The Ultimate Home Buying Checklist

Home buying is not an impulsive venture. It all comes down to how personally and financially ready you are. Most reality TV shows and movies make home buying look so easy and quick.

Couples with beaming smiles always find their dream home on the first day, but real life is an entirely different process. There are many questions a first-time home buyer will have, but here is the ultimate checklist to help you feel less overwhelmed.

Determine Your Budget

The best way to start home buying is by setting aside a budget. Otherwise, you will be wasting a lot of time looking at houses outside your price range. You can also protect your emotions by not falling in love with a property you cannot afford. With a realistic budget, you can go on your first-time home buyer search more comfortably.

The most efficient way to do this is by determining your debt-to-income ratio or DTI. This will be your monthly expenses versus cash intake. The figure should include all the household bills you owe, which are then divided by your monthly income.

While going over your debts, do not forget to include car payments, student loans, and anything else you owe monthly. This can even be your phone and internet expenses.

When the time comes to apply for a mortgage, your DTI should be under 43%. Keep in mind that this figure is how much you can spend outside your budget.

It does not mean that you must aim for this to avoid becoming “house poor” when you spend too much on buying a home and have no funds left to have an exciting lifestyle.

Always include some breathing space in your budget to enjoy the new home you buy. Ensure that you have enough money remaining to spend on repairs and new furniture to avoid financial stress after moving in.

Prepare Your Down Payment

Sorting out your mortgage is only the beginning. You will need to save up for a down payment, which is a large chunk of money. A down payment can be 20% of a property’s value, so you can imagine how much you need to save if your dream house costs $4 million.

However, you can also put down a larger down payment which will lower your interest rates. A lower loan-to-value ratio (LTV) will reduce the lender’s risk, and your bank will be more willing to lend to you with better interest. If you’re struggling to come up with the money for a hefty down payment, you can also check if you are qualified for USDA loans which allow you to finance 100% of the price of your home without the need for a down payment.

Get Pre-Approved

Before embarking on your home buying experience, you should shop around for mortgage brokers and lenders. This is because sellers want to trust and have confidence that you can buy their property after making an offer.

This confidence comes when you get financially pre-approved to afford the house you want. Your mortgage broker will do all the paperwork, get your credit report and the pre-approval amount to determine the type of loan you can get to make an official offer for your dream home.

A pre-approval is not a full guarantee that you will secure a loan. This is only a statement that you qualify to receive one based on how your finances are looking. Then the seller you want to buy a home from will gladly accept your offer, knowing that you will not hesitate to pay them after the sale is complete.

Find a Trustworthy Agent

Since the seller typically pays the fees for their own agent and a buyer’s, there is no reason why you should avoid hiring a professional. You can jump on real estate websites online or go to open houses yourself, but an experienced realtor can be your best ally, especially if you are a first-time home buyer.

Agents have a lot of valuable information and insights about market conditions. They can secure the best deal for you by knowing what properties in your area are worth your price.

A professional realtor can also prepare the best offer or counter offers on your behalf. They know all the areas well and can suggest your ideal properties close to the schools and shops you desire. Realtors also have access to properties that have not been listed anywhere else yet.

The best way to find a real estate agent you can trust is by getting recommendations from online sources and friends. Otherwise, you can also jump on Google to type in “house for sale near me,” and the top realtors’ information should be present on several listings.

You can reach out to them directly and let them know that you are a new buyer. They will ask about the type of properties you are interested in and some questions about your lifestyle to find the perfect home.

Gather Your Paperwork

A lot of financial documents are involved when buying a new home. You may be asked to supply a couple of years’ worth of tax returns, pay stubs, proof of income, bank statements, investment account statements, proof of funds for your down payment, a letter of recommendation from landlords, and an ID to your mortgage lender.

These are the basic things your lender will ask to process your loan. However, you should always be prepared to supply more because everyone’s financial conditions are different.

Organize Home Inspections

As a first-time home buyer, you should never make a significant offer without doing a house inspection. A typical real estate contract should include a contingency clause that the house you are buying passes all inspection checks. This will reveal any functional or structural damages that a seller may not be upfront about.

You will need to pay for this home inspection, but it will save you a lot of repair expenses down the line. Imagine if you spend all your life’s savings on the house, but the walls start falling right after you move in.

Hiring a reputable house inspector is worth it because they can find all the problems for you, like plumbing, electrical, mold, cracked foundations, and many more.

Do Your Home Buying Efficiently

When you complete all the tasks from this checklist, you will have the best home buying experience. After securing your mortgage, hiring professionals, and conducting home inspections, you can finally pop open the champagne to celebrate getting the keys to your new property.

If you enjoyed reading this checklist, check out some of our other articles for more information.