# First-Time Home Buyer Checklist: Everything You Need Before You Buy By Opendoor Editorial Team | 2019-01-16 > If you’re feeling overwhelmed trying to understand the process of buying a home, you’re not alone. Our infographic helps you to make sense of the journey. ## Key Takeaways **In this article:** - Step 1 — Assess Your Financial Health - Step 2 — Set Your Home Buying Budget - Step 3 — Explore First-Time Home Buyer Programs - Step 4 — Get Pre-Approved for a Mortgage - Step 5 — Find a Real Estate Agent - Step 6 — Search for Your Home - Step 7 — Make an Offer - Step 8 — Schedule a Home Inspection - Step 9 — Navigate the Appraisal - Step 10 — Close on Your Home - Common First-Time Home Buyer Mistakes to Avoid - Your Printable First-Time Buyer Checklist - Frequently Asked Questions So, what do first-time home buyers need? In short: a solid understanding of your finances, a mortgage pre-approval, a qualified team around you, and a step-by-step plan to follow from initial budgeting through closing day. The process of buying your first home typically takes [four to six months](https://www.opendoor.com/articles/briefs/how-long-does-it-take-to-buy-a-house) from start to finish — and it involves more decisions than most people expect. According to the [National Association of Realtors (NAR), the median age of first-time home buyers reached 38 in 2024](https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers), a sign that many buyers spend years preparing before they feel ready to take the leap. The good news: you don't have to figure it all out on your own. This first-time home buyer checklist breaks the entire journey into 10 manageable steps, covers first-time home buyer programs that can save you thousands, and flags the common mistakes that trip up new buyers. Whether you're six months or six weeks out from your target move-in date, this guide will help you move forward with confidence. <a id="step-1"></a> [Get your offer](#) ## Step 1 — Assess Your Financial Health Before you browse a single listing, take an honest look at where you stand financially. Lenders will scrutinize two numbers above all else: your credit score and your debt-to-income ratio. ### Check Your Credit Score Your credit score is the single biggest factor in determining the interest rate you'll qualify for — and even whether you'll be approved at all. Minimum score requirements vary by loan type: - **Conventional loan:** 620 minimum (740+ for the best rates) - **FHA loan:** 580 with 3.5% down; 500–579 with 10% down - **VA loan:** No official minimum, though most lenders require 620+ - **USDA loan:** Typically 640+ You're entitled to a free credit report from each of the three major bureaus (Equifax, Experian, and TransUnion) every year through [AnnualCreditReport.com](https://www.annualcreditreport.com). Review all three — errors are more common than you'd think, and disputing inaccuracies can boost your score quickly. **Quick ways to improve your score before applying:** - Pay down credit card balances to below 30% of your limit - Avoid opening new credit accounts - Set up autopay so no bill goes past due - Keep old accounts open (length of credit history matters) ### Calculate Your Debt-to-Income Ratio Your debt-to-income ratio (DTI) measures how much of your gross monthly income goes toward debt payments. Lenders use two versions: - **Front-end ratio:** Housing costs alone (mortgage, taxes, insurance, HOA) should stay at or below **28%** of your gross monthly income. - **Back-end ratio:** All monthly debt payments combined — housing plus car loans, student loans, credit cards, and other obligations — should stay at or below **36%**. **Example:** If your household gross income is $7,000 per month, lenders generally want your total housing costs below $1,960 and your total debt payments below $2,520. Some loan programs allow higher DTIs (FHA loans may approve up to 50% in certain cases), but staying within the 28/36 guideline gives you a comfortable buffer for unexpected expenses. If you're not sure where you stand, use the [Consumer Financial Protection Bureau's debt-to-income calculator](https://www.consumerfinance.gov/ask-cfpb/what-is-a-debt-to-income-ratio-en-1791/) to run the numbers. <a id="step-2"></a> ## Step 2 — Set Your Home Buying Budget Knowing your credit score and DTI gives you a starting point. Now it's time to translate those numbers into a realistic budget — one that accounts for far more than just the purchase price. ### Determine How Much House You Can Afford A common rule of thumb is to look at homes priced at roughly two to three times your annual household income, but the real answer depends on your complete financial picture: existing debt, savings rate, local property taxes, and lifestyle priorities. When calculating affordability, factor in: - **Principal and interest** on your mortgage - **Property taxes** (vary widely by state and county) - **Homeowners insurance** - **HOA fees** (if applicable) - **Private mortgage insurance (PMI)** if your down payment is under 20% For a detailed breakdown of every cost involved, see our guide on [how much it costs to buy a house](https://www.opendoor.com/articles/how-much-does-it-cost-to-buy-a-house). ### Save for Your Down Payment and Closing Costs The down payment is often the biggest hurdle for first-time buyers. [NAR's 2024 data shows the median down payment for first-time buyers was 9%](https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers) — well below the 20% many people assume is required. Here's what you actually need, depending on the loan type: | **Loan Type** | **Minimum Down Payment** | **PMI Required?** | | Conventional | 3% | Yes, until you reach 20% equity | | FHA | 3.5% (with 580+ credit) | Yes, for the life of the loan (unless you refinance) | | VA | 0% | No (VA funding fee applies instead) | | USDA | 0% | No traditional PMI (guarantee fee applies) | On a $350,000 home, a 3% down payment comes to $10,500 — a much more achievable number than the $70,000 you'd need for 20% down. To dig deeper into whether a smaller down payment makes sense for your situation, read [is 5% enough for a down payment?](https://www.opendoor.com/articles/briefs/is-5-percent-enough-down-payment) **Don't forget closing costs.** Buyers should expect to pay between **2% and 5%** of the purchase price in closing costs, covering items like lender fees, title insurance, escrow deposits, and prepaid taxes. On that same $350,000 home, that's an additional $7,000 to $17,500. **PMI basics:** If you put down less than 20% on a conventional loan, you'll pay private mortgage insurance — typically between 0.5% and 1.5% of the loan amount per year. PMI automatically drops off once you reach 20% equity. FHA loans handle this differently: mortgage insurance premiums (MIP) stay on for the life of the loan unless you refinance into a conventional mortgage. **Bottom line:** Don't drain your entire savings to maximize your down payment. Keep an emergency fund of at least three to six months of living expenses for unexpected repairs or income disruptions after you move in. For a full savings roadmap, check out [how much to save for a house](https://www.opendoor.com/articles/how-much-to-save-for-house). <a id="step-3"></a> ## Step 3 — Explore First-Time Home Buyer Programs One of the most overlooked steps on any first-time home buyer checklist is researching the assistance programs available to you. Thousands of dollars in grants, favorable loan terms, and tax benefits go unclaimed every year simply because buyers don't know they exist. ### Government-Backed Loan Programs The federal government sponsors several loan programs specifically designed to lower the barrier to homeownership: - **FHA loans** (Federal Housing Administration): Popular with first-time buyers thanks to the 3.5% down payment minimum and more lenient credit requirements. Available through FHA-approved lenders nationwide. - **VA loans** (Department of Veterans Affairs): Offer 0% down and no PMI for eligible active-duty service members, veterans, and surviving spouses. One of the most powerful home-buying benefits available. - **USDA loans** (U.S. Department of Agriculture): Provide 0% down financing for homes in eligible rural and suburban areas. Income limits apply, but coverage areas are broader than most people expect — you can check property eligibility on the [USDA's map tool](https://eligibility.sc.egov.usda.gov/eligibility/welcomeAction.do). ### Down Payment Assistance and Grants Beyond federal loan programs, there are over 2,000 state, county, and city-level down payment assistance (DPA) programs across the country. These come in several forms: - **Grants** that don't have to be repaid - **Forgivable second mortgages** that are forgiven if you stay in the home for a set number of years - **Low-interest deferred-payment loans** that come due only when you sell or refinance To find programs in your area, start with [HUD's state-by-state list of local home-buying programs](https://www.hud.gov/buying/localbuying). Other programs to look into: - **Good Neighbor Next Door** (HUD): Offers a 50% discount on homes in revitalization areas for teachers, law enforcement officers, firefighters, and EMTs. - **HomePath ReadyBuyer** (Fannie Mae): Provides up to 3% in closing cost assistance on Fannie Mae-owned foreclosure properties for first-time buyers who complete an online homebuyer education course. - **Employer-assisted housing programs:** Some employers — particularly large companies, hospitals, and universities — offer down payment assistance or matching programs as an employee benefit. Ask your HR department. ### Tax Benefits for First-Time Buyers Homeownership also comes with meaningful tax advantages: - **Mortgage interest deduction:** You can deduct interest paid on up to $750,000 of mortgage debt (for loans originated after December 15, 2017). - **Property tax deduction:** State and local property taxes are deductible up to $10,000 per year under the current SALT cap. - **IRA withdrawal exception:** First-time buyers can withdraw up to $10,000 from a traditional IRA without paying the usual 10% early-withdrawal penalty (income tax still applies). Roth IRA contributions (not earnings) can be withdrawn penalty- and tax-free at any time. Consult a tax professional to understand which benefits apply to your situation. <a id="step-4"></a> ## Step 4 — Get Pre-Approved for a Mortgage Pre-approval is the step that turns you from a browser into a serious buyer. A pre-approval letter tells sellers and their agents that a lender has reviewed your finances and is willing to lend you a specific amount — making your offer far more competitive. Pre-approval is different from pre-qualification. Pre-qualification is an informal estimate based on self-reported information. Pre-approval involves a hard credit pull and document verification, and it carries real weight. ### Documents You'll Need for Pre-Approval Gather these before you sit down with a lender: - **W-2s** from the past two years - **Recent pay stubs** (last 30 days) - **Federal tax returns** from the past two years - **Bank statements** (last two to three months for all accounts) - **Investment and retirement account statements** - **Government-issued ID** - **Rental history** or proof of current housing payments - **Documentation of any additional income** (freelance, alimony, bonuses) If you're self-employed, expect to provide profit-and-loss statements and possibly a letter from your CPA. ### Understanding Your Mortgage Options Not all mortgages are the same, and the right choice depends on your timeline, risk tolerance, and financial goals: - **Fixed-rate mortgage:** Your interest rate stays the same for the life of the loan. Predictable payments make this the most popular option, especially for buyers who plan to stay in the home long-term. - **Adjustable-rate mortgage (ARM):** Starts with a lower fixed rate for an introductory period (often 5 or 7 years), then adjusts annually based on market rates. Can be a smart choice if you plan to move or refinance before the adjustment period kicks in. - **15-year vs. 30-year term:** A 15-year mortgage builds equity faster and saves tens of thousands in interest, but monthly payments are significantly higher. Most first-time buyers choose a 30-year term for the lower monthly obligation. **Compare at least three lenders.** According to [Freddie Mac research](https://www.freddiemac.com/research/insight/20180417-consumers-who-shop), borrowers who get quotes from multiple lenders save an average of $1,500 over the life of their loan — and those who get five quotes save an average of $3,000. Rates, fees, and closing costs vary more than you'd expect from lender to lender. <a id="step-5"></a> ## Step 5 — Find a Real Estate Agent A skilled buyer's agent guides you through every step from home search to closing — and their expertise is especially valuable when you've never done this before. If you're unfamiliar with common industry jargon, Opendoor's [real estate terms glossary](https://www.opendoor.com/articles/real-estate-terms-you-should-know) is a great resource to review before you start interviewing agents. **How to find the right agent:** - Ask friends and family for referrals - Read online reviews, but also interview at least two or three agents in person - Look for experience with first-time buyers in your target neighborhoods **Questions to ask before signing:** - How many buyers have you worked with in the past year? - What's your communication style and availability? - How do you handle multiple-offer situations? - What are the terms of our buyer-agent agreement? **A note on 2024 NAR settlement changes:** As of August 2024, new rules require buyers to sign a written buyer-agent agreement before an agent can begin showing you homes. This agreement spells out the services your agent will provide and how they'll be compensated. Make sure you read and understand this document — and don't hesitate to negotiate the terms. For more background on how agent compensation works, see [who pays real estate agent commission](https://www.opendoor.com/articles/who-pays-real-estate-agent-commission). <a id="step-6"></a> ## Step 6 — Search for Your Home With your pre-approval in hand and an agent by your side, it's time for the part most buyers have been dreaming about: the home search. ### Create Your Must-Have vs. Nice-to-Have List Before you start touring homes, write down two lists: **Must-haves** are non-negotiables — things like a minimum number of bedrooms, proximity to work or school, or a single-story layout for accessibility needs. **Nice-to-haves** are features you'd love but can live without — a finished basement, an updated kitchen, a large backyard. Being clear about the distinction prevents you from falling in love with a home that checks every "nice" box but misses a fundamental need. It also helps your agent filter listings efficiently. ### Research Neighborhoods The home itself is only half the equation. Spend time evaluating: - **Commute times** during actual rush-hour conditions - **School quality** (even if you don't have kids — school ratings affect resale value) - **Safety statistics** (check local crime mapping tools) - **Appreciation trends** — are home values in the area rising, stable, or declining? Our guide on [factors that influence home value](https://www.opendoor.com/articles/factors-that-influence-home-value) explains what drives neighborhood-level price changes. - **Walkability and amenities** like parks, grocery stores, and public transit Visit neighborhoods at different times of day and on both weekdays and weekends to get a realistic feel. When you're ready to tour in person, review our [open house tips for first-time buyers](https://www.opendoor.com/articles/open-house-tips-for-first-time-buyers) so you know what to look for and what questions to ask. <a id="step-7"></a> ## Step 7 — Make an Offer Found a home you love? Now it's time to put together a competitive offer. Your agent will help you craft an offer based on comparable sales data, market conditions, and the seller's situation. **Key components of your offer:** - **Offer price:** Your agent will run a comparative market analysis (CMA) to determine a fair price. In a competitive market, you may need to offer at or above asking. For a deeper walkthrough, see [how to determine what to offer on a house](https://www.opendoor.com/articles/how-to-determine-what-to-offer-on-a-house). - **Earnest money deposit:** Typically 1% to 3% of the purchase price, this shows the seller you're serious. The funds are held in escrow and applied to your closing costs or down payment. Learn how it works in our [earnest money guide](https://www.opendoor.com/articles/earnest-money). - **Contingencies:** These are conditions that must be met for the sale to proceed. The three most common are: - **Inspection contingency** — gives you the right to back out or renegotiate if the inspection reveals major issues - **Financing contingency** — protects you if your mortgage falls through - **Appraisal contingency** — lets you renegotiate or walk away if the home appraises below your offer price - **Proposed closing date and timeline** - **Seller concessions:** You can ask the seller to cover a portion of your closing costs. Our [seller concessions guide](https://www.opendoor.com/articles/what-are-seller-concessions) explains when and how to make this request. Once your offer is accepted, the home typically moves into [contingent or pending status](https://www.opendoor.com/articles/contingent-vs-pending) while you complete inspections, the appraisal, and final loan underwriting. <a id="step-8"></a> ## Step 8 — Schedule a Home Inspection A home inspection is one of the most important safeguards in the buying process — and one you should never skip, even in a competitive market. **What happens during an inspection:** A licensed home inspector conducts a thorough evaluation of the property's physical condition, typically taking two to three hours for a standard single-family home. They examine: - Roof condition and estimated remaining lifespan - Foundation and structural integrity - Electrical systems, plumbing, and HVAC - Water damage, mold, or pest infestation - Windows, doors, insulation, and ventilation - Appliances included in the sale For a detailed walkthrough of what gets checked, read [what do home inspectors look for](https://www.opendoor.com/articles/briefs/what-do-home-inspectors-look-for) and our full [home inspection checklist for buyers](https://www.opendoor.com/articles/home-inspection-checklist-for-buyers). **Average cost:** Expect to pay between $300 and $500 for a standard inspection, though this varies by location and home size. Specialized inspections (radon, sewer line, termite) are additional. **What to do with the results:** Not every issue is a dealbreaker. Here's a general guide: - **Potential dealbreakers:** Major foundation cracks, extensive mold, knob-and-tube wiring, failed septic systems, or significant structural damage. - **Negotiation leverage:** An aging roof, outdated electrical panel, or failing HVAC system. You can ask the seller to make repairs, reduce the price, or offer a credit at closing. - **Normal wear and tear:** Minor cosmetic issues, small cracks in drywall, or a dripping faucet are typical for any lived-in home and generally not worth renegotiating over. **How to find a qualified inspector:** Ask your real estate agent for referrals, check that the inspector is licensed in your state, and look for membership in the American Society of Home Inspectors (ASHI) or the International Association of Certified Home Inspectors (InterNACHI). <a id="step-9"></a> ## Step 9 — Navigate the Appraisal After your inspection contingency is resolved, your lender will order an independent appraisal to confirm the home's market value supports the loan amount. **Why it matters:** The lender needs assurance they're not lending more than the property is worth. If the appraisal comes in at or above your offer price, you're in the clear. If it comes in low, you have a few options: - Renegotiate the purchase price with the seller - Pay the difference between the appraised value and the offer price out of pocket - Challenge the appraisal with additional comparable sales data - Walk away using your appraisal contingency The appraisal typically costs $300 to $600 and takes one to two weeks to complete. For more detail on the timeline, see [how long does an appraisal take](https://www.opendoor.com/articles/how-long-does-an-appraisal-take). <a id="step-10"></a> ## Step 10 — Close on Your Home Closing day is the finish line. This is when ownership officially transfers from the seller to you. The process typically takes [one to two hours](https://www.opendoor.com/articles/how-long-does-closing-take) and involves signing a significant amount of paperwork. **What to expect at closing:** - **Final walkthrough:** Usually conducted 24 to 48 hours before closing to confirm the home is in the agreed-upon condition and any negotiated repairs are complete. - **Review the Closing Disclosure:** Your lender is required to provide this document at least three business days before closing. It details your final loan terms, monthly payment, and an itemized list of all closing costs. Compare it carefully to the Loan Estimate you received when you applied. - **Sign documents:** You'll sign the mortgage note, deed of trust, and other legal documents. - **Pay closing costs:** Bring a cashier's check or arrange a wire transfer for your down payment and closing costs. (Do not bring a personal check.) - **Get your keys:** Once everything is funded and recorded, you're officially a homeowner. **Pro tip:** Do not make large purchases, open new credit lines, or change jobs between your pre-approval and closing. Any of these can disrupt your loan approval at the last minute. <a id="mistakes"></a> [Get your offer](#) ## Common First-Time Home Buyer Mistakes to Avoid Even well-prepared buyers can stumble. Here are the most common first-time buyer mistakes — and how --- *Originally published at [https://www.opendoor.com/articles/checklist-for-first-time-home-buyers](https://www.opendoor.com/articles/checklist-for-first-time-home-buyers)*