8 Helpful Home-Buying Checklists for First-Time Buyers

August 14, 2014 | By Brandon Cornett | © 2018, QualifiedMortgage.org | Our copyright policy

There is a lot of information on this website, but it’s spread over hundreds of pages. So we thought it might be helpful to create a series of short but informative checklists for first-time home buyers. You’ll find them below, along with links to additional information.

8 Home Buying Checklists for First-Time Buyers

The eight home-buying checklists below coincide with the various steps in the buying process. They start with budgeting and saving, since those steps should be completed early on. From there, we will discuss mortgage shopping, house hunting, negotiating and more. Here are some shortcut links to the home-buying checklists offered below:

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1: Creating a Budget Before Buying a Home

Before you try to buy a house, you need to know how much you can afford to spend each month toward the payments. Don’t wait until you apply for a mortgage loan to figure this out. Do it now. Reality check: It’s not the lender’s job to tell you where your financial comfort zone lies. It’s your job. You must determine your budget on your own. Here’s a home buying checklist to help you do it:

  1. Figure out how much money you bring home each month, after taxes are taken out.
  2. Next, determine how much money you spend each month on all of your non-housing expenses. This should include everything except for your current rent or house payment, since that will be replaced by your new mortgage payment.
  3. When adding up your expenses, be sure to include any money you want to contribute toward savings each month.
  4. Add the amounts from steps #2 and #3, and then subtract them from the amount in step #1. In other words, subtract your total monthly expenses from your net monthly income. Write this number down — it’s important.
  5. When considering your monthly mortgage payments, you need to make sure they do not exceed the number you wrote down in step #4. In fact, your monthly payment should be less than the difference between your income and expenses.
  6. Example: If I subtract my expenses from my income, and I’m left with $2,200 a month, I might want to keep my mortgage payment below $1,900. This would allow me to meet all of my other debt obligations, while keeping some emergency funds in reserve.

Read: How much of a house can I afford?

2: Saving Money for Your Housing Costs

Cash pileThe next home-buying checklist discusses the importance of saving habits. The more money you can save now, the better off you’ll be when it comes time to close on the house. On the contrary, if you don’t save enough, you could find yourself cash-strapped or even disqualified by the lender.

  1. Start by considering the potential costs of buying a house. Unless you use the VA loan program, you’re going to have a down payment of some kind. This could be a minimum of 3.5% for the FHA loan, or 5% – 10% for a conventional mortgage. You’ll also have closing costs that could easily add up to thousands of dollars.
  2. Think about the items you spend money on each month. Some of them are necessities — others are luxuries. Which of the luxuries can you do without? If you dine out a lot, consider making more dinners at home. This will help you save money every week. Apply this same discipline to everything you do, between now and your closing day.
  3. Consider creating a separate savings account for your housing fund. If you dip into your checking account on a daily basis with your debit card, it might be better to have a separate account for your home-buying fund. That way, you won’t chip away at those funds without realizing it.
  4. Every time you’re about to buy something that you don’t absolutely need, remember your priorities. Think about that house you want to buy, and how you’re going to need every extra penny to make it happen. Do you really need that new TV set right now? Probably not.

More: How much are the buyer’s closing costs?

3: Checking Your Credit Before You Buy

credit report and penIf you plan to buy a house within the next six months, you need to review your credit reports. The sooner the better. You should also check your credit score to see if it’s high enough to qualify for a mortgage loan. Here’s a handy home-buying checklist to guide you through the process:

  1. Start by requesting your credit reports from all three of the reporting bureaus. You need to get your reports from TransUnion, Experian and Equifax. You can get all three at once, for free, by visiting AnnualCreditReport.com.
  2. Review your credit reports for accuracy. Make sure all of the personal information is correct. Make sure all of the credit and banking accounts listed in the reports are actually yours (and not a mistake).
  3. If you find errors in any of your credit reports, you need to have them fixed immediately. All three of the credit-reporting bureaus have a section of their website where you can dispute these types of errors. They are required by law to investigate the issue, and to remove any erroneous information they find.
  4. It’s important that you start this process as soon as possible. Erroneous information on your credit report can lower your credit score, which in turn can hurt your chances of getting approved for a loan. It may take weeks to correct these items, so start today.
  5. When you get your credit reports from AnnualCreditReport.com, you may be given the chance to buy your credit scores as well. The reports are free, but you will have to pay a small fee for the scores. We recommend that you obtain your scores as well, to find out where you stand. Lenders will use your credit score to determine if you’re qualified for a loan, and also to assign an interest rate to the loan.
  6. If you choose not to buy your score at the time you are requesting your reports, you can get them later by visiting MyFICO.com.
  7. If your middle score is below 620, you should work on improving it as much as possible. With a FICO score below 620, you will have fewer mortgage options available. You might even have trouble qualifying for a loan. The more you can boost your score between now and the time you apply for a mortgage, the better off you will be.

More: How your credit score affects your mortgage

4: Choosing the Right Mortgage for Your Situation

Loan TypesHome buying checklists 1 – 3 focused on the preliminary steps in the process. We talked about the importance of establishing a budget, saving money, and reviewing your credit information. Now it’s time to look forward and think about the different mortgage options you have when buying a house:

  1. Consider the differences between the FHA loan and the conventional mortgage. This is one of the key decisions you will have to make when buying a home. If your credit score qualifies for the FHA program, you could make a down payment as low as 3.5%. You probably won’t find a down payment that small with a conventional mortgage. The downside is you’ll pay more in mortgage insurance with a low-down-payment FHA loan.
  2. Another important decision is whether you want to use a fixed-rate mortgage (FRM) or an adjustable-rate mortgage (ARM). Here again, there are certain pros and cons with each option. With a fixed mortgage, your monthly payments will never increase. But you’ll pay more in interest during the first few years, when compared to an ARM loan. You need to weigh these pros and cons over the long term.
  3. You should also think about the size of your down payment. How much can you afford to put down on a home? This will help you determine which type of loan is best for you. It will also determine the size of the loan you can afford. The VA loan is great for veterans because it has no down-payment requirement. With an FHA loan, you will pay at least 3.5% down. Conventional mortgages usually have a minimum down payment of 5% to 10%.
  4. Do you know someone who has bought a home recently? If so, pick their brain about the type of loan they used. Home buyers who have recently navigated the mortgage process are intimately familiar with current lending options.

More: Different types of home loans explained

5: Getting Pre-Approved for a Mortgage Loan

pre-approvedAs a home buyer, you are not required to get pre-approved for a mortgage. But it’s a good idea to do so. We encourage all first-time buyers to get a pre-approval letter before starting the house-hunting process, and we’ve provided a helpful home buying checklist to guide you:

  1. Starting this process is fairly easy. You would simply contact a mortgage lender or broker and tell them you want to get pre-approved for a loan. You can do this online, over the phone, or by email.
  2. When you get pre-approved, the lender will review many aspects of your financial situation. They will likely check your credit score at this point. They will also request some financial documents. This may include your tax returns for the last couple of years, as well as proof of income and recent bank statements.
  3. This is your opportunity to ask the lender any questions you have about your mortgage options. Ask them about down-payment requirements, debt-to-income ratios, and whether or not you can lower your rate by paying points at closing.
  4. Things will go more smoothly if you round up your financial documents before contacting the lender. Here’s a checklist of commonly requested documents you might have to provide when you apply for a loan.
  5. It’s okay to get get offers from more than one lender. In fact, it’s wise to shop around for the best rates and terms. If you have an existing relationship with a bank or credit union, you might want to start there. They might offer lower fees and rates, since you’re an existing customer / member.
  6. Just remember that a pre-approval is not a guarantee. Things can still fall off track between now and the final closing. So make sure you maintain the status quo, as far as your finances are concerned. Continue saving money. Don’t tap into your savings. Don’t switch jobs. Don’t make any major purchases or open new credit accounts.

Getting pre-approved will put you in a better position when it’s time to make an offer on a house. The seller will be more inclined to take your offer seriously if you’ve been “vetted” by a mortgage lender. So it’s a critical item on any home buying checklist.

More: Mortgage pre-approval process explained

6: House Hunting and Negotiating

You’ve established a budget. You’ve researched the different types of mortgages. You’ve been pre-approved by a lender. Now it’s time for the most exciting part of the first-time home buyer checklist. It’s time to look at houses! Here’s how to do it the right way:

  1. Start by making a list of your housing needs. What’s the minimum square footage you are willing to accept? How many bedrooms and bathrooms do you need? Is it okay if the house backs up to another home, or do you want open space behind you? What part of town do you want to live in? Do you have a particular neighborhood in mind?
  2. If there are certain things you would like to have in a house, but don’t necessarily need, you can put those on the list as well. Just be sure you divide the list between needs and wants. This will help you remain flexible when shopping for a home. You’ll have to make some compromises when choosing a house — everyone does.
  3. Give a copy of your “wants and needs” checklist to your real estate agent. This will make your agent’s job easier and the process more efficient.
  4. If you haven’t done so already, find a good real estate agent. Seek referrals from someone you know and trust. Do you know someone who has bought a home in the area where you plan to buy? Ask them if they were happy with their agent, and get the agent’s contact information.
  5. Use the internet to pre-screen homes, before visiting them in person. This can be a real time-saver. Start by using Realtor.com, Trulia.com and Zillow.com.
  6. If you’re open to buying a bank-owned foreclosure home, you should sign up for RealtyTrac.com. This will give you access to a wealth of foreclosure data for your area.
  7. In addition to the websites listed above, you can also get property listings from the Multiple Listing Service (MLS). Your agent should have access to this database. He or she should also be sending you MLS properties that match your requirements.

More: How to find out what a house is worth

7: Making an Offer on a House

Make offer signLet’s assume you’ve found the perfect house, and you are now ready to make an offer to buy it. How much do you offer to pay? Do you go with the asking price, or can you start below that? Here’s a home buying checklist to help you shape your offer:

  1. Before putting an offer on paper, you need to evaluate the seller’s asking price. It’s called the “asking” price for a reason. It’s what the homeowner is asking for, but it may not reflect the current value of the home. In order to determine the true value of the property, you will need to look at comparable sales. A comparable sale (or “comp”) is a similar home that was sold in the same area recently.
  2. The more comps you can collect, the easier it is to determine the home’s market value. Your real estate agent should help with this. He or she should pull up a list or spreadsheet of recent sales in the area. You would then compare those sale prices to the asking price on the house you are considering.
  3. When using comps to determine your offer amount, be sure to consider any unique features that might add value. If the seller is asking more than similar homes have sold for recently, you should ask yourself why. Is there something unique about this house that would justify a higher price? Maybe a swimming pool or a completely renovated interior?
  4. Keep an eye out for overpriced homes. It’s common for homeowners to set their asking prices based on the amount they need to get out of the deal. This is a flawed pricing strategy, but a common one.
  5. When you put your offer on paper, you should also include certain contingencies for the purchase. A contingency is something that must happen in order for the deal to go through. At a minimum, you should have a contingency for the home inspection. If the inspection uncovers a serious flaw the seller is unwilling to repair, you should be able to back out of the deal through a contingency.
  6. Consider making the offer contingent upon your mortgage being approved. Sure, you’ve been pre-approved for a loan. But that doesn’t guarantee you will get a final approval. So it’s wise to have a financing-related contingency in place as well.

More: How to make a smart offer on a home

8: Home Inspections and Appraisals

home inspection The home buying checklist below deals with appraisals and inspections, two important steps in the purchase process. If you’re using a mortgage to pay for the house, your lender will request an appraisal to determine its value. The home inspections protects you. Here are some tips for success.

  1. Have the home inspected as soon as possible after your offer is accepted. If there are any serious problems with the house, you want to know about them as soon as possible. Most buyers schedule the inspection within a few days of the offer acceptance.
  2. When the inspector completes his inspection, he should sit down with you and review all of the things he found. He might even give you an estimate of what it would cost to repair any discrepancies, though not all inspectors do this.
  3. You can ask the seller to repair all of the discrepancies, some of them, or none of them. The amount of leverage you have will depend on the type of real estate market you’re in. In a buyers’ market, you can ask for almost anything. In a sellers’ market, the homeowner is more likely to refuse your repair requests.
  4. This is an area where your real estate agent’s experience will pay off. An experienced agent will have a pretty good idea what you can get away with, in terms of repair requests. The worst the seller can do is tell you no. So it never hurts to ask.
  5. After your offer is accepted by the seller, you will need to give your lender a copy of the purchase agreement. They will want to know how much you have agreed to pay for the house.
  6. The lender will send a professional home appraiser out to determine the value of the property. Your mortgage company has a big financial stake in the house, probably more than you do. So they want to make sure the home is worth the price you intend to pay.
  7. If the appraisal comes in low, you should ask the seller to lower the price. They may or may not do this. If they refuse to lower the price, you have an important decision to make. Do you want to pay the difference out of your own pocket? Or would it be better to walk away from the deal?

More: The home appraisal process explained

Despite its length, this home buying checklist only scratches the surface. There is plenty more you need to know about the topics covered above. Fortunately, you can research all of them right here on our website. Follow the links provided throughout this checklist to continue your research, or use the search box located at the top of the page.