First-Time Home Buyer Checklist
Make the move to buy your first home with this home buyer's checklist.
How to Prepare and Buy Your First Home
1. DECIDE WHERE YOU WANT TO LIVE
Find a location that fits your lifestyle. If you’re single, the cityscape may be for you. If you have your family in mind, scope out neighborhoods at different times of day to see what fits your needs. Search nearby attractions and schools and do research of homes in the area to find the cost of living.
2. KNOW WHAT YOU CAN AFFORD
Your financial situation will determine your ability to obtain a mortgage. Use our mortgage calculator to determine your monthly mortgage payment, adjusting for variables such as the size of your down payment, your mortgage type, and current interest rates. You will also need to factor in cost of homeowners’ insurance, utilities, taxes and, if applicable, associational fees.
Make a wish list that is divided into three categories. This can help narrow your focus on affordability.
- Nice to Have
- Dream Features
3. PREPARE YOUR CREDIT
Do not pass “Go,” do not start browsing homes until you have checked your credit score and credit report. This is the number that mortgage lenders will look at to determine whether you are “creditworthy,” and thus dictates the rates you will get. The higher your credit score, the lower your interest rate—and that’s what you’re going for. Get a free copy of your credit report at AnnualCreditReport.com to see where you stand. Clean up any credit errors that you may have.
Once you’re ramping up to buy a home, it’s wise to not make any major changes in your life or, most important, your finances. Do not switch jobs. Do not buy a new car. Do not even buy furniture or apply for a new credit card, which could affect your credit.
Check out our 10 commandments to live by during your mortgage process.
4. SAVE FOR A DOWN PAYMENT
To get the best rates, you’ll need to make at least a 20% down payment on a home. If you don’t have an adequate down payment, you could end up paying Private Mortgage Insurance (PMI) to protect the lender in case you cannot repay your mortgage.
5. SHOP FOR A MORTGAGE LENDER
At MTC Federa, yourl mortgage lender involves more than just getting a good interest rate; you want a trusted financial partner who will guide you through the process. When you buy a home, you’re in it for the long haul. You’ll have a mortgage payment for 15, 20 or 30 years, after all, so it’s smart to shop around to find the best mortgage lenders out there.
6. RESEARCH FIRST-TIME HOME-BUYER MORTGAGE OPTIONS
- Adjustable-Rate Mortgages – An adjustable-rate mortgage, or ARM, is a home loan with an interest rate that can change periodically. This means that the monthly payments can go up or down. Generally, the initial interest rate is lower than that of a comparable fixed-rate mortgage. After that period ends, interest rates — and your monthly payments — can go lower or higher.
- Fixed-Rate Mortgages – A fixed-rate mortgage has an interest rate that remains the same for the life of the loan. In other words, your monthly principal and interest payments won’t change.
- Know home upgrade programs such as Energy Efficient Mortgage program for making energy-saving improvements or HUD offers for those who want to tackle a fixer-upper project.
7. SECURE A PRE-APPROVAL LETTER
Once you’ve found the mortgage that’s right for you, you’ll want to show sellers that you have what it takes to buy their home. In hot markets, a pre-approval is almost required for a seller to take your offer seriously. That’s because it spells out exactly how much a lender has agreed to loan you, thus assuring the seller that you’re both willing and able. What documents will you need for a mortgage pre-approval?
- Personal information such as your driver’s license, Social Security number, marital status, contact information and address
- Recent statements from your bank accounts and any investment accounts (exactly how far back you’ll have to go depends on the lender)
- Employment information, including where you have worked and for how long, as well as recent paycheck stubs and W-2 income tax forms for the last two years
- Your total monthly expenses—that includes bills you pay regularly • Your overall financial condition, which includes all your assets (stocks, 401(k), IRAs, bonds, cash) and all your liabilities (any debts such as credit card debt, student loans, car loans)
- Profit and loss statements if you are self-employed
- Rental property income
- Canceled checks for rent, which shows your payment history
- Gift letters, if you are using a gift from a relative to help cover the down payment
8. FIND A REAL ESTATE AGENT
Don’t try to tackle the housing market alone. MTC Federal partners with real estate professionals that can help make the process easier. Referrals are a good place to start to have a qualified source. An agent can narrow the focus of your wish list to fit a home with your budget.