Interior of living room with large picture windows

Buying A House: Your Checklist For The Home Buying Process

Carla Ayers10 minute read
January 10, 2022

You’ve decided to buy a house – congratulations! Buying real estate is exciting. It’s not every day that you decide to buy a new home, so you can’t be expected to know every step of the process. With so many things to consider, we want to make sure you start off on the right foot. So, we’ve created a checklist to help you prepare for the home buying process.

Here’s Your Home Buying Checklist

We’ve done the research and broken down the home buying process into eight steps to keep you on track as you prepare to hit the ground running looking for your new home.

1. Determine Your Budget and Start Saving

2. Get Preapproved For A Mortgage

3. Figure Out Your House Must-Haves

4. Find A Real Estate Agent

5. Tour Homes

6. Make An Offer And Negotiate

7. Get A Home Inspection And Appraisal

8. Close On The House And Take The Keys!

Step 1. Determine Your Budget

Getting an idea of what you can realistically afford is important before you step foot in an open house. Knowing how much home you can afford will help determine which homes you should make an effort to see in person. Read on to learn more about the costs of homeownership and how to be prepared. 

Personal Budget

The first step in purchasing a new home is figuring out how much you and your family can afford. Start by creating a simple home budget based on your current income and expenses to help determine what you’re comfortable spending on housing.

You’ll also want to calculate your debt-to-income ratio. Your DTI is a percentage that tells lenders how much money you spend versus how much money you have coming in. Manually calculate your DTI by adding up your monthly minimum debt payments and dividing it by your monthly pretax income. Or use the Rocket HomesSM home affordability calculator to do the work for you.

Down Payment

If you don’t have a down payment savings already, you’ll need to start saving for your down payment. A down payment is the lump sum of money you pay upfront when you close on your home. The amount of your down payment is a percentage of your home’s final purchase price and reduces the amount you’ll need to borrow from your lender. The amount of a down payment is determined by your credit score and the type of mortgage you’ve been approved for. The higher the credit score, the more favorable loan terms that are offered. Lower interest rates can save a lot of money over the life of the loan so take your time when considering your options.

One-Time Fees

In addition to the down payment, there are other one-time fees you will likely need to pay for during the home purchase process.

Some of the most common one-time fees include:

  • Home inspection fee: $300 – $500
  • Home appraisal fee: $300 – $500
  • Credit report fee: $20 – $30
  • Title search fee: $75 – $100
  • Moving company fees: Up to $5,000 for a long-distance move

Budget For Recurring Costs

Every home purchase is unique, but there are common recurring costs associated with homeownership that you should be aware of. The following are some of those costs explained. 

Mortgage

Your monthly mortgage payment will likely cover these expenses but it’s a good idea to know what line items are included in your monthly statement. Your lender will likely pay these fees to ensure they are made on time and in full.

  • Mortgage: The monthly mortgage loan payment due will include principal and interest based on the amount borrowed.
  • Mortgage insurance: If you have a conventional loan and you didn’t put 20% down, you’ll likely see a line item on your statement for private mortgage insurance. Once you’ve built up 20% equity in your home, this expense will end.
  • Property taxes: Property taxes are collected to pay for essential services. Costs vary from year to year, but you can expect to pay about $1 per $1,000 of your home’s value each month.
  • Homeowners insurance: You will be required by your lender to purchase homeowners insurance. The average homeowners insurance policy premium is $1,200 but your rate could vary depending on the location of your home, its condition, your credit score and your deductible.

Maintenance, Repairs, And Upkeep

If you’re accustomed to renting, maintenance might not be something you’ve had to deal with. Homeowners are responsible for the maintenance, repairs and overall upkeep of their home. Things like changing the furnace filter and fixing the dishwasher fall under the homeowner’s responsibility. A good rule of thumb is to set aside 1% – 3% of your home’s value each year to cover any work that your house might need.

Utilities

Utilities like electricity, natural gas, and water are typically the responsibility of the homeowner. Utility rates vary based on the utility type and service provider. That said, the average homeowner in America spends roughly $270 per month to cover these expenses.

Homeowners Association Fees

If a home is in a neighborhood under a homeowners association, the homeowner will need to pay fees as a member. These fees cover the upkeep of community amenities and common area maintenance. Fees are set by each individual association. That said, the average homeowner of a single-family residence within an HOA pays $200 – $300 per month.

All of these expenses can be overwhelming but you’re starting now and giving yourself a good head start by preparing and saving.

Here are few tips to make step one of buying a new home a breeze:

  • Find areas you can save in your budget. If you like to eat out, try cooking at home more to save money. Take a look at your bank statement and get rid of subscriptions that you’re not using or downgrade your plan to save.
  • Postpone large discretionary purchases. If you plan a big vacation every year, consider a staycation and putting those funds toward your down payment savings.
  • Make more income. Talk to your employer and let them know you’re available for special projects or overtime. You can also consider a side hustle. Additional streams of income are a great way to expedite your savings goals.
  • Automate deposits. Most banks can automatically deposit a set amount of money into a savings account of your choosing. With automatic deposits you can ensure you’re making saving a priority.

Get approved to buy a home.

Rocket Mortgage® lets you get to house hunting sooner.

Step 2. Get Preapproved For A Mortgage

Now that you have a snapshot of your finances, you’re ready to get preapproved for a mortgage from a lender. Mortgage preapproval is the process of determining how much money you can borrow from a lender to buy a home. A mortgage lender is a financial institution or mortgage bank that offers and underwrites home loans. It’s important to note that some lenders use the terms preapproved and prequalified interchangeably, but traditionally they mean different things. We’ll explain the difference below.

Mortgage Prequalification

Most lenders will require a simple application online or over the phone to apply for a mortgage prequalification. The applicant's credit report is pulled and the information reviewed. They may ask for written or verbal estimates of the applicant’s income and assets. This information is self-reported and unverified.

Mortgage Preapproval

A mortgage preapproval will require an application be completed and the applicant’s credit report pulled and reviewed. The lender will then verify income and assets through documents like W-2s, tax returns, pay stubs, bank and other financial statements. A mortgage preapproval has verified information.

Staying organized through the home buying process will keep your blood pressure normal and keep things moving along smoothly. Throughout the process you’ll be asked a lot of questions, and you may not know the answer off the top of your head. So, it’s a good idea to have your information in a folder or on a drive you can access quickly.

The following is a list of documents we think you should have on hand when applying for verified preapproval: 

  • Personal information like Social Security number and identification
  • Employment and income verification
  • Ownership documents for assets like cars and property
  • Property details
  • Credit and liabilities
  • Homeowners insurance

You have a choice in lenders, in fact it's in your best interest to shop around for the best deal for your circumstances. Start your search with local banks, credit unions, and online lenders.

Make sure to note each lender’s offerings, including loan terms, current rates, down payment requirements, mortgage insurance, closing costs, etc. so you can compare all of your loan options.

It is important to note that a letter of preapproval does not imply a commitment to a particular lender. Once you’ve chosen a lender, the mortgage will be finalized later in the home buying process.

Step 3. Decide On Your Dream House Must-Haves

Before you jump in a car and head to the nearest open house, take some time to think about what you’re looking for in a new home. Figure out your wants vs. needs and any nonnegotiables you’ll require in your new home. If you’re close enough, drive around the areas you’re interested in and take note of the features you’d like to have in your own home.

To help avoid getting overwhelmed with options, make a list of those wants and needs and reference them when you’re considering a home.

To help narrow down the search, here are a few criteria to get your list started:

  • Type of home
  • Number of rooms
  • Energy efficiency features
  • Location preference (school district/neighborhood)

Step 4. Find A Real Estate Agent

Real estate agents are licensed professionals who organize real estate transactions between buyers and sellers. Agents who represent sellers are called listing agents. Buyer’s agents are real estate agents who represent buyers.

Your agent will show you properties, write an offer letter on your behalf and assist in negotiations. Real estate agents are local market experts and can also advise you on how much to offer for each property. Talk to your family and friends and ask for referrals to agents they’ve had a good experience with. It's important to find an agent who is aligned with your home goals, finds homes in your price range, and most of all is trustworthy.

Step 5. Tour The Homes

Many sellers have open houses for their properties where anyone can walk inside and take a tour of the home. You can also arrange personal viewings with your real estate agent. When viewing a home, don’t be afraid to be a little nosy. Test outlets, showers, toilets and kitchen appliances to make sure they work. Make a mental note of repairs or replacements you might want to ask the seller to complete if you decide to buy the home. As you tour more homes and check out each neighborhood, you’ll get a better idea of the right home and community for you.

Step 6. Name Your Price

When you decide to make an offer on a home, you must submit an offer letter in writing. Your offer letter includes details about yourself (like your name and current address), the price you’re willing to pay for the home and more. It will also include a deadline for the seller to respond to your offer. Your agent will almost always write the offer letter on your behalf, but you can write it yourself if you choose.

Your agent will then get in contact with the seller or the seller’s agent to submit the offer. If you have a preapproval letter from a lender, your agent will likely include that letter as proof you’re ready to purchase a home. Being preapproved early in the process will give you and your real estate agent the confidence you need to make a competitive offer that will get noticed by sellers.

Negotiations may go on for some time after you submit your offer. Let your real estate agent help you manage negotiations – don’t be afraid to walk away if you can’t reach an agreement. Once you and the seller agree to an offer, it’s time to move on to the appraisal and inspection.

Step 7. Home Inspection And Appraisal

During a home inspection, an inspector will go through the home and specifically look for problems. They will test electrical systems, make sure the roofing is safe, make sure appliances are working and much more. Once the inspection is complete, the inspector will give you a list of problems they found in the home. This helps determine how much work may need to be completed before the home is up to your standard.

You must get an appraisal before you buy a home with a mortgage loan. A home appraisal is a review that gives the current value of the property you want to buy. Lenders require appraisals because they can’t lend out more money than a home is worth. If the appraised value comes back lower than your offer, you might have trouble getting financing. Be thoughtful about your offer, your real estate can give you market insight to make sure you’re making an informed and competitive offer.

Step 8. Close On The House

Your lender is required to give you your Closing Disclosure, which tells you what you need to pay at closing and summarizes your loan details. Read through your Closing Disclosure and make sure the numbers don’t vary too much from your loan estimate. Once you’ve reviewed your Closing Disclosure, it’s time to attend your closing meeting.

We recommend bringing the following items to the closing meeting:

  • Personal identification
  • Proof of home insurance
  • Bank statements
  • Copy of Closing Disclosures

You’ll sign a settlement statement, which lists all costs related to the home sale. This is when you pay your down payment and closing costs. You’ll also sign the mortgage note, which states that you promise to repay the loan. Finally, you’ll sign the mortgage or deed of trust to secure the mortgage note. Once all documents are signed, you’re a homeowner!

The Bottom Line

We’re excited for you! Buying a new home is a huge step and to navigate it gracefully we recommend making checklists to keep you on task and prepared. When you’re ready to get out there and tour home, bring your list of must-haves with you so you don’t stray too far from your home buying goals. When your real estate agent and lender start asking rapid-fire questions, you’ll have all your information ready to get the deal done because you’ve prepared yourself for the process.

When you’re ready to start house hunting, jump in and peruse the houses for sale on Rocket Homes.

Apply For A Mortgage Online

Carla Ayers

Carla is a freelance writer and Realtor with a background in marketing, communications and property management. She attended Eastern Michigan University where she received a Bachelors in Arts Marketing and a Masters in Integrated Marketing & Communications.