Introduction
Buying your first home is the largest transaction most people make. A structured financial checklist prevents nasty surprises at closing and keeps you solvent afterward.
Why It Matters
Skipping any step below routinely costs first-time buyers thousands — in higher rates, surprise fees, or financial stress after move-in.
Step 1 — Credit Health
- Pull free reports from all three bureaus
- Target FICO 740+ for the best rates
- Dispute errors at least 60 days before applying
- Avoid new credit accounts for 6 months pre-application
Step 2 — Income & DTI
- Calculate gross monthly income
- List all monthly debt obligations
- Target back-end DTI ≤ 36%, max 43% per the CFPB qualified mortgage rule
Step 3 — Down Payment & Closing Costs
| Item | Typical % of price |
|---|---|
| Down payment | 3–20% |
| Closing costs | 2–5% |
| Moving / setup | 1–2% |
| Reserves (3–6 mo PITI) | 5–10% |
For a $300,000 home with 10% down, plan for about $45,000–$50,000 in liquid cash at closing.
Step 4 — Pre-Approval
- Get a written pre-approval (not just pre-qualification)
- Compare at least 3 lenders (rate + APR + points + fees)
- Lock the rate when comfortable with the offer
Step 5 — Loan Type Decision
| Loan | Best for |
|---|---|
| Conventional | Strong credit, 5–20% down |
| FHA | Lower credit, 3.5% down |
| VA | Eligible veterans, 0% down |
| USDA | Rural areas, 0% down |
Step 6 — Property Diligence
- Independent home inspection
- Title search & insurance
- Survey if rural/edge lot
- Verify property tax history
- Check flood and natural-hazard zones
Step 7 — Worked Affordability Example
- Income: $7,500/mo gross
- Existing debt: $400/mo
- Max housing payment (36% rule): 0.36 × 7,500 − 400 = $2,300/mo
- At 6.5% / 30 years, PITI = $2,300 → loan ≈ $273,000 (assuming $400/mo taxes + insurance)
- With 10% down → home price target ≈ $303,000
Step 8 — Post-Close Reserves
- 3–6 months of full PITI in savings
- 1% of home value/year for maintenance
- Separate emergency fund untouched by the move
Common Mistakes
- Spending the entire savings on the down payment
- Buying the max the lender approves
- Skipping the home inspection to win a bid
- Underestimating ongoing maintenance and utilities
Conclusion
Run every step above before signing a purchase agreement. Use the Loan Affordability and Mortgage Calculators below to size a realistic, sustainable purchase.