My best move: A Checklist for Homebuyers

Whether you are a First Time Homebuyer or have the confidence of experienced homeowners, buying a new home is always going to be stressful. We have constructed a handy checklist of ten simple things you can do beforehand to make the process a lot more organized and simple. Before you start packing, here’s what you need to consider doing.

1. Take Stock of Your Finances and Figure Out What You Can Afford

   Buying a home is very likely the biggest investment of your life. Therefore, it is critically important to analyze your finances to find out what you can afford before you do anything else. If you already pay for housing (as in rent), you’re a step ahead of the game. Follow these steps to get a full snapshot of your financial state: 
   
   a. Get your credit score: Your credit score will help determine the interest rate for your home loan, decide which types of mortgages you qualify for, and can even make or break your eligibility for a loan in the first place. To get a free Fico score, we suggest banking at a local credit union like Canvas Credit Union. They are a non-profit 501c financial cooperative whose board members are local members developing trustworthy financial solutions.
   
   b. Analyze your expenses: aside from rent, figure out exactly what you pay in student loans, credit cards, car payments, and anything else. Affordability calculator
   
   c. Keep careful track of spending for a month or two. Separate your expenses into categories such as groceries, entertainment, clothing, and whatever else you buy. 
   
   Compare your total current expenses against your income and savings to help determine what you can afford each month. Don’t forget the additional costs of homeownership, such as a higher electric or heating bill, lawn and yard care, HOA fees, and more. In addition, decide if you’re willing to scale back any of your spending areas to get more house. 
   
   Once you complete this step, you’ll have an idea of what you can comfortably afford for a mortgage payment. You should also calculate your DTI, or debt to income ratio (you can find a good guide on this checklist). If your home purchase keeps you under 36% DTI, you’ll get the best terms for your home loan. 
   
   Some hopeful home buyers need to pump the brakes already. If you don’t have a steady income, have a poor credit score, are carrying too much debt, or find that your spending is too high, take some steps to remedy the problem(s) and then revisit. 

2. Familiarize Yourself with the Market and Decide What You Want

   It’s always a good idea to know exactly what you’re getting into when you buy a home. That’s why we recommend that all potential home buyers familiarize themselves with the housing market in the area where they want to buy well before beginning their house hunt. Easy to save data and market reports through our Property Search
   
   Browse online listings (there are even several smartphone applications you can use) to get a sense of what is and is not available in your price range. You might be pleasantly or unpleasantly surprised by what you can get or may have to sacrifice. 
   
   Next, decide on a few must-haves that you cannot live without. This might be an extra bedroom to use as an office, plenty of storage and closet space, a yard for pets, or anything else that you need for your lifestyle. 
   
   After you’ve decided on your must-haves, make your wish list. These are items that you want, but that you’re willing to sacrifice. For some people, these include the number of bedrooms and bathrooms, an updated kitchen, or any number of other features. 
   
   Remember that there are only a few things that you usually can’t change about your house: its location and neighborhood, the size of the lot, the school district, and the basic structure of the home, including room size. Consider these especially when making your lists.

3. Get Pre-Approved for a Mortgage and Gather Your Documents

   Before you formally begin your house hunt, you need to get pre-approved for a mortgage loan. During this process, a mortgage broker will do a thorough evaluation of you and your spouse or other co-signer, and your readiness/risk for a home loan. 
   
   The broker will run a credit check, verify all sources of income, ask about your savings and how much money you plan to use as a down payment, and analyze your current debt obligations. They will then tell you whether or not you qualify, and if so, how much you can borrow. 
   
   Mortgage brokers are knowledgeable in their field, but it is also your responsibility to ask about all your loan options and make sure that you’re getting the best deal for the short and long term. 
   
   In addition to getting pre-approved, this is also a good time to gather all of the documents that you will need throughout the entire process. 
   
   FIRST TIME HOME BUYER PROGRAMS (Colorado) – Nerd Wallet

4. Find a Real Estate Agent You Trust

   Here’s a bit of good news: in most places in the US, hiring a real estate agent for your home purchase won’t cost you anything. Their commission comes out of the listing agent’s commission, which is paid by the seller. 
   
   Hiring a good realtor is especially crucial for first-time homebuyers since they can walk you through the ins and outs of the complicated legalities and negotiations that the process entails. 
   
   Feel free to speak to and interview a number of agents and get recommendations from friends and family who have recently bought or sold. According to Opendoor, more than half of people hire an agent who was referred to them by someone they know. 

5. Let the House Hunt Begin

   This is one of the most fun parts of buying a home — actually getting out there and looking! 
   
   A lot of home buyers start with open houses, even if they’re not extremely interested in the home that’s being shown. This is because it allows you to look without having to schedule a showing and is a good way of knowing what to expect. But on the other hand, you may just stumble upon your dream home, so don’t count it out. We still suggest becoming familiar with Littleton Communities along the way.
   
   How much time this phase takes varies a great deal depending on a few factors: 
   The home buyers: we’re not saying that it’s a bad idea to be picky when it comes to buying a house, but the more “must-have”s you come up with and items on your wish list, the longer it might take. That is unless you’re willing to compromise on some of them. If nothing is found after 10 or more listings are viewed, in your favorite area, this is a sign that competition is high in that market.
   
   Availability of homes for sale: if there aren’t a lot of homes on the market, you’ll have to wait. This can be affected by the time of the year. The most popular time to buy and sell is spring. 
   
   Your competition: it is stressful for some people to think about home buying as a competitive enterprise, but in many markets, that’s the case. If there are more home buyers than there are homes for sale, you’re even more likely to have to compete for your dream home. There are a few things that you can do to put yourself in a better position, should this happen: 
   
   Get pre-approved and have all of your paperwork ready to go: that way, there are no unexpected hiccups when you make an offer. 
   
   Have an experienced realtor or agent: they can act quickly on your behalf and are probably seasoned negotiators. 
   
   Stay on top of the market: this is another way that your realtor can really help you out.
   On your own, sign up for alerts about upcoming listings and check regularly.
   Broaden your search area and filters to make sure that you don’t miss anything. 

6. Make an Offer and Negotiate

   Congratulations! You’ve found a home that works for your family. Now it’s time to make an offer. How you go about this depends a great deal on the market, the seller, and how badly you want the house. A real estate agent can walk you through this process according to your particular situation. 
   
   Unless they’re for full price (and sometimes even when they are), first offers are rarely accepted. Be prepared to negotiate with the seller through your agents. Again, your particular situation will determine how flexible you are through this process. 
   
   Once you and the seller agree on purchase terms, you’ll sign a contract and put down earnest money. This is usually 1% to 3% of the purchase price of the home to demonstrate that you’re serious. This money is only refundable if the sellers back out or causes the deal to fall through, so make sure that you aren’t going to change your mind.

7. Have the Home Inspected and Appraised

   Inspections and appraisals are very often required by many mortgage lenders, but either way, both are musts. The appraisal places a value on the home and makes sure you’re not paying too much. Most mortgage companies won’t issue a loan for more than a house appraises at. 
   
   For the inspection, you hire an expert (in many states, home inspectors are required to obtain a license) to look at every nook and cranny and examine every inch of the home that you’re about to buy. Typically, both you and the seller have a right to be present for the inspection. Once it’s complete, you should sit down with the inspector to go over their report. They’ll explain everything they found wrong or that could be a potential problem and provide an overall assessment of the home. 
   
   You may have heard of a home “failing” its inspection. This happens when the inspector finds an issue or problem that the seller must remedy in order to legally sell the home. It doesn’t have to tank the sale, but it can give you a leg up or potentially cause problems during the next phase of the home buying process. 

8. Renegotiate and Finalize Financing

   Both the appraisal and the inspection can be starting points for more negotiations. The other party with a hand in this process is the mortgage lender. They want to make sure that they aren’t loaning you an inappropriate amount of money, and that the home will be worth more than their financial interest in it. 
   
   If the home is appraised for less money than the agreed-upon purchase price, the mortgage company or bank will require the price to be lowered, as we discussed above. 
   
   As long as the house passed inspection, the seller isn’t required to fix anything on the report. That said, you can almost always ask for some repairs to be made or money off of the sale price. How much you can get probably depends on the market, as well as how much you and the seller have already negotiated. 
   
   Once that’s done and you have the final sale price, it’s time to finish up the financing process with your mortgage broker. People called underwriters crunch the numbers and come up with all of your financing information and all of the terms of your mortgage. This process can take several weeks, and during that time, the underwriter and mortgage loan broker will probably ask you for more and more documents. It might seem endless, but remember that the faster you get back to them, the faster you can schedule your closing. 
   
   In the meantime, you need to procure home insurance (usually required before the closing), as well as start the process of having all utilities switched over into your name. 

9. Close on Your New Home

   You will have set a tentative closing date much earlier in this process that works on everyone’s (the seller, the home buyer, the agents, and the mortgage lender) timetables. That date won’t be formalized until very close to the end, though. 
   
   Your agent will walk you through how the closing will go and what you need to bring to the closing. The biggest item will undoubtedly be the check: the money you owe at closing. This can be a nerve-wracking prospect for first-time home buyers especially. It’s definitely a big commitment, but also one filled with joy and hope. 

10. Move In!

    We won’t mince words: home buying is a stressful process. But once you cross the finish line and are living in your new home, we promise it will all be worth it. Not only that, but by following this checklist, you know that you’ve made a solid, smart investment that will benefit your family in the long term. 
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