A First-Time Home Buyer's Checklist: 10 Steps to Success

1 Check Your Credit Score

Before you talk to a lender, you need to know your financial report card. Your credit score is a 3-digit number that tells lenders how reliable you are with debt. A higher score means a lower interest rate, which can save you tens of thousands of dollars over the life of your loan.

• Target Score: Aim for 740 or higher to get the best possible interest rates.
• Minimum Score: You can often get a conventional loan with 620 or an FHA loan with 580, but you'll pay a higher interest rate.

2 Calculate Your DTI Ratio

This is the metric lenders care about most. It's a percentage that shows how much of your monthly income goes to paying debts.

• How to Calculate: Add up ALL your monthly debt payments (car, student loan, credit cards). Divide that total by your gross (pre-tax) monthly income.
• The 36% Rule: Ideally, your total DTI (including your future mortgage) should be 36% or less. Lenders will sometimes go up to 43%, but a lower DTI gives you better loan options.

3 Save for Two Separate Goals

This is a common trap for first-time buyers. You need to save for two separate buckets of cash.

• 1. The Down Payment (3-20%): This is your stake in the home. While 20% helps you avoid PMI, first-time buyers can get FHA loans with 3.5% down.
• 2. Closing Costs (2-5%): These are the *separate* fees for finalizing the loan. They cover the appraisal, title search, lender fees, and more.

4 Get Pre-Approved (Your Golden Ticket)

A mortgage pre-approval is a formal letter from a lender stating they are conditionally willing to lend you a specific amount. It's far more powerful than a "pre-qualification."

• Why it's crucial: It proves to sellers you're a serious buyer. Many agents won't even show you a home without one.
• What you'll need: Be prepared with pay stubs, bank statements, tax returns, and ID. The lender will verify everything and run a hard credit check.

5 Find a Great Real Estate Agent

Don't just use the first agent you find. A good agent is your expert guide and fierce advocate. They will listen to your needs, find homes you won't see online, and (most importantly) negotiate on your behalf. As a buyer, you typically don't pay your agent—their commission is paid by the home seller.

6 Go House Hunting (The Fun Part)

This is when it gets real! You'll start touring homes with your agent. Here are a few pro tips for your search:

• Look past the paint: Ignore ugly colors or bad furniture. Focus on the "bones" of the house: the layout, foundation, roof, and location.
• Visit at different times: See what the neighborhood is like on a weeknight and a weekend. How's the traffic? Is it noisy?
• Stick to your budget: Don't get tempted to look at homes above your pre-approval amount.

7 Make an Offer

Found "the one"? Your agent will spring into action. They'll help you write a competitive offer, which includes:

• The Price: What you're willing to pay.
• Your Terms: Your loan type and down payment amount.
• Contingencies: These are your "safety clauses." The most common are the inspection contingency (you can back out if the inspection is bad) and the financing contingency (you can back out if your loan falls through).

8 Get a Home Inspection & Appraisal

Your offer was accepted! You now enter a 30-45 day period called "escrow" where you finalize the deal. Two major things happen now:

• The Home Inspection (For You): You hire a professional inspector to do a deep dive and find any hidden problems (bad roof, faulty wiring, plumbing issues). This is your chance to negotiate repairs with the seller or back out.
• The Appraisal (For the Bank): Your *lender* hires an appraiser to make sure the home is worth the price you're paying. This is to protect their investment.

9 Do a Final Walkthrough

You're almost there! In the last 24-48 hours before closing, you'll do a "final walkthrough" of the house to make sure it's in the condition you agreed upon (e.g., any negotiated repairs are done, and no new holes are in the walls). At the same time, your lender will give the "clear to close" on your loan.

10 Close the Deal!

This is the day you've been waiting for. You'll go to a title company or attorney's office and sign a mountain of paperwork. At this meeting, you will:

• Sign the final loan and title documents.
• Pay your remaining down payment and closing costs.
• Get the keys to your new home. Congratulations!

Frequently Asked Questions