Five Tips for Affording Your First Home

Christine Elias
Jul 1
4 min read

a young family moving into a new house | urbandogrealestate.com

Buying your first home is, of course, an exciting milestone, but it can also be stressful and overwhelming. You may feel pressured to exceed your budget in order to submit a more appealing offer or discouraged when you realize that you can’t afford everything on your must-haves list. At the Urban Dog Group, we’re here to make the process feel less intimidating and more empowering. Ultimately, finding a home that you (and your pup) love shouldn’t feel out of reach; it should feel possible, practical, and a little bit fun.

Before we dive in, it’s important to talk about the current housing market. While property prices are still increasing, the gains are slowing. Data from this spring revealed that national prices rose by just 2.1 percent year-over-year – the slowest growth rate since July 2023. Better yet, some major metropolitan areas across the country (including Jacksonville and Orlando) saw home prices notably decrease. Additionally, by the end of the month, we may see a decrease in mortgage rates. All good news for buyers!

Now, let’s consider five tips for affording your first home.

1. Set a budget and stick to it.

Before you begin house hunting, you need to determine how much you can afford to spend on a house. Monthly housing costs include principal, interest, home insurance, and property taxes as well as private mortgage insurance (PMI) (more on that below) and homeowners association (HOA) fees if applicable. In total, those costs should add up to 25 percent or less of your monthly take-home pay.

While this number seems low, it’s meant to set you up for success. It helps you be prepared for home repairs and other emergencies without all of your money already being allotted for monthly payments.

2. Save for your down payment.

Once you determine your budget, you need to save for a down payment. After all, having a sizable down payment makes a big difference when it comes to your final loan amount and monthly mortgage payments. To avoid private mortgage insurance (PMI), which protects the lender if you fail to make payments, aim for a down payment of 20 percent.

If you can’t afford that, it’s okay to do a smaller down payment of five to ten percent. However, note that PMI will be between 0.46 and 1.5 percent of your total annual loan balance, and budget accordingly.

Many states, including Florida, offer down payment assistance programs for first-time home buyers. However, this “assistance” is typically in the form of extra debt, with or without interest. Unless you find a program that offers a grant that you don’t have to pay back, it’s better to opt out.

3. Work with a team that you trust.

A good real estate agent not only understands your needs and wants but also knows the ins-and-outs of the local housing market. You want someone who will answer your questions and compassionately guide you through the buying process, which can be emotional and challenging at times.

When it comes to selecting a lender, it’s crucial to look for someone who offers competitive rates and low fees, not to mention excellent customer service. At the Urban Dog Group, we work exclusively with Michael Dean of CrossCountry Mortgage, ensuring that our buyers receive the best guidance and care.

4. Pick the right type of mortgage.

As a first-time home buyer, the best option is usually a 15-year fixed-rate conventional rate. While your monthly payments are higher than they would be for a 30-year loan, you’ll pay off your mortgage in half the time. Plus, 15-year loans typically have a lower interest rate, which is set for the loan’s full term.

There are other mortgage options that you should be wary of, including:

Adjustable-rate mortgages (ARMs): While the initial interest rate is lower, your lender can — and most likely will — raise the rate after a period of time, making it hard to budget accordingly.
Federal Housing Administration (FHA) loans: Popular with first-time home buyers without strong credit scores, these loans allow you to put as little as 3.5 percent down. However, you must pay a mortgage insurance premium (MIP) of 1.75 percent upfront as well as an annual premium of 0.55 percent. These added charges often remain for the life of the loan.
Veteran Affairs (VA) loans: These loans allow veterans to buy homes without a down payment or PMI but include an initial fee of at least 1.25 percent of the purchase price. With this approach, chances are higher that you wind up with more debt and a bigger payment than you can afford.

5. Get a preapproval letter before house hunting.

It’s helpful to preapproved — not just prequalified — for a loan before you begin looking. With a preapproval, your lender verifies your financial status and submits a letter stating how much you can borrow. This step shows the seller that you’re serious, often giving you a much-needed edge in a competitive market.

Be aware that some lenders may preapprove you for more money than you need or can even afford. Keep that 25 percent rule in mind and stick to your budget as you determine how much to borrow.