Buying your first home is one of the biggest financial decisions you will ever make, and the process has more steps than most people expect. This first time home buyer checklist walks you through the entire journey in order, from setting a realistic budget to getting the keys. Before anything else, run your numbers through a house affordability calculator so you know what price range you can genuinely afford, not just what a listing suggests.
1. Check your credit and get your finances in order
Your credit score is the single biggest factor in the mortgage rate you will be offered. A higher score means a lower rate, which can save you tens of thousands over the life of a loan. Pull your free credit reports, fix errors, and avoid opening new credit lines or making large purchases in the months before you apply.
- Review all three credit reports for errors and dispute anything inaccurate.
- Pay down high credit card balances, utilization under 30% helps, under 10% helps more.
- Do not open new credit accounts or finance a car right before applying for a mortgage.
- Save every pay stub, tax return, and bank statement you can find, lenders will ask for them.
2. Set your real budget (not just the sticker price)
The home price is only part of the cost. Your monthly payment also includes property taxes, homeowner’s insurance, and possibly mortgage insurance and HOA fees. Lenders use two debt to income (DTI) ratios as rules of thumb: keep housing costs under about 28% of gross income and total debts under about 36%. Use a house affordability calculator with your actual income, debts, and down payment to find a price range that keeps your monthly budget comfortable, not just approvable.
- Add up taxes, insurance, and HOA fees on top of principal and interest.
- Budget for maintenance: plan on roughly 1% of the home’s value per year.
- Keep an emergency fund separate from your down payment, never drain savings to zero.
- Remember closing costs, which typically run 2 to 5% of the purchase price.
3. Decide your down payment strategy and understand PMI
You do not need 20% down to buy a home, many first time buyers put down 3 to 10%, but putting down less than 20% on a conventional loan means paying private mortgage insurance (PMI). PMI protects the lender, not you, and typically costs a fraction of a percent of the loan amount per year. Run the numbers with a PMI calculator to see how different down payments change your monthly cost, and weigh a larger down payment against keeping cash reserves for repairs and emergencies.
- Conventional loans: 20% down avoids PMI entirely.
- FHA loans: minimum down payment is 3.5%, but mortgage insurance lasts for the life of the loan in most cases.
- VA and USDA loans: eligible buyers may qualify with 0% down.
- Conventional PMI can usually be dropped once you reach 20% equity; ask your servicer about the process.
4. Get pre approved before you start shopping
Pre approval is a lender’s written estimate of how much you can borrow, based on verified income, debts, and credit. It is not the same as pre qualification (a rough guess), pre approval carries real weight with sellers and their agents. Get pre approved by at least two or three lenders so you can compare rates and fees; multiple mortgage inquiries within a short window (typically 14 to 45 days) count as a single credit pull for scoring purposes.
5. Compare loan types and pick the right fit
Different loan programs suit different buyers. Conventional loans usually offer the best terms for borrowers with strong credit and at least a moderate down payment. FHA loans accept lower credit scores and 3.5% down, making them popular with first time buyers. VA loans (for eligible veterans and service members) and USDA loans (for eligible rural areas) offer 0% down options. Ask each lender for a Loan Estimate so you can compare rates, points, and fees line by line, the lowest rate is not always the cheapest loan.
6. Estimate your monthly payment before you fall in love with a house
Before touring homes, estimate the full monthly payment, principal, interest, taxes, and insurance (PITI), plus PMI and HOA if they apply, for houses at the top of your budget. A mortgage calculator lets you plug in price, down payment, rate, and local tax and insurance figures to see the real monthly number. If that number makes you uncomfortable, lower your price ceiling before you start looking; it is much harder to be disciplined after an emotional attachment forms.
7. Shop, tour, and make a smart offer
Tour several homes in your price range so you learn what your money buys. When you find the right one, your agent will help you write an offer based on comparable recent sales, not the asking price. Include the standard contingencies: inspection, appraisal, and financing. These protect your earnest money deposit if something goes wrong. In competitive markets, keep your offer clean but never waive the inspection contingency as a first time buyer; the risks are not worth it.
- Base your offer on comparable sales from the last 3 to 6 months, adjusted for condition.
- Keep inspection and appraisal contingencies, they protect your deposit.
- Ask the seller for disclosures about defects, flooding, and major repairs.
- Set an offer expiration so you are not left waiting indefinitely.
8. Budget for closing costs early
Closing costs, lender fees, title insurance, appraisal, prepaid taxes and insurance, and more, typically add 2 to 5% of the purchase price on top of your down payment. Many first time buyers are surprised by this. Estimate yours with a closing cost calculator as soon as your offer is accepted, and compare the estimate to the Closing Disclosure your lender sends three business days before closing. Some costs are negotiable, and some sellers agree to credits, ask your agent what is customary in your market.
9. Schedule the inspection and the appraisal
The home inspection (which you pay for) checks the property’s condition, roof, foundation, plumbing, electrical, HVAC. The appraisal (ordered by your lender) confirms the home is worth the loan amount. If the inspection finds serious problems, you can negotiate repairs, ask for a price reduction, or walk away under your contingency. If the appraisal comes in low, you will need to cover the gap, renegotiate, or exit the deal.
10. Final walkthrough and closing day
Do a final walkthrough within 24 hours of closing to confirm the home is in the agreed condition and any negotiated repairs were completed. On closing day, bring a cashier’s check or wire confirmation for the amount on your Closing Disclosure, plus a photo ID. You will sign a stack of documents, take your time and ask questions. Then you get the keys. Congratulations, homeowner: set up your mortgage autopay, file your homestead exemption if your state offers one, and keep that emergency fund intact.
Worked example: buying a $350,000 home, step by step
Checklists are easier to follow with real numbers, so here is one complete purchase worked through from price to monthly payment. These are round, illustrative figures, your taxes, insurance, and rate will differ, but the order of the arithmetic is exactly what you will do with your own numbers. Assume a purchase price of $350,000, a 20% down payment, a 30 year fixed rate loan at 7.40%, closing costs of 3% of the price, property taxes of 1.1% of the home’s value per year, and homeowner’s insurance of $1,800 per year.
Step 1, the down payment: $350,000 × 20% = $70,000. Step 2, the loan amount: $350,000 − $70,000 = $280,000. Step 3, the monthly principal and interest: a $280,000 loan at 7.40% over 30 years costs about $1,939 per month. You can confirm that figure in seconds with a mortgage calculator change the rate by even a quarter of a point and watch how much the payment moves, which is why comparing Loan Estimates from several lenders matters so much. Step 4, closing costs: $350,000 × 3% = $10,500. Remember that 3% is the middle of the usual 2 to 5% range, so on this home closing costs could run anywhere from $7,000 (2%) to $17,500 (5%). Estimate your own fees line by line with a closing cost calculator rather than guessing. Step 5, the total cash you need at closing: $70,000 down payment + $10,500 closing costs = $80,500, before prepaid taxes and insurance and any earnest money you have already paid (which is normally credited back to you at closing).
Now the monthly payment, which is the number you will actually live with. Property taxes: $350,000 × 1.1% = $3,850 per year, divided by 12 = about $321 per month. Insurance: $1,800 per year, divided by 12 = $150 per month. Add it all together: $1,939 principal and interest + $321 taxes + $150 insurance = $2,410 per month. Because the down payment is 20%, there is no PMI to add. As a sense check against the 28% guideline from earlier in this checklist, $2,410 is about 28% of a gross income of $8,600 per month ($103,200 per year), so a household earning roughly that much would be right at the edge of the traditional comfort zone with this payment, and earning less would mean aiming at a lower price. Run your own version of this example through a house affordability calculator before you tour a single home.
Down payment compared: 3% vs 10% vs 20% on the same home
Using the same $350,000 home, the same 7.40% rate on a 30 year term, and closing costs held at 3% ($10,500) in all three cases, here is what changes when only the down payment changes. The PMI figures are illustrative estimates at 0.50% of the loan amount per year, actual PMI varies with your credit score and loan type, and PMI payments stop once you reach 20% equity on a conventional loan.
| What you pay | 3% down | 10% down | 20% down |
|---|---|---|---|
| Cash down payment | $10,500 | $35,000 | $70,000 |
| Loan amount | $339,500 | $315,000 | $280,000 |
| Monthly principal & interest (7.40%, 30 years) | $2,351 | $2,181 | $1,939 |
| Illustrative PMI per month (0.50% of loan per year) | About $141, until 20% equity | About $131, until 20% equity | $0, no PMI |
| Cash needed at closing (down payment + 3% closing costs) | $21,000 | $45,500 | $80,500 |
Read the table both ways. The 3% option needs $59,500 less cash up front than the 20% option ($80,500 − $21,000), which keeps your savings intact for moving, repairs, and emergencies, but it costs about $553 more every month at the start ($2,351 + $141 PMI = $2,492, versus $1,939 with no PMI). Neither choice is automatically right. Buying sooner with 3% down can make sense if prices and rates are rising and your rent is high; waiting to reach 20% makes sense if your job and savings are stable and the lower payment matters more than the timing. The mistake is deciding by habit instead of by these numbers.
Common mistakes first time buyers make (and how to avoid them)
- House hunting before pre approval. Sellers take pre approved buyers seriously and may ignore everyone else. Fix: get pre approved by two or three lenders first, and house hunt only inside the budget that approval supports.
- Emptying your savings to reach 20% down. Avoiding PMI is not worth arriving at closing with nothing left for a broken water heater or a job gap. Fix: compare the 3%, 10%, and 20% rows in the table above and keep a separate emergency fund untouched, whatever you choose.
- Budgeting only for principal and interest. Taxes, insurance, PMI, and HOA fees can add hundreds of dollars a month on top of the loan payment, $471 a month in the worked example above, before PMI. Fix: always judge a home by its full PITI payment, not the loan payment alone.
- Opening new credit or buying big items before closing. A new car loan or furniture on credit changes your debt to income ratio and can delay or kill a loan that was already approved. Fix: make no large purchases and open no new accounts between pre approval and closing day.
- Waiving the inspection to win a bidding war. Saving a few hundred dollars on an inspection can mean inheriting a failed roof or foundation problem worth many thousands. Fix: keep the inspection contingency, especially as a first time buyer, and walk away if the seller will not allow one.
- Comparing loans by interest rate alone. Points, lender fees, and closing costs differ between lenders, so the lowest rate is not always the cheapest loan. Fix: compare Loan Estimates side by side, including the total cash to close, before you commit.
Frequently asked questions
How much do I really need for a down payment as a first time buyer?
Less than most people think. FHA loans allow 3.5% down, many conventional loans allow 3 to 5% down for first time buyers, and VA/USDA loans allow 0% down for eligible borrowers. The trade off is mortgage insurance and a higher monthly payment. A larger down payment is only better if it does not wipe out your emergency savings.
What credit score do I need to buy a house?
There is no single minimum. Conventional loans generally want at least 620; FHA loans can go down to 580 with 3.5% down (and lower with 10% down). Higher scores unlock better rates at every level, so even a 20 to 40 point improvement before applying can meaningfully lower your payment.
Should I get pre approved or pre qualified?
Pre approved. Pre qualification is a rough estimate based on self reported numbers; pre approval involves verified income, debts, and credit and carries weight with sellers. In competitive markets, offers without pre approval are often ignored.
How much are closing costs for a first time buyer?
Typically 2 to 5% of the purchase price. On a $300,000 home that is roughly $6,000, $15,000, paid at closing on top of your down payment. Your lender’s Loan Estimate and Closing Disclosure itemize every fee, compare them and question anything you do not understand.
Can I buy a house if I have no credit history?
It is harder but possible. Some lenders use alternative credit data (rent, utility, and insurance payment history) through manual underwriting, and FHA loans are more flexible about thin credit files. Building even 6 to 12 months of on time payments on a secured card before applying will widen your options considerably.
How long does the home buying process take?
From accepted offer to closing, typically 30 to 60 days for a financed purchase, depending on the lender, appraisal scheduling, and any inspection negotiations. The house hunting phase before that varies widely, give yourself a few months so you are not pressured into a bad decision.