By Matt Allen
Vice President, Portfolio Lending (NMLS #415037)

First-Time Home Buyer Checklist

Jan 09, 2023

  • First-Time Home Buyer
  • Mortgages
  • Helpful Tips
  • Mortgage Programs
  • Home Loans

Knowing where to start can be almost as challenging as purchasing a home for the first time. There’s a lot to consider, and if you’ve never purchased a home before, what to do and when to do it can be confusing. We’ve put together this checklist to help with the home process from beginning to end. 

  1. Get your financial situation in order. Before making the jump to buying a home, there are a few things you can do to improve your financial situation, which can help you get the best loan possible.  These include:
    • Check and improve your credit score- Your credit report is available from the three national credit bureaus, Experian, TransUnion, and Equifax. You can request them for free once a year per credit bureau. Obtain a copy of each report to review for accuracy and seek advice, if necessary, from a credit expert on how to improve your credit score.
    • Determine your DTI – Your debt-to-income, or DTI ratio, is the percent of your monthly gross income that goes toward outstanding debt. Lenders look at this ratio to determine how much you can afford to pay for a home, usually wanting it no higher than 43%. This is also why paying as many outstanding debts as possible is essential. If you want to know how much home you can afford, here’s a calculator you can use.
    • Save money – Having a substantial amount of money saved is crucial when buying a home. You will need at least a 3.5% down payment for an FHA loan, and some loans may require as much as 20% if you don’t want to pay private mortgage insurance. There are also closing costs and other fees you may need to cover. Start saving as soon as possible, putting away as much as possible toward these costs. Opening a certificate of deposit account can be a good option; they have higher interest rates than most checking and savings accounts. Some banks even offer better rates when combined with opening a checking account.
  2. Determine how much you can afford. Once you decide to purchase a home, one of the most important decisions you can make is to ensure you can make monthly payments. You want to get the best home, in the right location, at a price you can afford. Here’s a calculator that can help determine how much you should spend on a home based on the down payment, loan-to-value ratio, and total monthly loan payment.
  3. Find a mortgage lender. Another crucial step is finding the right mortgage lender who will consider your goals and limitations and seek your best interests. Find the loan that makes the most sense for your situation. It would be best if you tried to find a lender that handles your loan process from beginning to end and has the same contact point.  Read online reviews to see who offers the best customer service and results.
  4. Get pre-approved for a loan. Once you start working with a lender, they will assist you through the pre-approval process.  Several factors come into play for getting pre-approved, including how much of a down payment you can make, your credit score, if you have a good debt-to-income ratio, and proof of income. Getting pre-approved can give you better bargaining power over other buyers because sellers and real estate agents will know you have already selected a lender, and you know how much house you can afford.
  5. Find a realtor. The right real estate agent can make all the difference when looking to buy your first home. You want an agent who will look out for your best interests and give you their full attention. Ask friends and family for recommendations, check online reviews, and talk to two or more agents before you decide.
  6. Begin your hunt for a home. There are many factors to consider when looking for a home, most of which are based on the buyer’s goals. They say location is everything, and location can be a significant factor in the cost. How are schools? What is the crime rate in this area? How far is the commute to work? Your realtor can be a great resource to help you find the right home based on your needs.
  7. Get your loan documents together. There are several documents that your lender will request to process your loan, including but not limited to your pay stubs (at least the last two), recent W-2, tax return documents from the previous two years, and your current bank statement. If you have other sources of income, you will also need documentation supporting it. You will also need your driver’s license or other ID and Social Security number. Any other current debt, such as a car loan, student loan, or debt you have paid off, should also be available. Other documents may also be needed depending on your lender and the type of mortgage loan.
  8. Get a home inspection and appraisal. The home inspection and appraisal are both critical for moving forward with an offer. An inspection of the home may reveal significant issues that can affect the price of the house or stop the negotiation altogether. An appraisal, done by a third-party appraiser, will come up with a fair market value based on the characteristics of the home and the current market conditions.
  9. Submit an offer. Once you find the right home, it's time to make an offer. The offer will include the appraisal you have done, which should be close to the loan amount, and how the borrower will obtain funding. Once the seller accepts the offer, you both sign a purchase agreement, signifying both parties’ approval.
  10. Close on your new home! The final step in the home purchase process is closing. This is when funds are transferred from escrow, and the house’s deed is put in your name. You will need to present your driver’s license or Social Security card, provide money for the down payment and closing costs, sign all necessary documents and provide proof of homeowners insurance. The last step is getting the keys to your new home!

We hope this checklist can help you get started on your home-buying journey. If you have additional questions or want to talk to a NASB home loan expert, call us at 855-465-0753.