Before you start looking at houses, get your finances in order — check your credit, calculate what you can truly afford, save for the costs beyond the down payment, and get pre-approved. Skipping these steps leads to heartbreak, wasted time, or buying more house than you can handle.
The Complete Pre-Homebuying Checklist
| # | Task | Timeline | Priority |
|---|---|---|---|
| 1 | Check your credit reports (all 3 bureaus) | 12-18 months before | 🔴 Critical |
| 2 | Dispute any errors on credit reports | 12+ months before | 🔴 Critical |
| 3 | Pay down credit card balances below 30% utilization | 6-12 months before | 🔴 Critical |
| 4 | Stop opening new credit accounts | 6+ months before | 🟡 Important |
| 5 | Calculate your debt-to-income (DTI) ratio | 6-12 months before | 🔴 Critical |
| 6 | Save for down payment + closing costs + reserves | Ongoing | 🔴 Critical |
| 7 | Research loan types (conventional, FHA, VA, USDA) | 3-6 months before | 🟡 Important |
| 8 | Get pre-approved (not just pre-qualified) | 1-3 months before | 🔴 Critical |
| 9 | Budget for the true monthly cost of homeownership | Before making offers | 🔴 Critical |
| 10 | Research neighborhoods, schools, commute times | Ongoing | 🟡 Important |
| 11 | Hire a buyer’s agent | Before house hunting | 🟡 Important |
| 12 | Set aside money for moving and immediate repairs | Before closing | 🟢 Good to have |
How Much You Really Need Saved
| Cost | Amount (on $350K home) |
|---|---|
| Down payment (5%) | $17,500 |
| Down payment (10%) | $35,000 |
| Down payment (20% — avoids PMI) | $70,000 |
| Closing costs (2-5%) | $7,000-$17,500 |
| Home inspection | $300-$500 |
| Appraisal fee | $300-$600 |
| Moving expenses | $1,000-$5,000 |
| Immediate repairs/furnishing | $2,000-$10,000 |
| Emergency fund (3 months of new payment) | $6,000-$9,000 |
| Total (5% down) | $34,100-$59,600 |
| Total (20% down) | $86,600-$112,600 |
Credit Score Impact on Mortgage Rates
| Credit Score | Estimated Rate (30-yr fixed) | Monthly Payment ($350K) | Total Interest Paid |
|---|---|---|---|
| 760+ | 6.50% | $2,212 | $446,320 |
| 720-759 | 6.72% | $2,265 | $465,400 |
| 700-719 | 6.94% | $2,319 | $484,840 |
| 680-699 | 7.13% | $2,365 | $501,400 |
| 660-679 | 7.34% | $2,417 | $520,120 |
| 620-659 | 7.89% | $2,551 | $568,360 |
Improving your score from 680 to 760 could save you $122,040 in interest over 30 years.
True Monthly Cost of Homeownership
| Expense | Typical Monthly Cost |
|---|---|
| Mortgage payment (principal + interest) | Based on loan |
| Property taxes | $200-$500+ |
| Homeowners insurance | $100-$250 |
| PMI (if less than 20% down) | $100-$300 |
| HOA fees (if applicable) | $0-$400+ |
| Maintenance & repairs (1% of home value/year) | $290+ |
| Utilities | $200-$400 |
| Total beyond mortgage | $890-$2,140+/month |
Down Payment by Loan Type
| Loan Type | Minimum Down Payment | PMI Required? | Best For |
|---|---|---|---|
| Conventional | 3-5% | Yes, until 20% equity | Good credit (620+) |
| FHA | 3.5% | Yes (MIP for life of loan) | Lower credit (580+) |
| VA | 0% | No | Veterans / active military |
| USDA | 0% | Yes (guarantee fee) | Rural areas, income limits |
| Jumbo | 10-20% | Varies | Homes above conforming limit |
The Bottom Line
The biggest mistake first-time buyers make is starting to look at houses before their finances are ready. Give yourself 12-18 months of preparation: fix your credit, save aggressively, pay down debt, and get pre-approved before you ever set foot in an open house. The financial prep work saves you tens of thousands over the life of your mortgage.
Related: Before You Buy a House | Before You Sign a Lease
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