Buying Your First Home Checklist
So you're considering purchasing your first home–congratulations! Along with your excitement to be looking for a home, you probably have a lot of questions on how it's all done. If you've never been through the home-buying process, you may not know where to start. Understanding the big-picture of home-buying before you start shopping is key to making your first home purchase a success. We've created a "buying your first home checklist" to help you enjoy the journey.
What's Your Motivation?
Usually when prospective buyers have decided it's time to stop renting and time to buy, there's a motivating reason. The size of the current living space may no longer fit your needs, or maybe you crave more outdoor spaces, a place closer to work, or to finally be free of your roommates!
A place to call your own that you can decorate without limits is a great motivation for home-buying! Narrow down and rank your must-haves features. Use this guide when viewing prospective properties. Most homes will have some, but not all, of your desired qualities; it's important to keep the dealbreakers and the nice-to-haves in perspective as you begin your search.
Buying Your First Home Checklist
Phase One: Gather your financial information.
Have these numbers at-the-ready as you move forward. Lenders use them for pre-qualifications, and you’ll need them when using online calculators to get quick estimates of what you can afford.
Find out your credit rating.
Decide on your down payment. How much can you afford? What are they asking for?
Be sure of your job stability. Employment gaps or upcoming contract work end dates need to be disclosed to your lender. Have salary or tax information at-the-ready.
Budget in extra for home ownership costs that recur monthly. Other expenses could include water, sewer, trash collection, or HOA fees.
Keep track of your current budget and cut back on extras.
Factor in one-time home buying expenses like moving costs, home inspection fees, and good-faith or earnest money.
Phase Two: Figure out what you can afford.
Get familiar with mortgage and homeowners insurance, interest rates, lender fees, down payment requirements, and price ranges in your desired area.
Determine how much home you can afford. Anywhere from 25-30% of your take-home pay is a good ballpark figure to keep in mind.
Compare interest rates and fees. Try Nerd Wallet's Compare section for mortgage rates and more.
Choose a lender and get prequalified. This is where all your work in step 1 comes into play: lenders will ask for income, debt, savings and assets, and may check your credit score. This will determine the price you would be approved for if you apply with this lender.
Begin your search online. Learn more about the homes in your price range, including energy costs, and property taxes.
Find a realtor you like and trust. Do your research here, too: interview agents! You’ll spend a lot of time with this person, so be sure they match your communication style (text? email?) and understand what you want and can afford.
Start viewing homes! Attend open houses and schedule home tours. Once you find the home you want, work with your agent on submitting a fair offer. They'll let you know about earnest money and home inspection timing.
What NOT To Do When Buying Your First Home
We left out the most important part of this "buying your first home checklist" for a reason: it needs to stand out. Do not make any major life changes during this time, especially financial. Don't buy a new car, don't change jobs (if you can help it), don't open any credit cards, don't even buy new furniture for your new home on credit! This could affect your credit score and debt-to-income ratio; your home loan could be denied.
You may be excited to start buying new furnishings and paint, but keep your focus on buying your first home. The reward of home-ownership is worth your patience and dedication, I promise.