First-Time Homebuyer Checklist

Quick tip: If you’re buying your first home, try to think beyond the listing price. Insurance, taxes, maintenance and closing costs are all important things to know before buying a house.

Step 1: Evaluate your finances.

First, evaluate your current financial situation. Do you have enough money in the bank to own a home? In addition to paying a mortgage, you’ll have to cover costs such as taxes, insurance, utilities, repairs and more.

Owning a home offers stability, privacy and the freedom to personalize your property. But it also comes with financial responsibilities beyond the mortgage payment. Understanding your finances is one of the most important things to know before buying a house, especially if you're buying your first home.

Save for a down payment and closing fees.

Your lender may require a down payment anywhere between 3% and 20% of the loan. But if you put down less than 20%, you may also be required to pay private mortgage insurance (PMI). In addition, you should expect to pay closing costs and fees for the home inspection, appraisal, title search and attorney.

Reduce debt.

Having large amounts of credit card or other debt can hold you back from securing a loan. Your debt-to-income ratio indicates how much of your monthly income goes toward debt payments. To calculate yours, divide your total monthly debt payments by your gross monthly income. The right ratio can depend on the type of loan you’re applying for.

Understand your credit score.

When you apply for a home loan, lenders look at scores from three credit reporting companies: Experian, Equifax and TransUnion. Then they take the score that’s in the middle and apply it to your loan application. If you don’t know your credit score, find out by looking at a credit card statement, talking to a credit counselor, using a free credit score service or buying your score directly from a credit company.

Finally, if you’re about to purchase a home, avoid big financial transactions. For example, don’t open a new credit card or make a large purchase. Lenders will take note, and it may hurt your ability to secure a loan.

Before you apply for a mortgage:

• Check your credit score from all three reporting agencies (Experian, Equifax, TransUnion)  
• Calculate your debt-to-income ratio (monthly debt payments ÷ gross monthly income)  
• Avoid opening new credit cards or making large purchases  
• Gather documentation: Social Security numbers, proof of income, banking info, tax forms

Step 2: Find a reputable real estate agent.

Real estate agents can help make the home-buying process easier and more enjoyable. To find an agent, first ask family members, friends or lenders for referrals.

Then, narrow down top real estate agents by researching their background and experience. In addition, you may want to interview a few agents on the phone or in person to make sure they’re a good fit.

Step 3: Get preapproved for a home loan.

Do you know how much you can afford? Before moving ahead, it’s wise to find out. A lender can help you get preapproved for a loan by looking at your income, debts and assets. You’ll need to gather documentation such as Social Security numbers, proof of income, banking information and tax forms.

For many buyers, getting preapproved is one of the clearest early steps to buying a house for the first time because it gives you a more realistic price range before you start touring homes.

Step 4: Search for homes.

As you browse popular real estate websites, ask yourself a few questions to narrow down listings.

First, consider the location:

• If you have children, what is the school system like?
• Is the neighborhood conveniently located near your work?
• Is it a safe area?
• Is it near recreational activities you enjoy (e.g., hiking, parks, museums)?
• Is it on a cul-de-sac, a side street or a busy road?
• Is it in a suburban neighborhood, the city or a rural area?
• How much land does the home have? And how much land can you realistically maintain?

Then, write down your ideal home features such as:

• Do you need a garage?
• How much outdoor space would you like?
• Is there a deck or patio?
• How many bedrooms do you need? Bathrooms?
• Do you like the layout of the kitchen and living areas?

Once you find a few homes online, call your real estate agent and schedule showings or virtual tours. Knowledgeable agents may have not only in-depth details about the property, but also information about the home’s history of insurance claims or whether or not there are homeowners association fees. These details can be helpful when it comes to making an offer and negotiating a price.

Step 5: Shop for a mortgage.

As you shop for homes, talk with your lender about which types of mortgages and rates are available. Here are a few of the most common loan options you’ll want to understand:

Loan type

Most home loans are “conventional loans,” which means they’re backed by private lenders, rather than by the government. An example of a government-backed loan is a VA loan, which you may qualify for if you were a member of the U.S. Armed Forces or National Guard – or if your spouse is eligible.

Loan term

You’ll also want to decide on the term of your loan. Usually this means comparing a 15-year to a 30-year loan. With a 15-year loan, you’ll pay more money every month, but your interest will be less over time. A 30-year loan is designed to take longer to pay off, but your monthly payment may be more manageable. Consider which approach fits your financial goals.

Interest rate type

Finally, you’ll want to ask your lender about adjustable vs. fixed-interest loans. An adjustable mortgage can change throughout the life of the loan. Alternatively, a fixed-rate mortgage doesn’t change over time, so you’re locked into a rate. Ask your lender about the pros and cons of both.

Once you’ve settled on the basics of your loan, talk to your lender about any other financing options you may need. For example, some homeowners also need a construction loan if they’re making substantial updates to their new property. Your mortgage lender should point you in the right direction.

Step 6: Secure home insurance.

Next, it’s time to get a homeowners insurance policy. Many lenders require proof of homeowners insurance before closing. As you shop around, you may be wondering what factors can impact your insurance premium. Here are a few:

• The estimated replacement cost of your home
• The age and condition of your home and roof
• Your home’s security and safety features (lights and smoke detectors)
• Where you live
• If there have been other claims by homeowners in your area
• If you need to specifically insure personal property, like jewelry and other valuables
• If you have a home business that you need to protect

Once you get a quote, talk to a licensed insurance representative about what coverages to have to make sure you’re adequately covered and any other questions you may have. Depending on what you own and certain features of your house, you may want to look into different types of homeowners insurance coverages. For example, if you have a finished basement, you may want to make sure you have water backup and sump pump discharge coverage. Additionally, big life moments, like buying a home, are an ideal opportunity for securing or adjusting your life insurance policy.

If you’re comparing options, learning more about home insurance coverages, how to choose a home insurance company and when to Rrview and update your homeowners insurance policy can help you better understand what to look for.

Step 7: Make an offer.

You’ve found the perfect home, and you’re ready to make an offer. Your real estate agent should guide you by comparing the prices of similar homes that sold in the area so you can confidently make an offer.

If your offer is accepted, congratulations! Send the purchase contract to your lender so they can line up the closing details and appraisal. You’ll also want to schedule an inspection. This is when a professional inspects the house, looking for any potentially needed fixes or safety concerns such as signs of mold, wiring issues, poor ventilation and more. If an issue is found, you can either accept the finding and address it yourself, negotiate with the seller to fix it or work with the seller to adjust the price. Note that for significant issues, your lender may require it to be addressed before you close and move in.

Step 8: Close on your new home.

The day you’ve been waiting for has finally arrived. It’s time to close on your first home. Usually this happens 30 to 45 days after a seller accepts your offer and your lender has prepared your purchase contract. Provided all of the details are lined up, this is when you sign the final paperwork.

Remember to bring a photo ID, proof of home insurance and a cashier’s check to pay for closing costs. You’re officially a homeowner!

What should a first-time homebuyer avoid?

Now that you know the steps to buying a house, learn what to avoid during the process. As you’ve learned, the home-buying process can seem complicated from the start. There are many things you’ll need to consider and get done before you’re ready to move in. On the contrary, there are also things you shouldn’t do before moving in. We name just a few of them below.

Spending more than you can afford

Just because you received a mortgage preapproval for a loan larger than you expected doesn’t mean you should take out a mortgage that large. A preapproval amount may be higher than what fits your actual budget. Try following a budget with that mortgage payment for a few months. You’ll see if it’s a comfortable amount to spend or not.

Passing on a home inspection

Some homebuyers may skip an inspection to save money and time, while also creating an attractive offer for the seller. It may help you bid in a competitive market, but can lead to unexpected repair expenses. The goal of a home inspection is to make sure the home is safe and that everyone fully understands the home’s condition, which is valuable information you don’t want to pass up.

Not getting enough homeowners insurance coverage

Making sure you have the right kind and amount of homeowners insurance is a key component to protecting your investment in your first home. If you don’t have enough coverage to cover all your belongings, or you don’t have the right types of coverages to cover certain losses, you may find yourself footing the cost of certain damages. Reviewing your home, belongings and risks with a licensed representative can help you understand what coverage may fit your situation.