By Bill Lyons | Published on March 28, 2023
TABLE OF CONTENTS

    A home is a significant investment, but becoming a homeowner has many advantages. First, you’ll own your property, so as long as you continue to pay your mortgage, your home will increase in value over time. In addition, it gives you a permanent residence where you don’t have to worry about moving every few years if you don’t want to, and it comes with many tax benefits to reduce your tax burden every year. 

    Still, a home is a large purchase, so first-time home buyers must be ready. Luckily, once you buy a home, the process gets easier for buying a second or third home since you’ll learn everything you need to know the first time around. 

    If you’re interested in buying your first home, a home buyer checklist can help ensure you have all your documents ready and know the steps to securing your dream home. This article will discuss all the different steps for buying a home, so check out this buying your first home checklist to learn about all the steps you need to take once you’re ready to become a homeowner. 

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    Get In Touch With A Mortgage Lender

    The first step in the first-time home buyer checklist is contacting a mortgage lender to learn about your options. Before you start shopping for a home, you must know whether or not you qualify for a home loan. 

    In addition to finding a lender, you can also get mortgage pre-approval early in the process to help you understand how much home you can afford, the interest rate, and the different loan programs available to you. Of course, you don’t have to get pre-approval this early in the process, especially if you’re still trying to determine whether you qualify for a loan and how much you should have saved up for a down payment. 

    This is a great time to start vetting mortgage lenders to help you find the best for you. A few factors to consider when choosing a mortgage lender include the following: 

    • Competitive interest rates
    • Wide selection of loan products with ideal terms
    • Types of fees
    • The convenience of the application process
    • Closing times

    Of course, you should always choose a lender you trust. You can find reviews of lenders online to learn about the experience of real customers to help you make your final decision. 

    Figure Out Your Finances & What You Can Afford

    When going through your checklist for buying your first home, you should always know what you can afford. A lender will help you determine how much of a loan you qualify for based on your income, down payment amount, and credit score. 

    Before you can start shopping for homes, you must understand if you can afford one. Luckily, you can use a variety of online mortgage calculators to help you determine how much house you can afford, interest rates you can expect, and down payment amounts. 

    You should always check your credit score before applying for a mortgage because it will determine your interest rate. Credit scores for first-time home buyers vary, but generally, the higher your credit score, the lower your interest rate, which can save you thousands of dollars over the life of your loan. 

    In addition, you should look at your debt-to-income ratio, which compares your income versus expenses like credit card payments, student loans, and other types of debts. Most lenders look for a DTI of 43% or lower, but depending on the type of loan and lender, you may qualify for a home loan with a higher DTI. 

    Explore Mortgage Options When Buying Your First Home

    First-time home buyers should be aware of all the different types of mortgage programs available to them. While the most common type is a conventional mortgage, these often have stringent requirements, and many first-time home buyers don’t qualify for them, but that doesn’t mean they won’t qualify for another type of loan. 

    For example, borrowers may qualify for FHA loans for first-time home buyers, which allow them to put less than 20% down on the home and qualify with lower credit scores. The average down payment on a house doesn’t have to be as high as 20%, and many loan programs allow borrowers to put down anywhere from 3.5-20%, based on the type of loan and their unique financial situations. 

    Of course, borrowers don’t have to get a conventional or FHA loan. Instead, there are many other loan programs available to first-time home buyers. These include: 

    The type of mortgage you qualify for will depend on your financial situation, considering your income, credit history, down payment amount, and other factors. 

    Always talk to a mortgage lender to learn about your options and find the best choice for you because lower down payments could mean paying private mortgage insurance (PMI) that increases the monthly cost of your mortgage payments. 

    Look Into Getting Pre-Approved For A Mortgage

    Once you’ve worked with a lender to determine the right loan for you, it’s time to get pre-approved. You might have already done this as the first part of the checklist, especially if you know which lender and type of loan you want. However, after doing more research and before going shopping for a home, you should always get pre-approved because it gives you a more official idea of how much you can afford to pay for a home. 

    Pre-approval is crucial during the home-buying process because it shows sellers and agents that you’ll have funding to pay for the purchase, which can help you be more competitive. But, of course, a pre-approval is different from a prequalification, so don’t confuse these two documents. 

    A prequalification is an unverified document that states how much you can borrow once the lender vets your information. However, to issue a pre-approval, a lender must check your credit report and income to determine how much you qualify for. 

    Start Looking For Your Dream Home

    Once you have your pre-approval and know how much you can afford to spend on a home, you can start looking for your dream home. You may choose to work with or without a real estate agent, but there are many benefits to working with one for first-time home buyers. 

    Agents can help you find homes as soon as they’re listed, and they know the housing market in your area to help you find the best home and negotiate pricing. In addition, buyers don’t pay real estate commissions, so working with one is completely free to you. 

    Checklist For House Hunting:

    When looking for your dream home, you should consider a few things. It‘s important to prioritize what you want in a home because you may not be able to get everything depending on your budget. 

    A few considerations may include the following: 

    Home

    Every home buyer has a list of features they want in a home. Of course, you should prioritize your must-have features but be prepared to compromise based on your budget. If you’re working with a realtor, they’ll be able to set your expectations to help you understand exactly what types of features and homes your budget can get you. 

    Neighborhood & Schools

    If you plan on having children or already have some, you should also consider the safety of the neighborhood and the quality of the schools. You can find this information online by researching crime in the area and learning about the local school district through its website. 

    Overall Location

    Location is also important because you want to live in a place that offers convenience. No one enjoys long commutes to and from work, so try to find something that’s near work and shopping centers. 

    Of course, remember that the closer you are to amenities, the more expensive your home will be. This is why homes in the city are more expensive than homes in the suburbs. In addition, homes are smaller the closer you get to the city, so if you’re looking for a larger home, consider compromising on location to get more for your budget. 

    Get Your Documentation Together

    Always have your documentation ready before you’re ready to make an offer. Since home buying can be competitive, other buyers will move through the process quickly once they find a home they like. Once you’ve found a home you like, you’ll need to get approved for the mortgage, so gathering your documentation before you’ve found a home is a great idea to ensure you can get your loan approved as quickly as possible. The documentation you’ll need includes the following:

    • Identification (driver’s license or passport)
    • Income documentation (pay stubs, banks statements, tax returns)
    • Proof of funds for the down payment and closing costs

    Depending on your unique financial situation, lenders may ask for additional documentation, so always be prepared to have any financial documents ready to share. 

    Make An Offer & Negotiate

    After you’ve found your dream home, you can make an offer. If you’re working with a real estate agent, they’ll discuss how much you should offer and deal with any negotiations on your behalf. Of course, you’ll have the final decision for how much you want to offer on a home, but it’s typically based on a few factors, including:

    • Asking price
    • Competition 
    • How long the property has been on the market
    • Any issues you’re aware of that will need to be addressed once you move in 

    Once you make an offer, the seller can accept, decline, or counter the offer. 

    Home Appraisal & Inspection

    After the offer is accepted, the home will be inspected and appraised. Lenders require this process to determine a home’s value and reveal any potential problems that can affect your offer moving forward. For example, if the inspection finds holes in the roof, you’ll need to modify your offer based on how much repairing this major issue will cost you once you own the home. 

    If the appraisal comes in below the offer, your lender may suggest revising your offer based on the home’s current market value before closing on the loan. In cases where the value of the home is less than the offer, there are three options to remedy the situation and ensure you can get your home loan:

    1. Buyer and seller split the difference 
    2. Buyer pays the difference
    3. Seller reduces the asking price and accepts a lower offer

    In these situations, having a real estate agent can be beneficial because they’ll take care of the negotiations. 

    Close The Deal On Your New Home

    The final step in the first-time home buying checklist is closing, which includes putting earnest money into an escrow account to ensure the funds are held and can be distributed once the deal is finalized. 

    Once your mortgage is approved, and you’ve passed the appraisal and inspection, you can close on the home. During the closing process, you’ll pay your down payment and additional closing costs. You should also have all of your loan documents prepared and signed, proof of homeowners insurance, and identification. 

    Plan Your Move

    Congratulations, you’re now officially a homeowner! Once you’ve closed on the loan, it’s time to prepare to move. 

    Your move-in date is typically determined with the seller; the two parties will agree on terms for when one party will move out and the other will move in. These dates will be in a written contract, and sellers will typically agree to move out once the funds have been released from the escrow account. 

    How Griffin Funding Can Help You Get Started

    Buying a home is a process, but it doesn’t have to be complex. Hopefully, with this first-time home-buying checklist, you will feel prepared to start the home-buying journey to becoming a homeowner. 

    Of course, finding a lender you trust is one of the most important steps in the process. Griffin Funding is a premier home loan lender that can help you determine which loans you’re eligible for and find the right one for your unique circumstances. 

    We believe in working one-on-one with our potential borrowers to ensure they understand every step of the process and can choose a loan that’s right for them. Talk to a Griffin Funding representative today to learn more about our loan offerings. 

    Bill Lyons

    Bill Lyons is the Founder, CEO & President of Griffin Funding. Founded in 2013, Griffin Funding is a national boutique mortgage lender focusing on delivering 5-star service to its clients. Mr. Lyons has 22 years of experience in the mortgage business. Lyons is seen as an industry leader and expert in real estate finance. Lyons has been featured in Forbes, Inc., Wall Street Journal, HousingWire, and more. As a member of the Mortgage Bankers Association, Lyons is able to keep up with important changes in the industry to deliver the most value to Griffin's clients. Under Lyons' leadership, Griffin Funding has made the Inc. 5000 fastest-growing companies list five times in its 10 years in business.