There are many factors to consider before making one of the most important investments of your lifetime. Use this simple first-time homebuyer checklist to help you prepare and stay organized throughout the mortgage process.
The first step of the homebuyer checklist is to check your credit. Lenders use your credit score to gauge creditworthiness and the likelihood you'll repay the loan. It's also one of the most important factors when calculating an interest rate. You can go to freecreditreport.com to get this information. Checking your credit 12 months out allows enough time to improve it in the event your score is considered fair.
Knowing what you can afford will help narrow your focus even more. Use a simple mortgage payment calculator to get your estimated debt-to-income ratio and see how much you can expect to pay monthly for principal, interest, taxes, insurance, and of course your current monthly bills.
The largest upfront cost will be your down payment and closing costs. Plan for this ahead of time by organizing a savings budget. A down payment calculator can help estimate different options with their corresponding monthly payments.
Begin organizing your finances and cleaning up any issues. Use your credit report from step one to identify any issues. Contact creditors and ask for payment plans or work with an attorney to help clean up issues.
Owning a home means maintenance costs and other unexpected costs. Get in the habit of putting aside money each month for repairs, emergencies, and general home costs (think vacuum, light bulbs, cleaning supplies, etc.).
Calculator: Home Budget Calculator
Finally, the fun part! Begin a home search that aligns with your anticipated budget, lifestyle, and future plans. Consider your home type. Do you want a single-family detached home, a condominium, a paired home, a covenant controlled home, etc.? These are all good things to know and to add to your homebuyer checklist.
Search: MLS Home Search Tool
You're halfway through your homebuyer checklist! Now is the time we encourage everyone to learn a little about mortgage programs. This will give you a general idea of what options are available. A mortgage consultant can discuss specific programs based on your situation.
Learn: Available Mortgage Programs
Since this is the most time-consuming element of mortgage preparation, we suggest you start six months ahead of when you think you'll apply for a mortgage. Some documents may be easy to find, while others can take a little digging. Note that some of these documents may be outdated by the time you submit a mortgage application, but knowing where and how to get them will make the process easier.
Not all lenders are the same. Take the time to research several local and online mortgage lenders. Prepare questions and be sure they have expertise with first-time homebuyer programs. The last thing you want is a lender that misses an important detail or ideal mortgage program causing you costly fees.
About three months out, you'll want to start getting things verified. Getting pre-approved for a home loan shows your commitment to your real estate agent (buyer's agent), the listing agent (seller's agent), and the seller themselves. It's important to know the difference between "pre-qualified" and "pre-approved" as one is much stronger than the other when submitting an offer on a home.
Friends, family, strangers you meet at parties; it seems everyone knows a real estate agent. Ask them for referrals, or do a local search for someone you think can best help answer your questions. If you're starting a real estate agent search, contact our sister company, American Home Agents, and they can connect you to a local real estate agent.
Now that your mortgage pre-approval is in place and you've connected with an agent, it's time to search for a place to call home. Talk with your agent to discuss your goals and requirements for a new home. Gather information from each house and take pictures to help you recall the features of each property.
PDF Download: Home Features Comparison Sheet
Once you know your budget and have found a home you love, it's time to work with your realtor on making an offer. The written offer will include details regarding the purchase price and terms, the amount of earnest money you'll be using, any contingencies the deal may be subject to, an offer expiration, and much, much more.
Once your offer is made, the seller can accept, counteroffer, or decline the offer.