The First-Time Homebuyer Checklist: 12 Steps From Budget to Closing Day

Buying your first home involves a long list of decisions, deadlines and people. It's easier when you take it one step at a time. This checklist walks through the process most U.S. buyers follow, roughly in order.

1. Set a budget you can live with

A lender will tell you the most you can borrow. That isn't necessarily what you should spend. A common guideline is the 28/36 rule: keep total housing costs (principal, interest, taxes, insurance and any HOA dues) under about 28% of gross monthly income, and all debt payments under about 36%. Many loan programs allow higher ratios, but lower ratios leave room for savings and surprises.

2. Check your credit early

Pull your free credit reports from AnnualCreditReport.com and dispute any errors. Paying down revolving balances and avoiding new credit applications in the months before you apply can help your score and your rate.

3. Understand your down payment options

You may not need 20% down. Common minimums include:

• Conventional loans: as little as 3% down through programs like Fannie Mae HomeReady and Freddie Mac Home Possible, and for many first-time buyers.
• FHA loans: 3.5% down with a credit score of 580 or higher.
• VA loans: 0% down for eligible veterans and service members.
• USDA loans: 0% down for eligible buyers in qualifying rural and suburban areas.

Putting less than 20% down on a conventional loan usually means paying private mortgage insurance (PMI). Also look into your state housing finance agency and local governments, which often offer down payment assistance grants or forgivable loans.

4. Save for closing costs and reserves

Closing costs typically run about 2% to 5% of the purchase price and cover lender fees, title insurance, appraisal, recording fees and prepaid taxes and insurance. Plan for moving costs, too, and keep an emergency cushion after closing.

5. Get preapproved, not just prequalified

A preapproval means a lender has reviewed your income, assets and credit. Sellers take it far more seriously than a prequalification. Compare at least three lenders using their official Loan Estimates.

6. Choose an agent and understand the agreement

Since August 2024, buyers working with an agent generally have to sign a written buyer agreement before touring homes. That agreement spells out the services and how the agent is paid. Read it carefully, ask questions and negotiate terms if needed.

7. Shop with a must-have list

Separate needs (number of bedrooms, commute, school district) from wants (finishes, paint colors). Cosmetic issues are easy to change. Location, layout and lot are not.

8. Make a smart offer

Your agent will help you set the price from recent comparable sales. Your offer also includes earnest money, often around 1% to 3% of the price, and contingencies that protect you, such as inspection, appraisal and financing contingencies.

9. Get a professional home inspection

An inspection can reveal costly problems with the roof, foundation, plumbing, electrical or HVAC. Depending on the home, consider specialty inspections such as a sewer scope, radon test or termite inspection. Use the findings to request repairs, ask for a credit or walk away within your contingency period.

10. Lock your rate and shop insurance

Lock your interest rate when you're comfortable with it, and make sure the lock covers your closing date. Get homeowners insurance quotes early. Premiums vary widely by region, and your lender will need proof of coverage before closing.

11. Appraisal and final underwriting

The lender orders an appraisal to confirm the home is worth the loan amount. Until closing, avoid changing jobs, opening new credit or making large unexplained deposits, because any of these can delay or derail final approval.

12. Review the Closing Disclosure and close

You'll receive a Closing Disclosure at least three business days before closing. Compare it line by line with your Loan Estimate. Do a final walkthrough, bring a government ID, and wire funds only after confirming instructions by phone with a number you know is legitimate. Wire fraud targeting homebuyers is common.

The bottom line

The buyers who do best usually prepare early: they set a realistic budget, clean up their credit, compare lenders and protect themselves with inspections and contingencies. Take it step by step and closing day will be far less stressful.