First-Time Buyer Checklist

Review this checklist when preparing to buy your first home.

Know Your Financial Profile

Preparing to buy your first home can be daunting. I’ll keep this list as short, succinct, and helpful as possible.

Before anything else, it is important to note your work history. Roughly 2-years of work history will always be required unless you are just graduating from college or advanced training, this 2-year work history does not always need to be consecutive.

Here is a breakdown of the most common financial profiles to help you decide which profile may best describe you. Are you:

– A W2 employee with a steady annual salary?
– A 1099 contractor or self-employed with variable income?
– A business owner relying on bank statements?
– A retiree or investor using asset depletion strategies?
– A combination of some or all of these?

It also matters if you are applying independently or with a co-borrower. If you are applying with a co-borrower or multiple co-borrowers, their financial profiles also become a part of the equation.

Knowing this shapes the best mortgage path forward and what type of mortgage best suits your needs.

If you are not sure where you fall? Start here and take this short quiz to find out.

Gather Your Documents

For W2 Employees:
– 2 most recent pay stubs
– Last 2 years of W2s
– Last 2 months of bank statements

For 1099 / Self-Employed:
– Last 2 years of tax returns (1040s)
– Year-to-date profit & loss statement
– Business license or 1099s
– Last 2 months of bank statements (business or personal)

Business Owners using Bank Statements:
– 12 to 24 months of business bank statements
– Proof of business ownership (e.g., business license, CPA letter, LLC docs)
– Business expense ratio documentation (CPA letter or stated ratio accepted by lender)

Retirees or Investors using Asset Depletion:
– Retirement/investment account statements (60 days)
– Proof of asset ownership (title, deed, etc.)

For Everyone:
– Government-issued ID
– Social Security number
– Proof of any additional income (child support, rental, etc.) may require last 2 years of tax returns (1040s)

Understand Cash Requirements

When buying a home there are 3 main considerations when determining if you have enough cash on hand to qualify.

1. Down Payment (DP)
– Down Payments can go down to 3% for FTHB’s with conventional loans with Fannie Mae’s HomeReady, or FreddieMac’s HomePossible.
– Additionally, there are also 1% down conventional programs. The one I know of as of writing this requires a 620 minimum FICO, and has an 80% AMI limit with a max purchase price of $350,000.
– If none of these options seem fitting, then Down Payment Assistance (DPA) is also an option. These are either grants (meaning they do not need to be paid back) or 2nd liens (like a 2nd mortgage or additional loan) that must be qualified for. Some DPA programs can even help cover a portion of closing costs in addition to the down payment.
To learn more about DPA programs just click here to read more information.

2. Closing Costs (CC)

Closing costs are estimated to be anywhere between 2% to 5% of the sales price. This is in addition to the down payment requirement. There are numerous items that closing cost cover, here is a non-comprehensive breakdown of what is typically included in closing costs:
– Loan Origination Fees
– Mortgage Points (if applicable)
– Appraisal and Survey Fees
– Title Insurnace
– Homeowners Insurance
– Property Tax
– Closing or escrow fees
– Attorney fees

3. Reserve Requirements (RR)

Different mortgages have different reserve requirements. It is advised to talk to your loan officer or trusted mortgage expert to get a better understanding of any reserve requirements applicable to your specific scenario.

Getting Pre-Approved

Getting pre-approved is a critical and necessary step when purchasing a home if you are not a cash buyer. Considering that only 32.1% of home sales in 2024 were cash purchases according to redfin, that means roughly 67.9% of home buyers will need a mortgage or some type of financing.

What a Pre-Approval Gives You:
– Your maximum affordability.
– The ability submit strong offers on listed homes with the guidance of an experienced real estate agent.

What You’ll Need to get a Pre-Approval:
– A quick online form or conversation with your loan officer to complete the initial application. (This is to complete the 1003 – URLA)
– Your documents listed from above in Step 2
– Consent to run a credit check

Pro Tip:
Many buyers confuse pre-qualification with pre-approval. Pre-approval is stronger, it includes verified financials and a credit pull. Sellers take it more seriously.