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There are a few steps you can work into the homebuying process to help ensure you get a solid home and mortgage. But, the process can be fast-paced which makes being prepared key. As you plan ahead, here are 10 things to put on a checklist when buying a new home.
1. Evaluate your finances
The first item on your checklist should be to determine if it’s the right time for you to buy a house. Do this by asking yourself a few financial questions such as:
- What is your current credit score? A low credit score usually results in a higher mortgage rate. If that’s a hurdle, there may be ways to prepare your credit before you apply for a loan. You can also consider buying discount points (an extra upfront cost) from a lender to lower your rate.
- How much house you can afford? A mortgage calculator can help you settle on a number or a mortgage lender can pre-approve you to give you an estimate.
2. Calculate an affordable down payment
Settling on a down payment is crucial to your checklist for buying a home because it can dictate your new home’s cost. Homebuyers often think they need 20% down, but many pay much less thanks to low down payment mortgage options. This makes it possible to afford more home for less. For example, to buy a $300,000 home with 20% down, you’ll need $60,000 ($300,000 x 20% = $60,000). But if your loan allows a 3.5% down payment, you’ll only need $10,500 ($300,000 x 3.5% = $10,500). If you qualify for a VA loan, they can allow even less down—0%.
To determine your down payment and other funds you’ll need at closing, the Consumer Financial Protection Bureau (CFPB) suggests:
- Adding up your total available savings.
- Then subtracting what “you want to set aside for other savings goals, moving costs, and potential renovations to your new home.”
- Then, subtract an “emergency cushion”—roughly 3–6 months’ worth of monthly costs. What’s left is what you can pay upfront at closing.
3. Interview mortgage lenders
The mortgage process can involve a lot paperwork, loan types, and last-minute changes, so you’ll want a reliable mortgage company. To find the best lender for you, prepare a list of interview questions to ask lenders. For example, if you’ll want a quick response on a loan approval, ask if they have in-house underwriters.
Also ask if they offer any programs that can get your costs down, such as mortgage buydowns. These can temporarily lower a mortgage’s interest rate for 1-3 years, and some lenders may fund them for you.
4. Get a verified approval
The most time-sensitive item on your checklist when buying a home is making an offer. It’s important to be ready to make an offer during or soon after viewing a home. One way to show sellers you’re a serious buyer is to include a verified approval letter with your offer. These letters are a step above pre-approval Letters and include a strong estimate of what a lender says you can afford. Mortgage companies only share verified approval letters after checking a homebuyer’s finances, which can give sellers added confidence in a bid. Additionally, in a competitive market, sellers may require your “highest and best offer.”
5. Hire a real estate agent and inspector who work in the area where you’re buying
Finding the right home can be like finding a needle in a haystack. For expert tips, work with an experienced real estate agent. Hiring one in the area where you want to buy is also ideal. They may know where to find the best deals and what homes to avoid. After you find a home, you’ll also want a veteran inspector to check it out. Inspectors who’ve worked in the area may know about common problems to watch for. A good agent can point you to a few pros to choose from.
6. Research homebuilders’ reputations (if you’re buying new construction)
Buying from a homebuilder could bring you years of stress-free homeownership. But no builder is perfect and buying new usually means paying more—so protect your investment. Check with real estate agents, other builders, and current homeowners in a builder’s neighborhood on their reputation. You’ll want to know what warranties they offer and if they stand behind them.
7. Plan for how (and when) to walk away
One checklist item everyone should be prepared for is a rejected home offer. Expect that your bid may not be accepted and be ready to walk away if a home doesn’t pass inspection. Think ahead about where you can live in the short term if things fall through.
If you need to find another motivated seller, check into expired listings. These are real estate listings that timed out of their real estate agent’s agreement. These houses may need TLC or weren’t priced right when they went on the market. These sellers may be more negotiable to get their houses moving again.
8. Get an estimate of your loan fees and costs
The fees and upfront costs associated with closing on a sale can catch some buyers off guard. Create a spot on your checklist to ask your lender what costs will be associated with your mortgage. Some common fees include loan origination fees, a title search fee, an appraisal fee, homeowners insurance, and property taxes.
9. Prepare your loan documents
Make a mortgage documents checklist to get ready for your mortgage application. You’ll need some documents handy for a lender like identification, recent tax returns, and your signed contract.
10. Create a moving plan
While this is one of the last items on your “buying a new home checklist,” it can seem like the most difficult. Moving takes time, energy, and is usually an added expense for packing materials, rentals, or a moving service. For some great money-saving moving tips, check our blog “How to Reduce Moving Costs and Move For Free.”
Ready to get started on a loan? We can help! Call our Mortgage Professionals at 800-765-9194 to discuss your options or get started online.
