Buying Your First Home: A Mortgage and Down-Payment Checklist

Buying a house is the biggest purchase most people ever make. Yet many rookies jump in without a plan, overspend on the wrong home, or discover surprise costs at closing. By following a step-by-step checklist, you’ll stay organized, protect your wallet, and feel confident from the first credit pull to the final signature.

The high-stakes nature of a first purchase

A 1-percent swing in mortgage rates can raise – or drop – your monthly payment by hundreds of dollars. An appraisal glitch can sink a deal. A hidden repair can wipe out your emergency fund. Planning ahead keeps those land mines from blowing up your budget.

Common rookie money-pit mistakes

  • Shopping before fixing credit
  • Treating the pre-approval as a spending target
  • Forgetting “hidden” expenses like private mortgage insurance (PMI), homeowners association (HOA) dues, and higher utility bills
  • Draining every penny for the down payment and skipping a rainy-day reserve

How a structured plan saves you time, stress, and cash

You’ll know exactly which documents to collect, when to lock your rate, and how much cushion to keep. That means fewer lender delays, stronger offers, and – best of all – the peace of mind that you can truly afford the keys you’re handed.


Step 0: Define Your Home-Buying Goal

  1. Set a realistic timeline. Decide whether you want to buy in 12, 24, or 36 months. Shorter timelines mean more aggressive saving and quicker credit fixes.
  2. Clarify your “why.” Are you building equity, craving space, planning for kids, or eyeing investment potential? Your goal guides everything from neighborhood choice to loan type.
  3. Create a must-have vs. nice-to-have list. Bedrooms, commute, school district, yard size—rank them. This list will keep you focused when shiny countertops try to derail your budget.

Tip: Tape that list next to your computer or phone so it stares at you while you browse listings.


Step 1: Get Your Finances Mortgage-Ready

Check your credit report & score

Pull free annual reports from all three bureaus and dispute errors right away. Scores of 740+ snag the best conventional rates, but you can qualify for an FHA loan with 580 and 3.5 percent down.

Tame high-interest debt

Lenders use your debt-to-income (DTI) ratio to judge risk. Knock out credit-card balances first; every $100 monthly payment you remove can boost your max mortgage amount by $15,000–$20,000.

Build an emergency fund

Aim for at least three months’ living costs before you house-hunt. Roof leaks and appliance failures don’t care that you’re a new homeowner.

Start a “mock mortgage”

For the next six months, transfer the amount you expect your future mortgage to cost into savings on payday. If that feels tight, scale your target price down now instead of panicking later.


Step 2: Estimate Your Buying Power

Understand the 28/36 rule

Most lenders want your housing costs (principal, interest, taxes, insurance, and HOA) under 28 percent of gross income and your total debt under 36 percent. Aim lower if you like breathing room.

Use calculators—but verify with pre-approval

Online calculators are helpful, but only a lender’s pre-approval factors in your exact credit, income, and local taxes. Treat web estimates as ballpark.

Remember the hidden costs

  • PMI: Required if you put down less than 20 percent on a conventional loan.
  • Homeowners insurance & property taxes: Vary by ZIP code.
  • Maintenance: Budget 1 percent of the home’s value each year for upkeep.
  • Utilities: Single-family homes often double apartment utility costs.

Step 3: Choose the Right Loan Program

Loan TypeMinimum DownCredit Score GoalWho It Fits
Conventional3 %620+Good credit, stable income
FHA3.5 %580+Lower score, higher DTI
VA0 %FlexibleEligible veterans & spouses
USDA0 %640+Rural & some suburban areas

Conforming loan limits for 2025

You can borrow up to $806,500 on a single-family home and still get a conventional rate.

Adjustable- vs. fixed-rate

Adjustables start cheaper but can reset higher. If you’ll sell or refinance within five years, a 5/6 ARM may save money. If you plan to stay put, a 30-year fixed keeps payments steady—even as rates hover near 7 percent in mid-2025.

15-year vs. 30-year

A 15-year loan builds equity twice as fast and often carries a rate 0.5 percent lower, but your payment will be roughly 40 percent higher. Run both scenarios through your budget before deciding.


Step 4: Craft Your Down-Payment Strategy

How much should you put down?

Don’t assume 20 percent is mandatory. Putting down 10 percent might strike the best balance between killing PMI quickly and keeping your savings cushion intact.

Savings vehicles

  • High-yield savings or money-market accounts for easy access
  • CD ladders for 6–24-month timelines
  • Series I savings bonds if inflation stays elevated and you have 12+ months

Down-payment assistance

Federal and state programs can grant or lend you cash. Example: The CBC Mortgage Agency provides a 3.5 percent second mortgage that’s forgiven after 36 on-time payments.

Congress is also debating the $25,000 Downpayment Toward Equity Act, which could boost first-timer funds when passed.

Gift funds

If family helps, your lender will ask for a gift letter and evidence the money isn’t a loan. Keep it in your account at least 60 days before underwriting to avoid last-minute paper chases.

Retirement account taps

  • 401(k) loan: Pay yourself back with interest but risk job-loss payoff rules.
  • Traditional IRA: Withdraw up to $10,000 penalty-free for a first home; taxes still apply.
  • Roth IRA: Contributions (not earnings) come out tax- and penalty-free anytime.

Step 5: Get Pre-Approved — Not Just Pre-Qualified

A pre-qualification is a quick estimate. A pre-approval is a lender-verified offer that sellers take seriously.

Document checklist

  • Month-end pay stubs covering 30 days
  • Two years of W-2s (or full tax returns if self-employed)
  • Two months of bank statements
  • Photo ID
  • Proof of any gift funds

Employment & deposit verification

Your lender may call your HR department and question large, unexplained bank deposits. Flag holiday bonuses or side-hustle income upfront to avoid hold-ups.

Rate-lock timing

Rates can change daily. Once you have a signed purchase contract, ask your lender to lock immediately—especially in today’s volatile market where swings above or below 7 percent are common.


Step 6: House-Hunting with a Budget Guardrail

Your pre-approval is a ceiling—not a target

If you’re approved for $450,000 but the payment feels heavy, shop in the $375,000–$400,000 range. Leaving wiggle room lets you bid competitively without gutting savings.

Choose a buyer’s agent

Interview at least two agents. Ask for recent first-time-buyer references, average days-to-close, and strategies for winning in a competitive market.

Neighborhood due diligence

Look beyond curb appeal: compare property-tax rates, insurance premiums (especially in flood or wildfire zones), internet speeds, school ratings, and resale trends.

Build vs. buy existing

New construction offers modern energy efficiency but longer timelines and higher closing costs. Existing homes close faster, but inspections can reveal pricey repairs.


Step 7: Make an Offer Without Busting Your Cushion

Read the comps

Your agent should pull recent sales of similar homes. Offer within that range unless the property offers unique value or needs major repairs.

Protective contingencies

  • Inspection contingency: Walk away or renegotiate if serious issues surface.
  • Financing contingency: Shields your earnest money if your loan falls through.
  • Appraisal contingency: Lets you renegotiate if the home appraises low.

Negotiation levers

You can ask the seller to pay some closing costs, fix items, leave appliances, or contribute to a rate buydown that drops your payment for the first 1–3 years.


Step 8: From Offer to Closing—Documents & Dollars

Inspection checklist

  • Roof age and condition
  • Foundation cracks
  • HVAC life expectancy
  • Plumbing leaks and water-pressure test
  • Electrical panel amperage and GFCI outlets

Prioritize health and safety fixes; you can paint cabinets later.

Appraisal outcomes

If the appraisal comes in low, you can:

  1. Renegotiate price.
  2. Split the difference.
  3. Bring extra cash to keep the same loan-to-value ratio.

Title insurance, escrow, and the Closing Disclosure

Review the Closing Disclosure (CD) at least three business days before signing. Check that the interest rate, loan amount, and closing costs match earlier estimates.

Final walk-through

Do this 24 hours before closing. Test lights, faucets, appliances, and confirm negotiated repairs are complete.

Wiring funds safely

Confirm routing details with a known phone number. Wire fraud is rampant, and thieves love last-minute panic transfers.


The Ultimate First-Homebuyer Checklist (Printable)

  • Pull credit & dispute errors
  • Pay down high-interest debt
  • Build three-month emergency fund
  • Set target price based on 28/36 rule
  • Research loan types & limits
  • Choose down-payment vehicle(s)
  • Collect income & asset documents
  • Secure pre-approval
  • Interview real-estate agents
  • Tour neighborhoods & homes
  • Make data-driven offer with contingencies
  • Schedule inspection & appraisal
  • Review Closing Disclosure
  • Complete final walk-through
  • Wire funds & sign closing papers
  • Celebrate move-in day!

Frequently Asked Questions

1. What’s the minimum down payment for a first-time buyer in 2025?

  • 3 % on conventional loans
  • 3.5 % on FHA loans with a 580+ score
  • 0 % for eligible VA and USDA borrowers

2. Should you pay points to lower your rate?
Buying points makes sense if you’ll stay in the home long enough for the lower payment to offset upfront costs—often about five years. Plug both scenarios into an online calculator first.

3. Can student loans stop you from getting approved?
Not if they’re in good standing. Lenders include either your actual payment or a small percentage of the balance when computing DTI.

4. Is it ever smart to buy with less than two months of reserves?
Rarely. A leaky roof or job hiccup can derail finances fast. Keep at least one mortgage payment plus closing costs in the bank after signing.


Key Takeaways & Next Steps

  1. Start with credit. Clean reports and a solid score unlock better rates and lower down payments.
  2. Follow the numbers, not emotions. Use the 28/36 rule and your pre-approval as guide rails.
  3. Explore assistance. Grants, forgivable loans, and upcoming legislation can shrink your cash requirement.
  4. Document everything early. W-2s, pay stubs, and bank statements tucked in a digital folder keep underwriting smooth.
  5. Lean on pros. A seasoned lender and a buyer’s agent who educates, not pressures, will make the journey smoother.

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