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Buying A House: The Ultimate Checklist

Written by:  

Andrew Tavin

Andrew Tavin

Andrew Tavin

Personal Finance Writer

Andrew Tavin a contributing writer for Own Up.

See full bio

Fact Checked by:  

Dan Silva

Dan is the Vice President of Marketplace Lending at Own Up. Throughout his career, he has held executive leadership positions in the mortgage and banking industry.

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A women sitting on the floor between moving boxes while she reviews a pile of papers with a pen in hand

A home is one of the biggest purchases you will make in your life, but trust us: A robust plan will make the process much less intimidating. A detailed home-buying checklist can be your guide and make sure you don't overlook anything.

That’s why we've compiled a detailed home-buying checklist you can follow as you make your journey into the housing market. From taking stock of your current finances to finding the perfect home, to mortgage and closing, we've got you covered.

Here are the steps you need to succeed and become a home-buying pro:

1. Do a Financial Checkup

As of the second quarter of 2023, the median home price in America was over $416,000. No one is going to hand over hundreds of thousands of dollars to a prospective home buyer without trusting they'll be able to pay that money back. With this in mind, you should expect a mortgage lender to closely review your finances before offering you a home loan.

The best way to prepare for the buying process is by putting a magnifying glass on your finances before the bank does. Here are a few items to review:

Your Income

First of all, if you don't have a regular and consistent source of income, it's probably not the right time to buy a house. Lenders want to be certain you're capable of affording your monthly mortgage payments in addition to all of your other expenses.

Your Credit Score and Reports

Next, you should check your credit scores and credit reports. Lenders rely on them to help determine which type of mortgage you'll qualify for, assuming you qualify at all.

There are three major credit reporting agencies: Experian, Equifax and TransUnion. You can request your full credit report from each of them for free, at www.annualcreditreport.com.

The information in a credit repttps://resources.ownup.com/credit-scores-for-mortgages-what-you-need-to-get-approvedort is typically converted into a score between 300 and 850. Scores over 760 will earn you the best rates and terms. Scores under 500 are almost always too low for mortgage approval. VA loans and FHA loans aren't as strict when it comes to credit scores, but they do come with other restrictions.

If you have a low credit score and still manage to qualify for a mortgage, you may end up paying higher interest rates, higher fees, or both. If your score is on the lower side, consider waiting to begin the buying process until you've paid down some of your debts. You can also raise your score by using a credit card for purchases and paying your bill in full each month.

Also be sure to look for any mistakes on your credit report and contact the corresponding credit bureau to have them corrected.

Existing Debts

In addition to your credit history, mortgage lenders will also consider your DTI, or debt-to-income ratio. You can calculate your DTI by dividing your current monthly debt payments by your regular monthly income.

If your DTI is much higher than 40%, you'll struggle to be approved. Even if you are, it'll be with less favorable rates. In this case, it may be worth postponing your buying experience until you can lower your DTI to the 20% range. That way you'll have more money available should any unexpected expenses arise once you've settled into your new home.

Your Savings and Cash on Hand

Finally, you should evaluate your current savings to determine if you can cover the down payment and the closing costs. The amount of your down payment will impact the size of your mortgage loan and monthly payments.

See What You Qualify For

2. Set a Budget

Before you officially begin the home-buying process, you need to determine how much you can afford to pay – not just upfront, but every month for the life of the loan. You can do this by creating a monthly budget.

Here are some steps to get you started:

  • Start by figuring out your monthly income after taxes.
  • Next, subtract the costs of your regular monthly expenses, including credit card payments, student loans, car payments, and all other recurring expenses (such as groceries, gas, etc.).
  • Pinpoint how much money you spend each month on your wants vs. needs. You’ve already identified your needs, but try to be realistic about how much you spend on extraneous expenses, such as dining, entertainment, etc.
  • Be sure you're also putting some money away each month to maintain an emergency fund. A good rule of thumb is 10% or 20% of your monthly income, but any amount that you can afford is helpful.

Once you’ve gone through the above steps, you should have a sense of how much extra money you have each month that you could direct towards housing payments.

Bonus tip: You can use an affordability calculator to determine your potential monthly payment in different types of scenarios. Try calculating your monthly payment with different loan amounts, interest rates, down payment amounts, and home prices. Don’t forget to consider the cost of property taxes, homeowners insurance, potential HOA fees, and any other expenses that are affiliated with homeownership.

3. Talk to Mortgage Lenders and Obtain Mortgage Pre-Approval

It's a good idea to talk to mortgage lenders early in the home-buying process.

The first reason to talk to lenders is that they'll give you a feel for the types of mortgages you may be able to qualify for. You can ask as many questions as you'd like about possible terms, interest rates, and the cost of doing business with them (such as fees that may apply to your loan). It also allows you to find the loan officer or mortgage broker with whom you're going to get the best rate and be most comfortable doing business.

Second, you'll be able to ask your chosen mortgage lender for a mortgage pre-approval letter. This isn't a guarantee that you'll get a loan. It's simply a statement that you're financially qualified to receive one based on a preliminary examination of your finances.

A pre-approval letter will include a maximum loan amount, which gives you a firmer idea of what you can spend on a new home. Keep in mind that it’s common to receive pre-approval for a larger loan amount than you can actually afford.

A mortgage pre-approval isn't a necessity when you want to shop for a home, but it can be a helpful tool in a competitive market. Some sellers won't give an offer without a pre-approval letter the same weight as one from a pre-approved buyer. Similarly, some realtors won't give their full attention to buyers who have not yet been pre-approved. Overall, a pre-approval can make it much easier to navigate a challenging market.

Be certain that you're applying for a pre-approval and not just a pre-qualification. While a pre-qualification may involve a basic credit check, pre-approval is more rigorous. It resembles the actual mortgage process, requiring both a loan application and bank account statements.

Not sure how to choose a mortgage lender? Try to obtain quotes from a range of mortgage originators, including mortgage companies, national lenders, local banks, and credit unions. Read reviews about each potential lender and don't be afraid to ask the loan officer about the amount of their commission on your mortgage. Typically, the higher the loan officer's commission, the more the borrower can expect to pay in either their interest rate or in fees.

You should also ask about different types of loans. FHA loans, for example, are backed by the Federal Housing Administration and tend to be a good option for many first-time homebuyers.

4. Find a Real Estate Agent You Trust

There's little reason to buy a home without a real estate agent, since the seller usually pays the fees for the buyer's agent as well as their own.

There's nothing wrong with researching online real estate sites or going to open houses on your own, but an experienced agent can be your best ally when you become serious in your search. They can be especially helpful if this is your first home and you haven't been through the process before.

A real estate agent can provide expertise on local market conditions. The agent will let you know if a purchase price is fair, help you prepare your offers, and work through any sticking points that may develop. They can also suggest the best neighborhoods or school districts if you're new to the area, and may even have access to homes which haven't been publicly listed yet.

Speak with a number of agents and get recommendations from friends or trusted online sources before making your choice. The right agent can make all the difference between a smooth buying experience and a frustrating one.

5. Gather the Required Documentation

At some point, you'll need to submit a lot of financial documentation to a lender to complete your mortgage process. The last thing you want is to find your perfect home only to lose it to other prospective purchasers while you're digging up some tax documents. This can be one of the most stressful parts of the process, but don’t worry: You’re one step closer to your new home.

Among the documents you'll likely be asked to supply are:

  • The last two years' of your tax returns
  • Pay stubs or other documentation of income for the last two months
  • All bank statements, plus brokerage and investment account statements, for the last two years
  • Proof of funds for down payment and closing (or a gift letter, if someone is giving you the money)
  • Letter of recommendation from previous landlord, if you've been a renter
  • ID (preferably a driver's license or passport)

You can ask your pre-approval lender if there are any other documents you should gather, but these basics should be a good start.

6. Shop for Your Dream House

Time to go house hunting.

Make a list of what's absolutely essential in a house, what would be nice to have, and what's a deal breaker. Along with the budget you developed, this list will help narrow down your choices.

Your agent will be your best guide through the process, but don't be afraid to trust your gut. If you find your dream home but it needs a few thousand dollars in repairs, it could still be worth making an offer.

On the other hand, if all the numbers and details are supposedly “right,” but you simply don't think you'd be comfortable living in the house, don't feel obligated to settle. This is a big decision – and a long-term one, as well.

That being said, be mindful of any timetable you may be working with since it normally takes 30-45 days to close on a new house. If you want to settle in before the start of a new school year, if your previous house is on the market, or if your current lease is expiring and you have to be out by a certain date, you may not have the luxury of searching for months on end. In a competitive market, time is of the essence, since competing offers may be common due to low supply.

7. Hire a Lawyer

In some states you're required to have a lawyer represent you during the home purchase process, but it's optional in others. Your realtor can tell you whether it's a necessity in your area, but a lawyer is recommended given the complexity and major life significance of homebuying.

If your purchase is going to be a straightforward one, you may be fine without the extra expense of hiring a real estate attorney. Most transactions and closings are handled with standardized paperwork, and good real estate agents are experienced at making sure they go smoothly.

You should, however, hire a good real estate lawyer if:

  • Your state requires it.
  • You're not comfortable committing yourself to such a major purchase without the advice of an attorney.
  • You want help with any tricky issues or negotiations involved with a home purchase. These could include tax liens, short sales, issues that arise during a home inspection, or unexpected title problems.

Overall, a real estate lawyer can review and advise you on the multitude of documentation involved in the purchase contract and closing, preventing any expensive missteps.

Don't just hire the cheapest attorney you can find. This is a big purchase with long-term consequences. Your real estate agent may be able to recommend one, as they've probably worked with many of the attorneys in the area.

8. Make an Offer and Negotiate

Finally! You've found the home of your dreams – or you've at least found a home within your budget that meets all of the requirements on your buying checklist.

Your realtor will once again be your best friend and can walk you through how to make an offer on a house. They'll know the market and can advise you on the right amount to offer, as well as if they anticipate other offers on the property. That will help you decide how aggressively to bid.

After making an offer on a house, you may have to negotiate back and forth with the seller for several days. It can be frustrating, because it usually has to be done with written counter-offers and response deadlines, but it will all be worth it once you've settled into your new home.

Be prepared to include a check or money order with your offer to show that you're serious about the deal. This is called the earnest money deposit and the amount you submit often depends on your local market and the specific listing.

An earnest money deposit may be anywhere from 1-3% of the purchase price, or it could be a fixed amount like $2,000 or $3,000 for a reasonably priced home. The money is held in an escrow account and applied to the purchase price at closing. If the deal falls through because of a problem on the seller's end, you get your money back. If the problem is on your end however(like if you can't finalize your mortgage approval), you may lose it.

9. Finalize Your Financing

Once you and the seller have agreed on a price and have a contract in place, it's time for the actual mortgage application. Get ready to present those documents you have gathered and expect to go back and forth with your loan officer or mortgage broker multiple times during this process.

Underwriters, the people crunching the numbers, will usually have questions about your personal finances as they review your documents in full detail. They may make several requests for more documents, or for letters of explanation if there are any specifics that need further clarification.

Final approval may not come until shortly before the closing date, which is why it's a good idea to make sure you have all your documents in order before applying. The lender is going to be committing a huge amount of money, and wants to be 100% sure that you're an acceptable risk for the loan.

There are a couple other tasks you will have to complete at this time. Find an insurance company, or call your existing one, to arrange for homeowners insurance coverage. You'll also need to be sure the title search and title insurance are covered so there's no question of ownership. Your agent or lender should be able to guide you through this step.

10. Go Through the Home Inspection and Home Appraisal Process

While you're waiting for approval from your lender you can proceed with the inspection.

Typically, you will want to have a home inspection performed on a property prior to closing on a contract in addition to a contingency clause in your contract that says the house must pass inspection in order for the sale to close. This will assure you that there are no hidden structural or functional problems with the house, and will provide evidence for any contingencies that are written into the contract.

Typically the buyer pays for the basic inspection; your agent can suggest several reputable inspectors. You're welcome to stay with the inspector as they do their work, and you'll receive the entire house inspector checklist when it's done.

A home inspection may find minor problems in the home like electrical or plumbing issues that can easily be repaired, or it may uncover more serious problems like mold or a cracked foundation. It's up to you whether the issues are serious enough to back out of the deal, demand that the problems be repaired before closing, or agree to the sale “as is” and cover the repair expenses on your own.

A termite and pest inspection should also be done. Some home inspectors include these or you may need to call a separate exterminator company for the job.

The lender will also want an appraisal done to ensure that the home is worth what you've agreed to pay for it. You will probably need to arrange for the appraisal to be done at your expense.

11. Closing on Your New Home

Purchase agreements are done, inspections are complete, contingencies have been met, and financing is in place. All that's left is signing mountains of paperwork, receiving the keys to your new house, and of course, forking over your closing costs.

Be sure to have a few thousand dollars set aside for mortgage closing costs to cover underwriting fees, attorney fees, the rest of your down payment, and more.

Before or on the closing day, you will need:

  • Either a certified check or a scheduled wire payment for your down payment and closing costs.
  • Proof of homeowner's insurance coverage
  • An ID, such as a driver's license.

The closing process itself is sometimes completed in person, but now, more than a dozen states allow it to be done online through a secure digital eSigning service.

If you have a real estate attorney, they should be with you at the closing to read all the documents before you sign them, and if you can't attend an in-person closing, you can assign your power of attorney to another party.

The Bottom Line

You may experience a mixture of nervousness, anticipation, and boredom at a closing, since you're making a huge commitment, excited about taking possession of your new home, and sitting there for at least an hour signing document after document.

But the hardest part is behind you. Before you know it, you'll own a brand new house and it'll all feel worth it. Welcome to homeownership!

See What You Qualify For

See What You Qualify For



The information provided to you in Own Up blog is intended to be for general informational and educational purposes only and does not constitute legal or tax advice. This blog is not a substitute for obtaining legal or tax advice from a qualified professional. The views and opinions expressed on this blog are solely those of the authors and do not necessarily reflect the official policy or position of Own Up or describe Own Up's business model. Own Up makes no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability or availability with respect to the blog or the information, products, services, or related graphics contained on the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk.