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First-Time Homebuyers Checklist

Buying a home is both exciting and stressful. As with anything, becoming a first-time home buyer requires some careful planning and patience. There are some things you can do to make sure your experience in obtaining your first mortgage is successful. 

Below is a checklist of things you need to do before to seek out mortgage lenders in DC.

  • Know your financial status.
  • Pay down debt. 
  • Get educated with a homeowner’s course.
  • Put money in savings.
  • Understand what you can afford.
  • Make a priority list for the property you want.
  • Create a homeowner’s budget.
  • Look at mortgage options.
  • Gather paperwork.
  • Get pre-approved for a home loan.

Know Your Financial Status

Many people try to get pre-approved or purchase a home without looking closely at their finances. That could lead to embarrassment and disappointment. The first thing to do is list out your current income and compare it to monthly expenses. Then, trim back to see how you can pay down debt and put money aside for a home. 

Pay Down Debt

This is key to getting approved. Lenders compare your debt to your income ratio and don’t want to see more than 30 percent in debt. Little debt, like that $50 bill you owe the doctor, can affect your credit score in a big way. Everyone is entitled to a free annual credit report. Get one to see what’s on it, correct any errors, and pay off the little items first.

Get Educated with a Homeowner’s Course

Most banks and credit unions offer free homeowner’s courses that are incredibly helpful. They will teach you about the process, the requirements, and how to improve your chances of getting approved. 

Put Away Money in Savings

A lender will ask you how much you have saved toward your purchase. This could be a determining factor for both obtaining a loan and the type of home you can purchase. Most lenders want you to have at least six months of mortgage payments set aside, beyond your down payment. That way, you are assured of meeting your obligations for the mortgage even if something unexpected happens. 

Understand What You Can Afford

This has been a problem for some in the past, and many end up having to sell sooner than they want or losing their property because they overspent. People looking to buy a home need to know what their monthly budget can afford and stick to properties within that budget. 

Make a Priority List for the Property You Want

It’s rare to get everything you want in a property. You need to prioritize things like distance to schools or work, versus quietness of the neighborhood. You may want a big yard, or a fireplace but may have to give up nice landscaping or a separate laundry room for a property that has those high-value things. 

Create a Homeowner’s Budget

You need to understand what owning a home will cost monthly beside the mortgage payment. This includes taxes, lawn care, extra emergency expenses should something need repairs, utilities, new furniture and any extra things you plan on doing to the property.

Start living by that budget even before you apply for a mortgage so it won’t be a financial shock when you move in. You do that by putting money for the different categories aside in savings. If your mortgage is $200 more than rent, then put the $200 in savings so you get used to not spending it. If utilities at your home will cost $150 more, then put the additional money above your current bill in savings. 

Look at Mortgage Options

There are many mortgage products on the market and each has advantages and disadvantages. The key factors in what to choose are your future plans and your income. Those who want to sell in four years may benefit from a different product than someone who wants to raise their kids in a home. Research all mortgage options on the web or talk to your lender. 

Gather Paperwork

This is the most cumbersome part of the process of buying a home, especially for the first mortgage. Some of the things you will need are at least two past federal income tax returns, W2s, paystubs for the last six months, a copy of your credit report with a credit score, and three to six months of checking and savings account statements. You will also need canceled checks for utility and rent payments and possibly statements showing you pay utilities on time. It’s best to get a complete list of documents required from your lender so you can gather them all at once.

Get Pre-Approved for a Loan

The home buying process runs more smoothly and you have more property options if you get pre-approved. No sellers like to accept a bid only to find out the buyer can’t get approved. You can use your pre-approved status to work a great purchasing deal. 

It is good to establish a relationship with one of the mortgage lenders in DC before you actually apply. A lender you can trust can guide you along your path to homeownership.

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