First-Time Homebuyer Prep Guide

What to do before you contact an agent — plus a quick look at what happens next. This guide is designed to help first‐time buyers get financially ready, organized, and confident before they start viewing homes.

Who is This For?

- You're buying your first home (or it's been a while) and want to get financially prepared first.

- You want a step-by-step checklist, so nothing falls through the cracks.

The Pre-Search Readiness Plan (9 Steps)

Step 1 - Clarify your timeline & goals

[  ] Choose a target move-in month (plan for 30-45 days for contract-to-close)

[  ] List the reasons why you're buying (commute, schools, yard, investment, etc)

[  ] Define the "must-haves" vs "nice-to-haves"

[  ] Determine who will be on the loan/title

Step 2 - Build a realistic monthly budget (before price shopping)

[  ] Decide your comfortable max housing payment (PITI + HOA): aim for no more than 25-30% of gross monthly income for comfort

[  ] Add a buffer for utilities, maintenance (plan ~1% of home price per year), and lifestyle

[  ] Use a mortgage calculator to see payments at different prices/rates; note how taxes / insurance / HOA change totals

Rule of thumb: Lenders may allow higher debt to income ratios, but your budget should drive the price - not the other way around.

Step 3 - Pull & review your credit

[  ] Pull all 3 credit reports (Equifax, Experian, and TransUnion), dispute errors early (30-45+ days)

[  ] List revolving balances and plan pay-downs (lower utilization to less than 30%, less than 10% is even better)

[  ] Avoid late payments; set autopay minimums

[  ] Pause new credit cards and large purchases

Score tiers (typical, varies by lender)

• Conventional: 620+ minimum; better pricing usually 680/700/740+
• FHA: 580+ for 3.5% down (500-579 may require 10% down)
• VA: Veterans only, one VA loan at a time, must meet certain criteria
• USDA: Income-based, differs by county, must meet certain criteria

Step 4 - Map your cash: down payment, closing costs, reserves

[  ] Down payments: plan 3-5% (conventional) or 3.5% (FHA) at minimum; more can lower PMI and payment

[  ] Closing costs: estimate 2-5% of purchase price (lender + title + prepaids + escrows), USDA & VA loans are 0%

[  ] Reserves: keep 2-3 months of total housing payments post-closing (more if self-employed)

[  ] Move-in cushion: set aside for moving, tools, furniture, immediate repairs

[  ] If using gift funds, get early confirmation of source and required documents

Step 5 - Assemble your documents (lenders will ask!)

[  ] Last 30-60 days of pay stubs

[  ] Last 2 months of bank / asset statements (all pages)

[  ] Last 2 years of W-2s (and 1099s, if applicable)

[  ] Last 2 years of full tax returns (esp. self-employed)

[  ] Government ID + Social Security card (or equivalent)

[  ] Residence history (2 years), employment history (2 years)

[  ] Documentation for large deposits, gifts, bonuses, RSUs, child support, etc.

Step 6 - Choose a loan strategy

• Conventional: competitive for strong credit; cancellable PMI with equity is more than 20%
• FHA: flexible credit / down payment; mortgage insurance lasts longer
• VA (eligible veterans): often $0 down, no PMI; funding fee may apply, lifetime eligibility, only one VA loan at a time
• USDA (eligible areas / income): $0 down; geographic & income limits
• Fixed vs. ARM: fixed = payment stability; ARM can start lower but may adjust - know caps
• Points: paying points lowers the rate; break-even depends on time horizon

Tip: If you think you'll move or refinance within 5-7 years, avoid overpaying for points you won't recoup.

Step 7 - Get pre-approved (not just pre-qual)

[  ] Obtain at least 2-3 written Loan Estimates on the same day, if possible (rate, APR, lender fees, credits)

[  ] Request a fully underwritten pre-approval (documents reviewed by underwriting) for stronger offers

[  ] Rate-shopping credit pulls: most scoring models treat multiple mortgage inquiries within 30 days as one - complete your quotes within 2 weeks to be safe

[  ] Ask about rate locks, float-down options, and lender credits

[  ] Confirm how taxes / insurance / HOA are estimated in the payment

Step 8 - Lock in good behavior (from now until closing)

[  ] Do not change jobs (without talking to your lender)

[  ] Avoid new debt, co-signing, or large cash deposits

[  ] Keep credit card balances low and paid on time

[  ] Keep all documentation organized and respond quickly to lender requests

Step 9 - Create your "Buyer Packet"

[  ] Your pre-approval letter (PDF)

[  ] Proof of funds for downpayment / closing

[  ] Your budget, must-have list, neighborhoods & commute times

[  ] Notes on loan type, target payment, lock terms, and questions for your agent

Very General Steps Once You're Ready to Shop

1. Connect with your agent (share your Buyers Packet & goals)
2.  Tour homes (in-person or virtual) and refine criteria
3. Make an offer (price, earnest money, contingencies, closing date)
4. Inspections (general + specialty as needed); negotiate repairs / credits
5. Appraisal & underwriting (lender verifies value)
6. Clear to close (final approval), final walk-through, and close (sign docs, get keys!)

Expect costs during this phase: earnest money deposit, inspections, appraisal, and final cash to close.

Quick Reference: Payment & Cash Cheat-Sheet

• Monthly payment ("PITI") = Principal + Interest + Taxes + Insurance (+HOA / PMI if applicable)
• Closing costs include lender fees, title / escrow, appraisal, credit report, recording, prepaids (taxes, insurance), and escrow setup
• PMI (conventional) can be removed when you hit about 20% equity (varies); FHA MIP lasts the life of the loan.
• Taxes & Insurance vary widely by area - always verify with your lender / agent.

Final Prep Reminders

• Your budget is your anchor. Don't let approval max dictate your life
• Keep reserves for repairs and surprises
• Communicate early and often with your lender and (when ready) your agent

(General guidance only - always confirm details with your lender and real estate advisor)