Skip to main content

First Time Home Buyer Checklist

November 24, 2020

First Time Home Buyer Checklist

Buying a home is an exciting journey, but it is one that can feel overwhelming. There are so many moving parts to buying a house that it can often be intimidating to know everything

With a home buyer checklist, you can be better prepared for the process. Having a plan will make you feel more empowered, allowing you to enjoy this new adventure rather than dreading it.  

1. Decide Which Houses You Can Afford

When you start the home buying process, the absolute first thing you need to determine is how much you can spend on a new home. It would be heartbreaking to find your dream home to learn later that it is over your budget. This is the time to go over all your finances before your search even begins. 

Most lenders look at something called debt-to-income ratio to determine the loan amount for which you will qualify. This formula focuses on your current income versus the amount of debt you have. Your current debt includes credit card debt, student loans, and car payments. Take a moment to gather your monthly expenses and sources of income. A quick analysis of your total finances can help you get an idea of where you stand on monthly payments toward your home. 

While analyzing your current finances, this is also a great time to begin looking at your credit rating. At The Mortgage Firm NCF, we can do a soft pull to check if your credit is sufficient.  Later in the home buying process, your credit score will impact your ability to purchase a home. Your credit score determines what type of home you can buy by dictating the rate a lender will charge you. Keep in mind that you may be approved for a large loan by your lender, but that doesn’t necessarily mean you can afford that monthly payment.

2. Address Any Credit Blemishes

As previously mentioned, look at your credit report while you create your financial snapshot. Did you see anything surprising in that report? Did you find any mistakes or outstanding debt? It is important to look over this information before meeting with a mortgage lender because if you walk into a meeting with a low score, it might jeopardize your ability to access the loan you would like. We’ve outlined ways to make a path to a pre-approved loan for yourself:

  • Pay off your debt: Your credit score is calculated by payment history and how much debt you have accumulated in credit cards and loans. When you were looking at your debt-to-income ratio, did you notice more debt than income? If your debt is too high, you may not be able to receive the loan you want. The best course of action is to begin paying off any accumulated debt, such as student loans and credit card debt.
  • Fix errors on credit reports: No one is perfect, and sometimes mistakes happen – more often than you think. When checking your report, look for incorrect identification information, such as:
    • Data about someone else entirely 
    • Signs of identity fraud, such as accounts you didn’t open 
    • Account status errors
    • Incorrect payment and balance information

Any mistakes can be disputed, so beginning this process early is beneficial.

3. Shop for a Mortgage Lender

After you’ve created the snapshot of your financial status, it is time to choose a trusted lender. In addition to accessing your finances, your lender can also help you find insurance, loan options, and down payment assistance programs to help you throughout the buying process.  It can take years or even decades to pay off a mortgage, so you’ll want to know that the lender—and the loan servicer if a different company will process your payments—is communicative and trustworthy.

4. Secure Mortgage Pre-Approval

Once you have decided which mortgage lender you want to work with, it is important to begin discussing your mortgage options. This is the time to give your lender all the information you gathered in step one. Documentation such as credit, job history, income, debts, and assets help determine your debt-to-income ratio. This, along with your credit score, will lead to your pre-approval, one of the essential steps in the homebuying process. 

During these discussions, you can begin to get pre-approved for a mortgage loan. The pre-approval letter usually includes an estimate of your loan amount, interest rate, and the monthly mortgage payment. This can put you ahead of other buyers who don’t have one during the homebuying process.

“Remember, lenders will perform a hard pull on your credit during the pre-approval process, which can lower your score by a few points. However, if you’re shopping around and multiple lenders check your credit over a 45-day window, the credit bureaus will count these inquiries as a single credit pull.”

5. Make a Wish List

Home buying can be an extremely happy time in your life. Before you begin looking at houses,  you’ll need to focus on what type of home you want. This is the time to compose your wish list: what elements are must-haves?

  • Location 
  • Yard 
  • School district 
  • Double sinks 

It might be helpful to divide your list into three categories: non-negotiable, nice to have, and dream features. You should also include elements that you do not want in your home. This will help you find suitable house listings in the future. Having a solid idea of what you want in a home will help make sure you get a home that checks off almost every box with less hassle. 

6. Find a Real Estate Agent

Here comes the fun part: the house hunting process! If this is your first time buying a home, you should enlist the help of a real estate agent. An agent will be able to look over your wish list to match you with available homes in the area, trying to get as many of your must-haves within your budget. 

7. Determine How Much Cash You’ll Need  

How much money should you have in savings when buying a home? We normally think of a down payment as the only outside expense when buying a house. Most experts suggest that you have at least 20% of the house’s purchase price saved as a down payment. You can buy a house without that much down – and many people do – but there are good reasons to fork over at least 20%. And there are other costs to consider, including:

  • Closing costs: Getting the title to your home is a great accomplishment, but it doesn’t come without a fee.
  • Moving costs: After you’ve factored in packing materials, hiring a moving company, renting a trailer, and tipping movers.
  • Emergency cash reserves: Some lenders require cash reserves to approve you for a loan, and many financial planners suggest keeping three to six months of expenses in the bank as your emergency fund. 

8. Lock In Your Mortgage Rate

Now that you have picked out your dream house, it is time to decide what type of mortgage and mortgage rate is right for you. We believe it is best to lock in your mortgage rates closer to your settlement date. Standard interest rates lock in 60 days or less.  Working with an experienced lender will be beneficial during this process because you’ll be able to gauge better the best time to lock in your rate.

As a first-time buyer, there are a variety of mortgage rate options to choose from.

  • An adjustable-rate mortgage, or ARM, has an interest rate that can fluctuate over the loan’s life along with benchmark rates. 
  • On the other hand, a fixed-rate mortgage has an interest rate that never changes, even if rates fall.

The length of your loan will also play a part in determining your mortgage rate.  Typical durations of homeowners’ mortgages will be 15 or 30 years. A 30-year mortgage offers a more affordable monthly payment, but a 15-year mortgage may reduce long-term interest and help you pay off the loan much earlier.

The Mortgage Firm Is Here to Answer Your Home Buying Questions

We understand that home buying can be a complicated process. That’s why we draw on our years of experience and expertise to help new homebuyers. We want to help you get the home you want and empower you during the homebuying process. Contact The Mortgage Firm North Central Florida about qualifications or payment options to create a smooth homebuying process.