First-Time Home Buyer Checklist

First-Time Home Buyer Checklist

Purchasing a home is a huge milestone that takes a lot of care and attention to detail. From researching neighborhoods, to selecting brokers, real estate agents and lenders, navigating the process can leave you feeling somewhat lost in a maze of procedure and protocols.

Below, is a step-by-step list you can use to get started on making your dream of becoming a homeowner a reality.

Decide where you want to live

There are many factors that go into selecting a city or town to lay down some roots. One of the more important factors is the affordability, livability and price stability of that location. As appealing as large cities may be, suburbs stand out because they’re close to the amenities and jobs of a big city, often with a more affordable and quieter lifestyle.

On this topic, it is important to determine how much house you can afford. There are multiple free calculators available online that can help you factor home price, down payment, loan term, interest rate and your total debt payments relative to your income. Having an idea of how much house you can afford will help you start looking in the right places and will make pre-approval for a loan easier.

Prepare your credit

Credit scores directly impact mortgage interest rates. A difference of just 100 points could cost, or save, you thousands. On the surface a .25% difference may not seem like a big deal, but compounded over the lift of a 30-year-loan can really add up. Ideally, you want to purchase a home when you have achieved “excellent credit” status as lenders will feel confident lending you money with the knowledge that you make timely and consistent payments.

A score of 740 or higher is generally considered excellent credit.
A score between 700 and 739 is considered good credit.
Scores between 630 and 699 are fair credit.
And scores of 629 and below are poor credit.

A few ways you can improve your credit score is by making on-time payments on outstanding debt, keep credit card spending below 30% of your limit, check for errors on your credit report, eliminate some debt to free up some credit, and do your mortgage shopping within a 30-day period to avoid your credit being pulled frequently.

Save for down payment and secure pre-approval

The down payment is your contribution toward the purchase and represents your initial ownership stake in the home. The lender provides the rest of the money to buy the property.

Although most lenders require a down payment, VA loans and USDA loans are some exceptions to the rule.

If applying for a conventional loan, you should make it a goal to save 20% in cash for the down payment. There are cases where you will get approved with less cash on hand, but there are advantages to waiting to purchase a home until you have the cash reserve needed. A few advantages of making a larger down payment include:

A better interest rate
Lower upfront and ongoing fees
More equity in your home right off the bat
A lower monthly mortgage payment

Just keep in mind that owning a home is not cheap, and it is important to have cash on hand for unanticipated expenses. A larger down payment will mean a lower monthly mortgage bill, but putting down too much could leave you strapped for cash after you move in.

Once you feel confident in your down-payment savings it will be time to secure a preapproval letter. This shows that you are a serious home buyer and will help you select a lender who can work with your needs. Here is a list of documents you will need to compile to start the preapproval process.

Social Security numbers for yourself and any co-borrowers
Bank, savings, checking, investment account information
Outstanding debt obligations, including credit card, car loan, student loan and other balances
Two years of tax returns, W-2s and 1099s
Salary and employer information
Proof of down payment, and where the money is coming from

Selecting a lender

You will be spending a lot of time communicating with this person so it is important to do your research about how lenders conduct business and the timeframe in which they get loans closed. Research mortgage rates before starting the lender process and obtain multiple quotes to be certain that you are finding the best deal. As much as you need them, you are also interviewing them and should have a list of important questions to ask. Here are a few to get you started:

How do you prefer to communicate with clients — email, text, phone calls or in person? How quickly do you respond to messages?
How long are your turnaround times on preapproval, appraisal and closing?
What lender fees will I be responsible for at closing? (Fees may include commission, loan origination, points, appraisal, credit report and application fees.)
Will you waive any of these fees or roll them into my mortgage?
What are the down payment requirements?

Once you have your pre approval and trusted lender selected it is time for the fun part! Armed with information you can start the shopping process. In today’s competitive market, being prepared will mean an offer quickly submitted and accepted.