A Must-Have House Hunting Checklist

Am I ready? How do I start the process? Do I have enough money saved?

These might be just some of the questions that you’re asking yourself as you prepare to buy a house.

Thanks to the assistance of more than 10 real estate experts, we have created a house hunting checklist that will help you feel more prepared for finding and buying your dream house.

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Let's get started. Dive deeper into one of the tips below or start from the very beginning:

1. Get financially fit
2. Build a strong real estate team
3. Get a full pre-approval
4. Evaluate what type of home you want
5. Determine your priorities and deal breakers

1. Get financially fit

Multiple financial factors can affect home loan approval. Typically, the most important factors include the following:

• Credit score
• Debt-to-income (DTI) ratio
• Down payment

Work on your credit score

Credit score requirements vary based on lender and loan type, but a 620 credit score is generally the minimum requirement for conventional mortgage products. 

Your credit score plays a significant role in loan approval and determining what rate you qualify for. Therefore, while there are options to buy a house with bad credit, you should be aware of your credit score and do everything you can to increase it.

Senior Loan Officer Kim Hankins advises prospective homebuyers on specific ways to protect and improve their credit score:

Treat your credit score like your adult GPA, and be organized and conservative with your finances — that’s all a lender could ever dream. First-time homebuyers often overlook the importance of a strong credit score. An 800 credit score is more valuable than $100,000 in the bank.

Manage your existing debts

In addition to your credit score, mortgage lenders are also interested in how much money you have tied up in other debts. This is illustrated as a percentage known as your debt-to-income (DTI) ratio, which is calculated by dividing your monthly expenses by your gross monthly income.

While you want to ensure that your credit score is high, you want to aim for a low DTI ratio. In most cases, you will need to have a DTI ratio of 43 percent or less to qualify for a mortgage. 

While there may be some exceptions to this rule, mortgage lenders are less likely to approve you for a home loan if they see that you already have a substantial amount of debt — they want to make sure that you’ll be able to make your mortgage payments.

If you calculate your DTI ratio and discover that it is higher than the recommended 43 percent, work on paying off some of your existing debts or consider consolidating debt. Either option could help you secure lower interest rates, reducing your monthly mortgage payments.

Consistently save for your home

A 20 percent down payment is recommended when buying a house. However, that doesn’t mean that a 20 percent down payment is the fixed rule. In fact, most homebuyers make a down payment between 12 and 16 percent. Many mortgage lenders even have lower down payment options from 3 to 5 percent.

When saving money to buy a house, it is also important to factor in closing costs. Closing costs usually account for about 2 to 5 percent of the purchase amount on the house you are closing on.

Keeping all these costs in mind, it’s beneficial to save money and put aside a portion of your income. Doing so can provide you with peace of mind, as well as the confidence that you are financially prepared to purchase a house.

Determine how much home you can realistically afford

Utilize a home affordability calculator and consult with lenders about your financial situation to determine how much home you can afford. John Bodrozic, co-founder of HomeZada, recommends doing thorough research of the costs associated with homeownership:

Use mortgage calculators to estimate your monthly payments and estimate the annual household expenses, such as utilities, property taxes, and preventative and normal repair costs. Once you have these numbers, then you will know what price range of a home your finances will support.

This method makes sure you are looking for a house that is within your budget, versus getting emotionally attached to homes you really love but financially you cannot afford them. It also helps you be a more competitive and ready buyer because once you have the financial aspects down, you are ready to move quickly when you find a home that works for you. Other competing buyers for the same home may not have their financial house in order so you can move quicker with your offer.

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2. Build a strong real estate team

Shop around before committing to a lender

Doing research, talking to loan companies, and getting quotes is the best way to discover which lender and loan type is best for you. You can consult our list of top-rated lenders to learn more about specific lenders and what they offer.

There are several loan types with varying benefits, down payment options, and minimum credit score requirements. The most common loan types include some of the following:

• Conventional fixed-rate loan
• Adjustable rate mortgage (ARM) loan
• FHA loan
• VA loan
• USDA loan
• Jumbo loan

All mortgage lenders typically offer conventional fixed and adjustable rate loans, as well as the FHA loan product. The FHA, VA, and USDA loan products are government-backed loans that provide greater down payment flexibility for eligible borrowers. The jumbo loan product is reserved for home purchases that exceed the conforming loan limit, and it is not available with all mortgage lenders.

Kendra Barnes, founder of The Key Resource, offers her best house hunting tip for lender shopping:

Shop around. Most buyers go with the first lender they call because they aren’t aware that they can shop around! Just because a bank gives you a pre-approval letter does not mean you have to stick with them!

Ask about incentives. Ask the lender if they have any incentives such as lender credit at closing or fee waivers.

Make them compete for your business. As you’re shopping around, be sure to tell each lender you call what the other lender is offering. Ask them if they are able to match or beat that lender’s terms.

Find a realtor who is a good fit

Consider using a real estate agent to help you find houses that meet your expectations and are in your price range. Because real estate agents are familiar with the mortgage process, they can also answer any questions you may have along the way.

There are practical considerations to keep in mind when choosing a real estate agent. Shawn Breyer, owner of Breyer Home Buyers, describes what buyers can do to maximize efficiency and success within the realtor-client relationship:

You should find properties online and then do a drive-by as soon as possible before reaching out to your realtor. When you do this, you will quickly weed out homes that don't match your criteria. Imagine that you're trying to find a home in a well-maintained neighborhood and a couple of the neighbors have cars parked in the yard that they are working on.

These are things that Google Maps or the listing may not show. You will weed out properties much quicker with this approach while respecting your realtor's time by not making them meet you at houses that you instantly realize you don't want to buy when you pull up. In a competitive market, speed is king.

Find a highly recommended property inspector

Alex Romanov, co-founder of iwillbuyhouse.com, emphasizes the importance of an oft-overlooked aspect of house hunting:

Prior to house hunting, every buyer should find a highly recommended property inspector. A careful property inspection done by an expert can save you tens of thousands of dollars of costly repairs. Therefore, the top inspectors are highly sought after and are often booked for weeks in advance, so it helps to get one on your team as soon as possible.

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3. Get a full pre-approval

Prepare paperwork and complete a loan application

Senior Loan Officer Amy Tierce describes why it's smart for prospective buyers to choose and start working with a lender early on in the homebuying process:

Speak with a competent mortgage lender if the borrower is not looking to purchase for as long as a year out. Why? Because there are many items that can impact qualification, starting with credit.

If there is an error on the credit, getting it corrected can take weeks, which is often too late if you have an accepted offer on a home. Self employed (Schedule C) buyers need to look at year over year income and may want to change the way they file to maximize income.

Multiple asset accounts or complicated down payment strategies may also need to be addressed. For example, if a borrower is getting a gift, or has money in a trust or other financial vehicle, some adjustments may need to be addressed prior to buying.

Imrad Poladi, vice president of NextHome, describes what the ideal pre-approval process looks like:

It's been said before, but having a complete pre-approval process with a reputable lender is critical in the early stages of a home search. Buyers should aim to have as deep of an approval as possible.

Do your best to get what is known as underwriting approval, which basically means that the buyer has been vetted to buy a home up to a certain purchase price and all that is left to do is find the right home. The lender sees no current red flags on providing the buyer a home loan.

Talk to your lender about buying down your rate

Poladi also suggests buyers look into buying down the interest rate on their loan:

Depending on the type of loan, every $1,000 negotiated down only saves the buyer a few dollars per month. But if the buyer buys down the rate, the savings could be far more significant on a monthly basis. I suggest that a buyer talk to an agent and/or lender for further clarification on how this would work.

Buying down your rate is typically achieved through purchasing mortgage points — fees paid at closing in exchange for a reduced interest rate.

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4. Evaluate what type of home you want

Before you start looking at homes, it’s important to determine what type of house you want: Do you want to move in and not be required to change a thing? Do you want a challenge with a house that might need some renovations?

Compare the benefits of a turn-key home or fixer upper

John Bodrozic, co-founder of HomeZada, explains how buyers can compare the implications of the choice between a turn-key home or a fixer upper:

[A turn-key home] house commands a premium purchase price. So as an example, with a $400,000 house with a 20 percent down payment of $80,000, your mortgage would be $320,000. At current market rates, with a 30-year fixed-rate loan of 4.5 percent, the buyer’s monthly mortgage payment would be $1,620 and you would pay approximately $263,000 in total interest over the 30-year loan.

[A fixer upper] might sell for $325,000. A 20 percent down payment would be $65,000, which would be upfront cash savings of $15,000. The mortgage would be $260,000, which at the same 4.5 percent interest rate would be a $1,317 monthly payment, which is a savings of $303 every month. The total interest on this loan would be $214,000, which is an overall $49,000 savings from the other scenario. The ability to pay for those renovations could come from the savings in down payment along with the savings over time of having a lower monthly mortgage payment.

Realtor Tania Isacoff Friedland of Warburg Realty weighs in on the question of how much capital and time is realistic to invest in a property:

Some first-time buyers think they'll like the excitement of a renovation, but it's important to take into consideration the realistic cost and time involved to complete the work. In addition, renovating to your taste level or specifications is not always what someone else will want, so I caution first-time buyers doing a renovation not to ‘over-renovate’ and to keep things simple. 

When it comes time to re-sell, no one wants to overpay for someone else's renovation. Many first-time buyers don't have the time or energy to endure a renovation and will pay up for modern conveniences in a new development. Don't be misled, as there's still work to be done in new construction aside from decorating. For example, you will most likely have to outfit the closets and wire for audio-visual technology.

Determine what home and yard maintenance you can handle

Realtor, Broker, and GRI Frances Dawson reminds first-time home buyers to consider yard maintenance:

One common pitfall for first-time homebuyers is not considering the maintenance of properties compared to the time they want to spend. A condo or townhome has a monthly fee for maintenance, but frees the homeowner's time for other pursuits. A property with a big yard or acreage, while appealing, can quickly become an overwhelming drudge or an expensive chore to hire out.

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5. Determine your priorities and deal breakers

Knowing what you want may sound like the easiest task of them all, but this can be difficult to decide, especially if you are buying a house with someone else. If that is the case, the best house hunting tip would be to find middle ground on both your wishlists.

Here are a few questions that you can ask yourself to nail down your must-haves for a new home:

• How many square feet do you want?
• How many bedrooms do you want?
• Where do you want the house to be located?
• Do you want a big yard?
• Do you want to live in a populated neighborhood or a secluded area?

If you know what you want ahead of time, the process of buying a house is going to be less grueling.

Realtor Tracey Hampson recommends the whole family participate in this part of the house hunting process:

I always recommend doing a want list and a need list with the whole family. It helps so much! I wish my previous buyers had listened to me and done this. We had been looking for homes for about six months and they finally decided on a gorgeous home, but when they told their children they burst into tears because they did not want a swimming pool! I know, what kid doesn't want a swimming pool? So including the whole family is always a good idea!

Aside from the essentials (i.e., number of bedrooms, bathrooms, square footage), some home features to consider when you're making your wish list are ceiling height, closet space, versatility of the space, proximity to schools or work, gated communities, outdoor space, as well as additional storage in the building.

Study cities and neighborhoods in-depth

Suburban Jungle Founder and CEO Alison Bernstein shares three recommendations for town and neighborhood hunting:

Don’t prioritize the house over the town in which it resides. The goal is to find a place where the culture and values of the town match yours. You can always trade up or down for a new home, add a third bathroom, or renovate a basement.

Don’t excessively limit your search area by your commute. Just 10 more minutes on the train or bus could perhaps score you a lot more for your money.

Don’t over romanticize walkability. Often, buyers coming from more urban centers feel they need a house as close to the shops and restaurants as possible. The reality is that schooling, sporting events, and other activities often take place out of the town center, limiting the importance of this feature.

In addition, House Heroes co-founder, Earl White, recommends looking into neighborhoods that are most likely to hold value over time:

Nobody wants to buy property in the process of depreciating. Sales comparison prices and online estimates look back in time, not forward. The clearest sign that a neighborhood will continue to hold its value is average days on the market.

The days on market part of a listing tells you how long properties take to sell — it is an objective measure of neighborhood demand. If properties are sitting around for long periods of time at a certain list price, market values will fall below that price.

When houses are ‘flying off the shelf,’ it's a good sign values will be stable or even appreciate. Similarly, regardless of sales comps, if houses are sitting on the market and not moving, it's a sign prices are on the way down from those list prices.

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Take a deep breath 

It's a big deal to buy a home and there's a lot to consider and prepare, but by following some of the steps above you’ll be able to prioritize and manage the homebuying process with less stress.

Steve DiMarco, president of Key Mortgage Services, reminds first-time buyers of the long-term benefits and achievability of homeownership:

While it's a seemingly large investment at the time of purchase, this is an investment in your future and your overall wealth. The investment goes beyond the physical home. You're not just purchasing a piece of real estate, you are building wealth. Homeownership is the first very important step toward that wealth creation.

I tell first-time buyers that they are overlooking how achievable homeownership is. There are so many programs for first-time buyers — programs that require as little as three percent down. That's a few months of savings right there to get you into your home.

Don't forget to get your handy home buying process checklist below.