First-time Homebuyer Checklist

Read as much as you can about common mortgage terms before you search for a loan.

Buying a home for the first time can be intimidating. It's undoubtedly the biggest financial investment you've ever made and has a lot of potential pitfalls. It helps to do your homework and be as prepared as you can.

Financial Steps

The earliest step you need to take to buy a home is to save for a down payment. This could take a couple of years, depending on your income, so begin early and put away as much as you can afford. The bigger your down payment, the more options you will have when it comes to choosing a mortgage. Other financial steps you should take include paying down credit card balances to improve your credit score. Also pull your credit report and ensure everything on it is accurate.

Budgeting and Mortgage

Don't rely on what the bank says you can borrow. Make a realistic budget including your income and all your essential expenses, and figure out a reasonable monthly mortgage payment. This should be no more than 30 percent of your gross income. With this figure in mind, begin shopping for a mortgage. Do this before you find a house you're interested in. Then when you find a property you like, you're pre-approved and ready to offer quickly. When you find a mortgage product that's a good deal, ask the lender for a full disclosure of all fees, so that you know how much to budget for in closing costs.

Preliminary Search

Begin by targeting neighborhoods you may be interested in. Consider transportation to work, the school district, crime rates, traffic, local amenities and other factors that might be important to you personally. Drive round each of the neighborhoods you like -- both at night and during the day.

Property Search

Find a realtor who knows the areas you are interested in. Make sure she knows your most important criteria and also your maximum price. As well as her suggestions, search for yourself online. The more properties you compare, the more idea of price and features you will get. Be selective about which properties to view, otherwise you can waste a lot of time looking at unsuitable houses.

Offer and Inspection

When you see a home you want to make an offer on, discuss with your realtor a realistic price. Be rigorous about sticking to your budget though, and don't be afraid to try a low-ball offer if that's all you can afford. Once you make a successful offer on a home, hire a home inspector. Arrange to go around the property and ask him anything you have concerns about. Once you see his report, make a list of repairs you'd like the seller to take care of. Complete your mortgage application with the property details.

Insurance and Closing

Shop around for home insurance. Make sure you are getting sufficient coverage, but also look for a competitive rate. Arrange for the policy to go into effect on the day set for your closing. Hire an attorney to handle your closing paperwork. Do a final walk through of the home before the closing just to make sure there are no unresolved issues. Attend the closing, and make sure to read each document that you are asked to sign. Do not be afraid to take your time and ensure that you understand what you are signing and that all contents are as previously agreed.

References

• U.S. Department of Housing and Urban Development: Common Questions from First-time Homebuyers
• "Bankrate.com": 12 Must-do's for the First-time Homebuyer; Claes Bell; September 2009

Resources

• MSN Real Estate: First-time Homebuyers