First-time Home Buyer Checklist

Purchasing your first home can be stressful. Use this checklist to understand what's involved in the home buying process.

12 months out

Check your credit

This is an important first step to analyze your financial history and creditworthiness. You can go to freecreditreport.com to get this information.

Decide your budget

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.

Quick Tip - Budgeting
It’s easy to calculate a home purchase budget if you utilize the percentages distributed by banks (28% of your gross monthly income). But a better way to calculate your budget is to keep a daily log of your expenses and spending for a four-week period. Then take a look at what is outgoing for housing expenses and what you could realistically spend on a monthly mortgage.

Organize a down payment plan

The largest upfront cost will be your mortgage down payment and closing costs. Plan for this ahead of time by organizing a savings budget to help you prepare. A down payment calculator can help estimate different down payments with their corresponding monthly payments.

Quick Tip - Consider All Costs
Most buyers get so excited by the home buying experience that they lose sight of what their actual out-of-pocket costs will be when it’s time to close. For FHA loans, down payments can be as low as 3.5%, whereas conventional mortgages can be as low as 3% for a primary residence, and up to 20% for an investment property. Closing costs are a series of fees that need to be paid when it is time to sign the deal on your house. These can include attorney’s fees, title service costs, recording fees, survey fees, home warranties, a loan origination fee, and document preparation fees. Typically, closing costs equate to about 3% to 4% of the home’s value.

Strengthen your creditworthiness (if needed)

Begin organizing your finances and cleaning up any issues. Use your credit report from step one to identify any issues with creditors or debts. Contact creditors and ask for payment plans or work with an attorney to help clean up issues.

Read: 5 Tips to a higher credit score

9 months out

Start home savings account

Owning a home means maintenance costs and possibly 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

Quick Tip - Home Decor/Furnishings
Does your new home have appliances already installed, or will you have to make certain purchases like a washer, dryer, and/or refrigerator? Most new homes do not come stocked with these kinds of necessities, so budgeting for such items will be necessary depending on your family’s needs.

Research neighborhoods / home styles

Finally, the fun part! Begin a home search of places you want to live that align 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…?

Search: MLS Home Search Tool

6 months out

Research mortgage options

We encourage everyone to learn a little about mortgage programs to have a general idea of what you might be interested in and what options are available. A mortgage consultant can discuss specific programs based on your situation. Though, generally speaking, mortgages are based on time and interest.

Learn: Available Mortgage Programs

Quick Tip - Assistance Programs & Grants
Home affordability is easier than you expect, especially once you look into state and government home buyer assistance programs. Find financial help with down payments or closing costs, whether it be through a specific loan or even grant money.

Prepare documents

Since this is the most time-consuming element of preparing for a mortgage, we suggest you start 6 months ahead of when you think you’ll apply for a mortgage. Some documents you will be able to find easily, 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 it easier if you need more recent documents.

Research mortgage lenders

Not all lenders are the same. Take the time to research several local and online mortgage lenders. Prepare your questions to know how the lender communicates with borrowers and what expertise they have with first-time home buyer programs. The last thing you want is a lender that misses an important detail or ideal mortgage program causing you costly fees or potentially costing you the perfect home.

Learn: Questions to Ask a Mortgage Lender

3 months out

Apply for a mortgage

About 3 months out, you’ll want to start getting things verified. Obtaining a pre-approval letter 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.

Learn: How to Get Pre-approved For a Home Loan

Looking to apply for a home loan? American Financing is a national direct mortgage lender licensed in all 50 states. Contact us at (800) 910-4055 or apply for a home loan online.

Quick Tip - Pre-Approval
Get pre-approved for a mortgage. Many home purchases fall through because buyers are not able to find a lender after finding their dream home. Shop around with three or four lenders, and compare the rates and loan types offered. After finding the right loan for you, the lender will issue a letter telling you, and sellers, the amount you are qualified for. Most sellers feel more confident about creating a contract when a buyer has a pre-approval letter.
Quick Tip - Negotiating Fees
Don’t be fooled into paying everything someone tells you to pay. While some fees are required and cannot be negotiated, others are yours to shop around and trim. Speak up, and talk through closing costs and mortgage fees with your lender or real estate agent.

Hire a real estate agent

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.

Learn: Questions to Ask Your Real Estate Agent

Shop neighborhoods & homes

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

Quick Tip - Know the Neighborhood
While searching for homes within your price range, your agent may show you a home in the part of town you are not as familiar with. While you may fall in love with the home, yard, garage, and view, you must research the neighborhood itself. Bad neighbors can negatively affect the value of a home.

The offer

Make an offer

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 that 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.

Learn : How to Make an Offer on a Home More Appealing - 6 Tips to Follow

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