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Lori Schramek

Lori Schramek

Loan Officer
Movement Mortgage
NMLS ID # 1592042

How to buy a house: An 11-step checklist

By: Mitch Mitchell
August 20, 2020

Buying a home might be the biggest purchase of your life. But when faced with all the nitty-gritty, many first-time homebuyers seriously consider throwing in the towel. 

Don't do it! Instead, follow our “buying-a-house checklist” to get organized, know what to expect, and make the entire experience more manageable. 

1. Clean up your credit score

Banks look at your credit score to determine if loaning you money is a risk they're willing to take, and — if qualified — what kind of loan product to offer you. Scores over 700 get you the better interest rates and terms, while 620 is typically the minimum required for most mortgages. Under that and interest rates are higher and there are fewer loan options. 

To boost your score, check your credit report for inaccuracies — like late credit card payments. You can request yours from each of the three reporting agencies — Equifax, Experian, or TransUnion — once a year for free. 

It takes time to build your credit rating, so this is a habit you should get into long before thinking about buying a home.

 

2. Round up your docs

You won't be handing over any financial documentation just yet, but it's a good idea to gather stuff early on, so you're not scrambling later. Start pulling together this shortlist:

  • The last two years' worth of tax returns
  • Pay stubs for the previous two months
  • Proof of down payment and closing costs or a “gift letter” if a family member is giving you the $$ 
  • Recommendation from your landlord, if you've been renting
  • A government-issued ID (like a driver's license or passport

 

3. Pre-approval over pre-qualification

A pre-qualification is a best guess of what you can afford based on what you tell a lender about your income and debt. It's only as reliable as you are truthful, and even so, it doesn't show the full picture. 

A pre-approval is the real deal. Based on your financial docs, it's an actual underwritten estimate of how much home you can afford and how much debt you can take on. It's way stronger than a pre-qual. Real estate agents and sellers both prefer working with pre-approved buyers. 

 

4. Count your pennies

You'll need enough to cover a down payment, appraisal fees and closing costs. To estimate how much you'll need for the down payment, refer to your pre-approval amount.

Some mortgages expect you to put down as much as 20%, while others only require a 3-5% down payment. Lower down payments may require yet another expense: private mortgage insurance (PMI). All in all, there are out-of-pocket expenses when it comes to buying a house, so start saving early.

 

5. Know your DTI

Knowing your debt-to-income ratio, aka DTI, will help your lender decide whether you're someone they want to loan money to. 

List of all regular monthly expenses like car payments, credit card bills, monthly internet and phone bills, etc. Add in future monthly expenses related to your new home: mortgage payments, property taxes, homeowner's insurance, condo fees, etc.  

Now divide your monthly expenses by your monthly income and multiply by 100. That's your DTI. If it's higher than 36%, you start looking at higher interest rates and loan terms. If it's above 43%, you might want to slow down until you either cut your debt or reduce future mortgage payments by looking at lower-priced homes.

 

6. Swipe right for a Realtor

Any real estate agent can find a home that fits your budget. A great one will listen to your needs and drill down to the neighborhood and property that suits you best. Plus, they'll help you make an offer, manage seller negotiations, and navigate the home inspection.

Think twice before skipping this step to avoid paying Realtor commissions. Typically 5% of the purchase price, they come out of the seller's pocket, not the buyers. 

A great Realtor will also:

  • conduct a property search and review comparable home sales to see if asking prices are justified
  • be familiar with the neighborhood and know the dirt that a buyer alone wouldn't easily dig up
  • negotiate an offer, including clauses and contingencies in the purchase agreement
  • help manage the inspection and arrange for repairs or seller credits

 

7. Hunt for houses

Before searching for your dream home, spend some time considering wants vs. needs. Doing the mental legwork before actually hitting the streets (or online listings, if that's your thing), can save a lot of time. 

 Ask your agent to set up some showings, but once you know your budget feel free to pop into any open house you come across. Sometimes the perfect home falls right into your lap. 

But remember, it can take 30-45 days to close on a new house. If you have to be all moved in by a specific date, don't put off the search. You might need the extra time to find the perfect place. 

 

8. Make an offer

Once you've found the house you want to buy, figure out how much to offer. Your Realtor will research comparable sales, how much buzz the property is getting, and what competing offers look like. 

Ask about adding contingencies to the offer, like funding repairs or committing to a particular closing date. And avoid a bidding war unless you absolutely can't see yourself living anywhere else. 

You may need to prove you're a serious buyer by submitting “earnest money” held in escrow until closing. If your deal fails through no fault of your own, you get that money back. If you fail to get financing, it might not be returned, so only make offers that require earnest money if you're pre-approved. 

 

9. Lawyer up

Buying a house doesn't always require an attorney, but in some states it's necessary**. They'll handle the standard paperwork, make sure everything goes smoothly, and tackle tricky issues like short sales, tax liens or unexpected title snags. Your Realtor has probably worked with many in the area and will know who you can count on for a fair price.

 

10. Financing & more

Once an offer is approved, you and your lender will decide on the best loan product and button up your mortgage application. You'll probably need to supply additional documentation as well. Expect some back and forth for a few weeks.

During that time, you'll need to get your home inspected, set up an appraisal, have a title search done and look into homeowner's insurance coverage. Your agent will guide you. 

Just before closing, you'll receive your loan agreement and copies of everything that needs to be signed. Take the time to look the docs over and submit any questions.

 

11. Close it down & get the keys

The last step in buying a new home can take a few hours. Closings can be stressful (you'll sign mountains of paperwork and write a fat check) and also exhilarating (you get the keys to the front door.)  

Ask if you need to bring a certified check for your down payment and closing costs, rather than a personal check. If you've taken out homeowner's insurance, bring proof. And don't forget a government-issued picture ID.

 Closings usually happen in person, but are increasingly done online through a secure eSigning service — it all depends on state regulations and your lender's capabilities. Ask ahead. 

Ready, set, go.

The entire process can sound like a massive undertaking, but the secret is to be prepared. If you follow our 11 steps to buying a house for the first time, you'll know what to expect. 

It's always smart to find a loan officer early on to help you navigate the whole shebang with more confidence. 

** Alabama, Connecticut, Delaware, District of Columbia, Florida, Georgia, Kansas, Kentucky, Maine, Maryland, Massachusetts, Mississippi, New Hampshire, New Jersey, New York, North Dakota, Pennsylvania, Rhode Island, South Carolina, Vermont, Virginia and West Virginia. This list is subject to change as states frequently pass new legislation, so make sure to check your local laws. 

black and white photo of Mitch Mitchell
Author: Mitch Mitchell

Mitch Mitchell is a freelance contributor to Movement's marketing department. He also writes about tech, online security, the digital education community, travel, and living with dogs. He’d like to live somewhere warm.

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Lori Schramek
Lori Schramek
Loan Officer
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