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First Time Home Buyer’s Mortgage Checklist

Considering buying your first home? Prepare yourself for one of life’s most demanding experiences.

Considering buying your first home? Prepare yourself for one of life’s most demanding experiences. This first time home buyer’s mortgage checklist will get you organized to attack financing your home purchase as an informed shopper and avoid becoming a victim of pushy real estate agents and sneaky mortgage lenders.

1. Are You Ready?

Yes, home ownership makes more financial sense than renting. However, it’s better to rent than to own more house than you can afford. Get your budget in order with a program like Mint to ensure your monthly cash flow is healthy.

Then make sure you have 10% saved for a down payment—20% if you want to avoid private mortgage insurance (PMI), which can run several hundred a month. If you haven’t already, take advantage of the great interest rates offered by online savings accounts.

2. Is Your Credit Ready?

For every point your credit score is below 800 you’re going to pay more in interest. And while the difference between 5.9% and 6.9% may not seem like much, that one point will cost you about $35,000 on a $150,000 30-year fixed-rate mortgage. Ouch! Make sure you know all the details about your credit report before you apply for a loan (because they will ask!) You can easily get a free copy of your credit report and/or score in about ten minutes.

Your target should be 700 or above. Though you can buy a house with lesser credit, you won’t qualify for competitive mortgage rates. You can increase your credit score by paying off fixed-term loans, correcting any erroneous information, and reducing your credit card balances. If possible, don’t open or close any credit accounts two years prior to applying for a mortgage. (Closing credit cards can actually hurt your credit!)

3. Will You Qualify?

Though your credit may be in order, it’s not the only factor in qualifying for a mortgage. Lenders are going to scrutinize your income and monthly expenses. That means any large payments (such as car loans) will count against you. Lenders will probably ask to see bank statements, so be prepared to explain any large or unusual purchases. The bottom line? The best-prepared first time home buyers will have very few fixed monthly expenses other than rent.

4. What Can You Afford?

Ideally, a bank wouldn’t write a loan you couldn’t afford. Realistically, they can, and they will. You are the only one who can prevent this! Your mortgage payment, including all insurance, taxes, and fees, should not exceed 30% of your take-home pay. Understand that local tax rates, condo fees, and whether you’ll need PMI will all eat away at how much house you can actually buy.

Work backwards to determine the price range you can afford. Then be prepared to do battle. Real estate agents will show you houses above your range and more than likely, you will be approved for a loan that is well above your range. Stick to how much house you can afford and you won’t live to regret it later!

5. Have You Compared Rates?

If your finances are in order and you’re ready to begin home shopping, do an application blitz. That is, apply for loans from as many lenders as you can find, all within a day or so. This will give you the most options and the best chance of getting a great rate. By applying for several loans at once, the multiple inquiries to your credit report will have less of an impact on your score.

Ready to go house-hunting? Save time, money, and aggravation by lining up your financing first with a mortgage pre-approval. Read my post on how to get no-obligation mortgage quotes online.

6. Go Shopping!

Once you have several financing options, it’s time to go find your house! Only after you have your loan lined up should you go out and house hunt. Why? Sooner or later you’re going to fall in love with a house, and your real estate agent will be there to tell you that you deserve to live there, even if it’s way above your price range. Stick to your well-planned house buying strategy, and live wealthfully ever after.


Published or updated on January 1, 2012

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About David Weliver

David Weliver is the founding editor of Money Under 30. He's a cited authority on personal finance and the unique money issues we face during our first two decades as adults. He lives in Maine with his wife and two children.


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  1. […] First Time Home Buyer’s Mortgage Checklist […]

  2. nick says:

    This would have been great to read before we bought our house, but luckily we pretty much checked em all off.

  3. Sam says:

    Very Useful post and thanks.

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