Homebuying checklist

1. Find out how much house you can afford

Aim for a mortgage limit that’s two to three times your household income.

Remember, your loan payment isn’t your only home expense. You’ll pay closing costs and deal with recurring expenses, including homeowners insurance, property taxes and repairs. Lenders often qualify you for a larger mortgage than you can comfortably afford, so don’t feel like you have to take out the full amount.

According to the Federal Deposit Insurance Corporation, a good rule of thumb is to get a mortgage that’s no more than two to three times your household income.

For example, say you and your spouse earn a combined $90,000 annually. You’d want to set your mortgage budget between $180,000 ($90,000 x 2) and $270,000 ($90,000 x 3). Ultimately, your other living expenses will help you determine the amount that’s right for you.

2. Save for a down payment

A down payment is a lump sum of money you pay upfront toward the property. You immediately gain that amount of equity in your home. For instance, if you put down $20,000 on a $100,000 home, you start with 20% equity in the property.

The larger your down payment, the lower your monthly mortgage payment is. Also, if you put down less than 20% on your home and get a conventional mortgage, you’ll have to pay private mortgage insurance until you reach 20% equity in the property.

Here are the minimum down payment amounts for various types of mortgage loans:

• Conventional mortgages: Varies by lender, but at least 3%
• FHA loans: 3.5%
• USDA loans: 0%
• VA loans: 0%

3. Find a lender

When buying a home, the lender you choose to work with matters. “If you don't get a call back within the hour from the lender you are trying to reach, they are either too busy or not focused on your business, so go to the next choice,” said Ellen I. Sykes, a broker at Coldwell Banker Warburg. “Make sure it is a person with whom you can communicate easily and that you understand what they are saying.”

As one ConsumerAffairs reviewer from Virginia discovered, the right lender can make all the difference. They said: “I found a new job and needed to move quickly from Colorado to Virginia. [My mortgage company] got me pre-qualified quickly, recommended a super good real estate agent who found an excellent house on a good piece of land.”

You can find the right lender for you by shopping for mortgage rates and reading reviews. If you know that you will get a government-backed mortgage instead of a conventional home loan, make sure you search for lenders that specialize in your desired loan type. Sykes also recommends checking that the lender has its license number displayed and that it talks with you about all possible options, not just one product.

» MORE: Types of mortgage loans

4. Get preapproved

Once you find a good mortgage lender, you’ll want to get preapproved. Preapproval is the closest thing to getting your loan before closing. It gives you conditional approval of your loan amount and interest rate and describes the type of loan you’re approved for.

To get preapproved, you submit financial and other documentation to the lender so it can determine the loan size and terms to offer you. The lender will likely require you to provide:

• A copy of your state-issued ID
• Documents verifying your income
• A list of your assets
• Information on your debt
• Miscellaneous documents related to bankruptcies, foreclosures, rent history, etc.

The lender runs a hard inquiry to formally check your credit. If the lender preapproves you, you’ll receive a preapproval letter that’s good for 60 to 90 days.

5. Get a real estate agent

Buying a home is complicated. It can turn into a full-time job without expert help — which is where a real estate agent comes in.

Real estate agents are licensed industry professionals who help you complete real estate transactions. They help you find a home to purchase and handle other tasks, including writing up the purchase offer and acting as your representative throughout the homebuying process.

Buyers and sellers usually have agents to represent their interests.

Most agents receive a commission based on the home’s price, meaning they only get paid if you close the deal. That incentivizes them to get things done as quickly and accurately as possible. Buyers and sellers can get agents to represent their interests.

Many people find good agents through referrals from family and friends. If you know someone who was in a similar homebuying situation to yours, talking to them might be a good place to start.

Otherwise, you can research online for agents through organizations like the National Association of Realtors (NAR). Research each candidate to see their experience, and be sure to look at reviews or testimonials.

Ideally, you want someone with experience working with clients similar to you. You also want to make sure there’s a good personality fit — you’ll be working closely for an extended period.

6. Find a home

Now comes the fun part. Time to find a home!

Online listings are a preferred way to start the home shopping process since you can sort and filter by multiple criteria. That includes age, home type, price, location, number of bedrooms and bathrooms, amenities and more. One ConsumerAffairs reviewer from California used an online listing site to see “location, description, aerial maps, distances to your job, property details, public facts, schools, estimate, flood risk, sale and tax history” on possible homes.

Many listings now offer 3D tours to help you get a feel of the property from the comfort of your couch. However, an in-person tour often gives you a better idea of the house’s condition and gives you the ability to look more closely at the house.

Schedule a walk-through on the homes you love to get a better feeling about the neighborhood. Your agent will likely accompany you and help by keeping a close, professional eye out for any potential problems while you get a general sense of the home. You can then weigh any flaws to see how important they are to you.

7. Make an offer

If you really like a home, it’s time to make an offer to the seller.

To make a good offer, it helps to know whether it’s a buyer’s or seller’s market and how hot the market is in either direction. This will indicate how much competition you may have to purchase the home. You’ll also want to research comparable homes in the area to see what they’re selling for. Your real estate agent can help you with this.

When making an offer, you’ll include earnest money to show you’re seriously interested in buying the property. The seller usually gets the money if you back out or change your mind, so this shows commitment.

You may also want to get a real estate lawyer at this point. Depending on your lender and location, you might be required to get one.

Even if hiring an attorney isn’t required, it can be a great investment. At this stage, they’ll help you draw up contingencies to add to the home purchase agreement. These contingencies must be met before closing on the home. Otherwise, you can back out and keep your earnest money. An attorney can also help with any other legal issues or questions.

A word of caution: Just because your lender preapproved you for a certain amount doesn’t mean you need to use it all. Sometimes, lenders preapprove you for more than you can comfortably afford. It’s totally fine to make an offer on the home that’s less than your preapproval amount if the offer makes sense for the home.

» MORE: How much to offer on a house

8. Secure your mortgage

If your offer is approved, it’s time to formally apply for your mortgage.

Since you’re already preapproved, much of the work is done. You’ll need to submit a few more documents, including the purchase agreement.

The mortgage underwriter then looks over the agreement, all your previous paperwork and the property details. They ensure everything lines up with guidelines from the lender and any other relevant entities, such as the FHA, USDA or VA (if you’re taking out a government-backed loan).

If everything looks good, you’ll be on track to get your loan.

In some cases, the underwriter may grant a conditional approval. This means you’ll likely get approved, but the underwriter or someone else needs more information before finishing up. Once you provide this information and the underwriter or other relevant parties confirm it’s what they need, you should be set to receive your loan.

» MORE: Best mortgage lenders

9. Schedule an inspection

Home inspections are usually not necessary to close on a home — but getting one is strongly recommended. Sometimes the seller knowingly or unknowingly fails to disclose problems with the home that may require repairs. Additionally, you and your real estate agent may have missed these issues during the walk-through.

Home inspectors can often uncover issues you didn’t notice and provide a report with any problems they find. If they find issues, you could have additional negotiating power or legally back out of the sale. You may be able to demand the seller pay to fix the issues before you close on the home, or you can negotiate a lower price.

10. Get an appraisal

Before you close on the home, the lender will request a third-party appraisal. It’s your responsibility to pay for it.

The appraisal is different from a home inspection — the appraiser isn’t looking for problems to be fixed. Rather, they're estimating the value of the property.

If the home’s valuation is significantly lower than expected, you may be able to back out of the deal if you have an appraisal contingency in your purchase offer.

11. Negotiate price

You have less negotiating power if it’s a seller’s market, which means more people are interested in buying homes than selling them.

It’s almost time to close on your new home — but first, you may have some room to negotiate a better price. For instance, if the appraisal comes back significantly under the price you and the seller initially agreed upon, you may be able to talk the price down.

As mentioned earlier, unrepaired problems can also grant you negotiating power. You can ask for the repairs to be made or persuade the seller to lower the price.

Market conditions also play a role. If you’re in a seller’s market — meaning there’s a lot of buyer demand and fewer homes for sale — the seller may not budge. After all, they probably have others lining up to buy.

Things are different in a buyer’s market. You can talk the price down more easily, especially if the appraisal or inspection results warrant a lower price.

12. Close on the home

When it’s time to close on the home, you’ll do one final walk-through. This ensures the home is in the same condition as when you first entered the agreement.

After that, it’s time for the paperwork. You’ll need a lot of documents, but your agent — and maybe your lawyer — are there to help you figure out what to bring to the closing.

Some items you’ll need include:

• ID
• Funds to pay for closing costs
• Proof of homeowners insurance
• Deed of trust (makes the home collateral for your mortgage)

There could be more documentation required, so work with your agent and lawyer. Be sure to make copies of all important documents and keep them somewhere safe.

You’ll also need a document called a Closing Disclosure. This outlines all your mortgage loan’s terms so you can review everything before signing. By law, buyers must receive this no later than three days before the closing date.

If everything looks right, sign all the necessary papers, and the seller will officially hand you the keys.

Bottom line

Buying a new home is a long process, which is why it is essential to take care in choosing the right home, lender and real estate agent. Following this checklist will help you stay on track with your homebuying budget and know what to expect along the journey.