Spend no more than half of your max budget for your starter home experience. Better men/women than you have come before you and failed because of the obvious unforeseen. If you make good decisions, you will make a little money and in a few years upgrade to a new model. If you make bad decisions, you will lose a hell of a lot less on a $125,000 mistake vs. a $250,000 mistake. Ignore all the "best time to buy!" nonsense, as we're rapidly approaching a second housing bubble in the major markets anyway.
- Do not use a major bank. The list of reasons are immense (they will sell your shit without a second thought), use a Credit Union.
- Both FHA and CONV have their own set of advantages and disadvantages. Too long to list here, just Google it.
- Go in with a pre-approval letter or you are wasting everyone's time, including your own.
- Do not buy the first home you come across that seems "perfect". Don't even buy the home on the top of your list without first having a #2 and a #3, and putting in a low-ball on both just in case. The last two times I was buying, the night before I put in my offer on my #1, I called and put in extreme low-balls on #2 and #3, and told them they had 4 hours to accept before I moved on - in both cases they took the offer and I ended up making serious cash when I decided to move due to having significant equity. Think long-term with home ownership, it is not a decision to be made lightly and/or in impulse - make those mistakes with less expensive shit.
- Find your own home inspector, do not use the REA's. Ask friends for referrals.
- Make the seller pay as much of your closing costs as possible.
- If you cannot afford a high enough down payment to eliminate PMI, pay as little as possible (the rest is not saving you anything at all and is better spent on the unforeseen and/or invested elsewhere).
- Realize that, on average, people stay in homes between 3-5 years before moving or upgrading/downgrading. Factor this into your decision making process as a reality, not a scenario.
- Call the utilities companies and ask for previous bills. It lets you know the potential energy costs as well as how efficient the home is.
- Knock on the neighbors doors - introduce yourself, say you are looking to buy this house, and ask them if they know of anything negative you should know. I've learned various things, from sue-happy neighbors living close-by who went after people for shit as trivial as smoking outside, to finding out a drive-way was poured partially on a neighbors lot and was never brought to the city's attention, decreasing a lot size respectively having passed the statute of limitations for action, etc.. ask the neighbors, they know this shit.
I could go on for ages, I've bought and sold half a dozen homes in various parts of the US, and I now act as my own agent for better bargaining. Feel free to ask for more specifics if necessary, home-buying can be one of the most complex things the average person will ever do, and for that reason the list of reasons you can (and will!) get screwed are vast.