first-time home buyer checklist

The First-Time Home Buyer Checklist

March 30, 2021 5:05 am Published by

Owning a home is still an integral part of the American Dream, and almost two million Americans each year make homeownership a reality for the first time. Yes, it’s a complex process that can take months to complete, but the good news is that 18% of first-time buyers in 2020 reported a smooth, positive experience. Here’s how to join them, and to find a place of your own with as few hiccups and hitches as possible using our first-time home buyer checklist. 

Save for the Down Payment

The median price of a home in the U.S. in 2020 was $257,000. As a first-time buyer, getting that kind of money together will typically involve financing, and many lenders will want to see at least a 20% down payment. For the majority of first-time buyers in 2021, most of whom are millennials, saving up for the down payment is the biggest obstacle, with student loans to pay, high rental prices and an uncertain job market. Be prepared to save, save, save to make the down payment. 

The good news  

Not all lenders will require 20% or more. In fact, you might be able to take advantage of more than 2,500 down payment assistance programs in the U.S. that can get you on the property ladder with a zero or single-digit percentage down payment. These range from Federal Housing Authority (FHA) backed loans to state or local incentives for buyers. Search for those that apply to your area at the U.S. Department of Housing and Urban Development

Audit Your Financial Health

Although purchasing a property rather than renting is nearly always a prudent investment, it shouldn’t put you under an unnecessary financial burden just to get a foothold on the ladder. Audit your finances thoroughly to confirm that you’re able to commit to a long-term investment. That means looking at the following financial checklist:

  • Savings. To cover the down payment, closing costs, moving expenses and emergency fund.
  • Credit score. Now is the time to obtain your full credit report to see how you shape up. ScoreMaster can provide your 3-Bureau Credit Report & Scores and recommend a plan for achieving your best score for the best possible interest rates. 
  • Income. Make a list of all your monthly income from employment and investments. 
  • Monthly expenses. Calculate your outgoings on rent, medical insurance etc. 
  • Debt. Calculate your monthly payments on car loans, student loans, credit cards, etc. 

Establish Your Budget

Given that 86% of homebuyers finance their purchase, it’s time to get comfortable with the idea of financing a substantial loan for the next 25 years or more. The task is easier if you can set a manageable budget and stick to it. With your credit report and financial statement in order, start talking to a range of mortgage lenders about how much they will lend you and what options are available, such as:

  • Fixed rate (set interest for the life of the loan).
  • Adjustable rate (fluctuates according to interest rate changes).
  • Conventional loan (backed by mortgage insurance).
  • FHA loans (Government-insured).
  • VA loans 

Once you know how much you can borrow, you can start searching for what your loan can buy. 

Begin Your Property Search

Start with a “soft:” search, as in identifying your target neighborhoods, scouring online listings and generally familiarizing yourself with the breadth of housing stock available to your budget. Now is not the time to start discussions with any sellers. Once you’ve decided whether you want an apartment or detached house, single-family home or fixer upper, it’s time to move to search with intent.

Get Mortgage Pre-Approval

On average, it takes about 10 weeks to find a home according to the National Association of Realtors, but once you’ve found the right one, there’s no time to lose. That’s why it’s crucial to get mortgage pre-approval before you start talking to sellers. Until your paperwork is in order and your credit report is up to date, you’re only window shopping at best. Here’s what mortgage lenders will look at:

Pre-approval checklist

  • Credit score: each lender will have its target score.
  • Employment status and proof of income.
  • Proof of assets (savings, investments).

You’ll typically need a Debt-to-Income Ratio of no more than 43%, and usually around 30%, to indicate that you can comfortably service the loan on your current income minus existing payments. 

Important tip! Once you’re pre-approved for a loan, don’t do anything that could impact your credit score, such as missing payments or taking additional loans or financing. 

Bring in the Professionals

If you’re a seasoned flipper, you might have developed the skills to buy a home independently. But 89% of homebuyers use the services of a real estate agent, and as a first-time homebuyer, their support is almost indispensable. Particularly if you’re touring Open Houses, realtors can negotiate a competitive deal, alert you to any red flags and provide comparable alternatives if your first choice falls through. 

Make an Offer

Once you’ve found your dream home, seize the day. As long as you’re pre-approved, things can move quickly from here and you can expect a response from the seller in a matter of days. At this point, your down payment will usually go in escrow for 30 days, the property will be taken off the listing and a flurry of paperwork is unleashed. This is also your cue to do due diligence on your investment. 

Carry out the Home Inspection

Up until now, you’ve probably only viewed the property. Now it’s time to inspect it, with the services of a professional realtor. You’ll have the chance to examine the structure completely to identify any potential flaws, and your realtor will get to work on trawling local and court records for any liens, foreclosure notices or Homeowner Association regulations that apply. 

Time for Mortgage Appraisal

Your chosen mortgage lender will also need to perform an appraisal to confirm that the sale price proposed and loan requested corresponds to the actual value of the property. They will look at the property condition and amenities, square footage and comparable sales in the area, among other factors. 

Steel Yourself for Closing Time

The last step is to sign contracts, exchange paperwork and settle the associated fees. Bear in mind that closing costs can be as much as 5% of the total purchase price and that closing can take up to two months in some cases. When it’s done, you’ll have the property deed, settlement statement and promissory note for your mortgage lender. Oh, and a new set of keys!

Remember that the total cost of homeownership factors in not just mortgage payments but also property taxes, insurance and maintenance. It might seem a lot to absorb, and a big financial responsibility, but a step-by-step approach makes the process manageable. 


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This post was written by David B. Coulter

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