A first-time home buyer checklist is supposed to make this easier. Most of them don’t. They run 60 items long, half of them say “find a realtor,” and none of them mention that closing costs on a $320,000 house will land somewhere between $8,000 and $15,000 in cash, wired three days before you get the keys.
So here’s one built around the order things actually happen, with the numbers attached.
Start With the Money, Not the Listings
You need three separate piles of cash, and they are not the same pile.
Pile one: the down payment. Twenty percent is a nice round number that most first-time buyers never hit. The median is closer to 8% or 9%. FHA loans allow 3.5% down, conventional loans as little as 3%, and VA and USDA loans zero. A smaller down payment usually means mortgage insurance, which adds to your monthly payment, but it does not mean you’re doing it wrong.
Pile two: closing costs. Plan on 2% to 5% of the purchase price. On a $300,000 home that’s roughly $7,000 to $14,000 covering lender fees, title insurance, the appraisal, recording fees, prepaid interest, and a year of homeowners insurance collected up front. Buyers routinely know their down payment to the dollar and get blindsided by this.
Pile three: reserves. Lenders typically want to see two months of mortgage payments still sitting in your account after closing. You should want more. A furnace that quits in January is a $6,000 problem, and a roof is $9,000 to $15,000.
Add those three numbers before you look at a single listing. If the total isn’t there yet, you’re not house hunting, you’re window shopping.
Know your debt-to-income number before the lender does
Lenders compare your total monthly debt payments to your gross monthly income. Most conventional loans cap out around 43% to 45% debt-to-income; some programs stretch to 50%. Say you earn $6,000 a month. At 43%, that’s $2,580 available for everything. A $450 car payment and $300 in student loans leaves $1,830 for principal, interest, property taxes, insurance, and any HOA dues. On a 30-year loan at 6.5%, that’s roughly a $230,000 mortgage, not the $350,000 you might have guessed from an online calculator.
It helps to know what lenders actually check before you hand over documents, because the rules differ sharply between FHA, conventional, VA, and USDA loans.
Pre-approval is not pre-qualification
A pre-qualification is a lender’s guess based on what you told them over the phone. A pre-approval means an underwriter read your pay stubs, tax returns, and bank statements and verified them. Sellers treat those two pieces of paper very differently. Get the full pre-approval, and get it before you tour anything, because it also tells you the real ceiling on your price range. Many of the 25 first-time home buying mistakes that derail deals trace back to this one shortcut.
Gather the Paperwork Before Anyone Asks
Underwriting is a document business. Having this folder ready saves you a week of email tag:
- Pay stubs covering the last 30 days
- W-2s for the past two years, plus two years of federal tax returns if any part of your income is self-employment, commission, rental, or bonus
- Bank and brokerage statements for the last two months, every page, even the blank ones
- Photo ID and your Social Security number
- A gift letter if family is helping with the down payment, plus proof the money moved
- Divorce decrees, bankruptcy discharges, or child support orders if they apply
Self-employed buyers get tripped up here constantly. Underwriters add certain deductions back to your income, but not all of them, so the number on your tax return is rarely the number they use. If you write off a lot, expect to document more.
Down Payment Assistance Is Real Money
There are thousands of programs in the United States aimed at first-time buyers, and most go unused because nobody mentions them. State housing finance agencies offer below-market rates. Local governments offer grants and forgivable second mortgages that disappear after five or ten years of occupancy. Some professions get their own deals, including teachers, nurses, veterans, and police officers.
These programs have income limits and purchase price caps, and the application paperwork is real work, but a $10,000 silent second mortgage is worth an afternoon of form-filling. Start with first-time buyer government programs to see where the funding actually sits in your area.
Tour the House Like You’re Going to Own It
Showings are staged to make you feel something. Your job is to look at the boring parts. Bring a phone flashlight and check the following:
- Run two faucets at once and flush a toilet. Weak pressure at the far bathroom is a plumbing clue.
- Look up in the attic for staining, daylight, or soggy insulation.
- Ask the age of the roof, furnace, and water heater. Anything past 15 years is a replacement you’re inheriting.
- Check window panes for fog between the glass, which means a failed seal.
- Walk the basement and sniff. Damp smells don’t lie.
- Note how many outlets each room has; a 1950s house with two per room will need work.
- Drive the street at 7 a.m. on a weekday and 9 p.m. on a Saturday. Traffic and noise read very differently than they do at a Sunday open house.
This is the stage where enthusiasm costs the most money. There’s a reason the strongest advice is don’t make an offer without this kind of pre-tour homework done first.
Read the HOA documents, all of them
If the home has a homeowners association, request the budget, reserve study, meeting minutes, and rules before your inspection period ends. You want to know the monthly dues, whether a special assessment is being discussed, how much is in reserves, and whether rentals or pets are restricted. A $250 monthly HOA fee is $90,000 over thirty years, and it never stops.
The Offer Stage: Protect Yourself in Writing
Your offer needs more than a price. Include an inspection contingency, an appraisal contingency, and a financing contingency unless you’re genuinely prepared to lose your earnest money. In competitive markets, sellers push buyers to waive these. Waiving the appraisal contingency on a $400,000 house when you have $15,000 in the bank is how people end up scrambling for a second loan, or walking away.
Also budget for the inspection itself: $400 to $700 for a standard home inspection, $150 to $300 for a sewer scope, and $300 to $500 for radon or pest. That’s the best money you’ll spend in the entire process.
Contract to Closing: The Quiet Middle
Once you’re under contract, roughly 30 to 45 days pass and it feels like nothing is happening. A few things must happen, though. Lock your rate and get the lock confirmation in writing. Shop homeowners insurance early, because a claims history or an old roof can change the price or the approval. Answer underwriter requests the same day.
And do not open a credit card, finance a car, or change jobs during this window. Lenders re-pull credit before closing, and a new $400 monthly payment can push you over the debt-to-income line you just barely cleared.
When the closing disclosure arrives three days before signing, compare it line by line against the loan estimate you got at application. Fees move. If something jumped, ask why in writing, then call the title company at a phone number you looked up yourself rather than one from an email, since wire fraud targets closings specifically.
The Last Week Before Keys
Schedule the final walkthrough within 24 hours of closing and test everything again: appliances, heat, water, and any repair the seller agreed to make. Confirm your cashier’s check or wire amount with the title company. Set up utility transfers so the power and water are in your name the day you take possession, not three days after.
Change the locks the week you move in, which runs $100 to $250 for a locksmith or much less if you swap the cylinders yourself. Keep your closing paperwork somewhere you’ll find it in April, because mortgage interest, points, and property taxes paid at closing are deductible in many cases.
One last habit worth building: for the first year, keep a running list of everything that breaks and what it cost. It’s the least sentimental and most accurate renovation budget you’ll ever write.