on a house, especially when you are strategically waiving contingencies. But if you find a house you really want, making that first best offer might be your only opportunity to make it yours.

If you don’t get the house the first time around, you’ll either be waiting to see if the deal falls through and you can improve your offer, or moving on to the next place.

“It’s hard to go into it with that mentality, especially for first-time buyers, but you can’t expect a second chance to improve your offer,” says Navarro.

3.Don’t pick an agent without vetting them first

There’s always someone who has a friend (or a friend of a friend) who is a real estate agent, but as buyer Hayden found out, going that route isn’t always a good idea.

“I went with someone a friend of mine knew,” he says. “They were a new agent and didn’t have a lot of experience, which ended up not being a great fit for me.”

He suggests researching agents beforehand, talking to other homeowners about who they used, and looking at online reviews of various real estate companies. Your agent is really going to be the one to guide you through the entire home purchase, so make sure you choose someone with a proven track record.

Don’t be afraid to interview a few agents before you make your decision, and while you don’t have to be best friends, having an agent you “click” with and can talk to openly will make the process easier.

4. You can still write a letter to the seller, but they might not read it

In some markets, buyers will sometimes write a letter to the seller and submit it with their offer, introducing themselves and explaining who they are and why they want this particular home, all in the hopes of connecting with the sellers ahead of another buyer. But in 2021, the buyer letter seems to be going by the wayside.

“According to the Fair Housing laws, it’s not recommended that sellers even read those letters,” says Navarro. “It could be interpreted as discrimination.” He adds that he will usually tell the listing agent a little bit about the buyers, but doesn’t recommend that buyers write a letter.

A strong offer, especially if you can make use of a service like HomeLight’s cash offer program and become an all-cash buyer, is likely going to be a much bigger incentive to a seller.

5. Don’t get discouraged if you don’t have immediate success

As quickly as the real estate market is moving, you may feel like you can’t compete against some of the big offers on the table, and watching more than one house you’ve bid on go to someone else can be disheartening! It might take a little more time than usual to get into a home, but it can still happen.

Success in purchasing your first home often has a lot to do with your agent, and making sure you work with someone experienced is a big part of finding your way to homeownership.

“It’s a process,” says Navarro. “Your agent isn’t just there to write the offer. We are there to help you learn the market, and help you try different tactics. That’s the real value in having a professional agent.”