Buying a home is one of the biggest decisions most people make in their lives. The process can feel overwhelming with all the steps involved. Many first-time buyers make costly mistakes because they do not know what to look for or how to prepare properly.
This complete checklist helps buyers avoid common problems and make smart choices.
Understanding Today's Home Buying Market
First-time home buyers made up 32% of all home buyers in 2023, according to the National Association of Realtors. This number shows that many people are entering the housing market for the first time. 52% of first-time buyers used conventional loans, while 29% used FHA loans and 9% used VA loans.
The typical first-time buyer put down 8% as a down payment in 2023. This is much less than the 20% many people think they need. Understanding these facts helps buyers set realistic expectations and prepare properly.
Home prices have climbed sharply in recent years, making it harder for many people to jump into the market. For most buyers, understanding loan options and getting their finances in order can feel overwhelming. That’s why it’s so important to start early and know the exact steps to take, so you can move forward with confidence when the time is right.
Credit Score Requirements: Your Most Important Number
Your credit score determines what loans you can get and how much you will pay. Most conventional loans require a credit score of at least 620. FHA loans may accept scores as low as 580 with a 3.5% down payment. VA loans often accept scores of 580 or higher.
We also created a full article about this topic: What Credit Score Do I Need for a Mortgage? Experts Answer
Higher credit scores mean better interest rates. The difference between a 620 score and a 740 score can cost thousands of dollars over the life of a loan. For example, on a $300,000 loan, a one percent difference in interest rate costs about $60,000 over 30 years.
How to Check and Improve Your Credit Score
Get free copies of your credit reports from all three bureaus: Experian, Equifax, and TransUnion. Look for errors like wrong payment dates, accounts that are not yours, or incorrect balances. Dispute any mistakes you find.
To improve your score quickly:
- Pay down credit card balances to below 30% of limits
- Do not close old credit cards
- Pay all bills on time for at least six months before applying
- Avoid opening new credit accounts during the home buying process
Start working on your credit score at least six months before you plan to buy. This gives you time to fix problems and see improvements.
Related article: How To Raise Your Credit Score by 50 Points in 30 Days Fast
Are You Financially Prepared? Loan Options and Requirements
Before looking at homes, buyers need to understand their financial situation and loan options. Different loans have different requirements and benefits.
Conventional Loans
Conventional loans are the most common type. They require:
- Credit scores of 620 or higher
- Down payments as low as 3% for first-time buyers
- Debt-to-income ratio below 43%
- Private mortgage insurance if down payment is less than 20%
These loans offer competitive rates and flexible terms. They work well for buyers with good credit and steady income.
FHA Loans
FHA loans help buyers with lower credit scores or small down payments. Benefits include:
- Credit scores as low as 580 accepted
- Down payments as low as 3.5%
- More flexible debt-to-income requirements
- Mortgage insurance required for the life of the loan
FHA loans cost more in mortgage insurance but help buyers who cannot qualify for conventional loans.
Recommended Read: How Quickly Can You Qualify for a Mortgage After Credit Issues?
VA Loans
VA loans are available to veterans and active military members. Key features:
- No down payment required
- No mortgage insurance
- Competitive interest rates
- No prepayment penalties
VA loans offer excellent benefits but are only available to qualified military personnel.
USDA Loans
USDA loans help buyers in rural areas. They offer:
- No down payment required
- Below-market interest rates
- Income limits based on area
- Property must be in eligible rural area
These loans work well for buyers in smaller towns and rural communities.
Getting Pre-Approved: Know Your Budget
Pre-approval shows sellers that you are a serious buyer with financing in place. This process involves:
- Submitting financial documents like pay stubs, tax returns, and bank statements
- Having a lender verify your income and assets
- Getting a specific loan amount approved
- Receiving a pre-approval letter valid for 60-90 days
Pre-approval is different from pre-qualification. Pre-qualification is just an estimate based on information you provide. Pre-approval involves document verification and is much stronger.
During pre-approval, lenders calculate your debt-to-income ratio. This includes all monthly debt payments divided by gross monthly income. Most lenders want this ratio below 43%, though some loan programs allow higher ratios.
Remember that pre-approval amount is the maximum you can borrow, not necessarily what you should spend. Consider other costs like property taxes, insurance, utilities, and maintenance when setting your budget.
Home Inspection: Your Safety Net
Home inspection is one of the most important steps in buying a house. An average home inspection costs between $280 and $401, but it can save thousands of dollars by finding problems before you buy.
Professional inspectors examine the home's structure and major systems. They provide written reports detailing any issues found. This information helps buyers make informed decisions and negotiate repairs or price reductions.
What Home Inspections Cover
Standard home inspections examine:
- Foundation and structural elements
- Roof and exterior walls
- Plumbing systems and fixtures
- Electrical systems and panels
- Heating and cooling systems
- Windows and doors
- Insulation and ventilation
Inspections typically take 2-4 hours depending on the home's size and age. Buyers should attend the inspection to ask questions and understand any issues found.
Foundation Inspection: The Base of Everything
Foundation problems can be extremely expensive to fix. Signs of foundation issues include:
- Cracks in walls, especially near doors and windows
- Doors that stick or do not close properly
- Uneven or sloping floors
- Gaps between walls and ceilings
- Water damage in basements or crawl spaces
Types of Foundation Problems
Settlement cracks are common in new homes as the foundation settles. These are usually small and do not cause structural problems. Larger cracks or those that grow over time may indicate serious issues.
Water damage around foundations can cause major problems. Look for:
- Water stains on foundation walls
- Mold or mildew smells
- Standing water in basements
- Poor drainage around the house
Foundation repairs can cost $10,000 to $40,000 or more depending on the problem. Major structural issues may make a home too expensive to fix. If you're seeing signs of damage for your potential Denver homes, it's wise to consult a Denver structural engineer early, before small problems turn into costly disasters.
Plumbing System Inspection: Water and Waste
Plumbing problems can cause expensive damage and health issues. Home plumbing inspections cost around $200 and can catch problems before they become disasters.
What to Check in Plumbing Systems
Water Supply System:
- Water pressure throughout the house
- Hot water temperature and recovery time
- Pipe materials and condition
- Water heater age and condition
- Main water line location and shutoff valve
Drainage System:
- All drains flow properly without backups
- No leaks under sinks or around toilets
- Sewer line condition and location
- Septic system if not connected to city sewer
Fixtures and Appliances:
- All faucets and toilets work properly
- No water damage around fixtures
- Dishwasher and washing machine connections
- Garbage disposal operation
Common Plumbing Problems
Old galvanized pipes often have low water pressure and rust problems. These pipes may need replacement within a few years. Copper pipes last longer but can develop pinhole leaks over time.
Sewer line problems can be very expensive. Tree roots often grow into older sewer lines, causing backups and requiring expensive repairs. Camera inspections can check sewer line conditions for about $200-400.
Water heaters typically last 8-12 years. Check the age and condition of the unit. Replacement costs $1,000-3,000 depending on the type and size needed.
Electrical System Safety
Electrical problems can cause fires and safety hazards. Many older homes have outdated electrical systems that need upgrades.
Key Electrical Components to Inspect
Main Electrical Panel:
- Panel age and manufacturer
- Available capacity for additional circuits
- Proper labeling of all breakers
- No rust, burn marks, or other damage
Wiring Throughout the House:
- Wire types and age
- Proper grounding in all outlets
- GFCI outlets in bathrooms, kitchens, and outdoor areas
- No exposed or damaged wiring
Safety Features:
- Smoke detectors in all required locations
- Carbon monoxide detectors if needed
- Proper electrical codes compliance
Electrical Red Flags
Some electrical problems require immediate attention:
- Fuse boxes instead of circuit breakers (very outdated)
- Aluminum wiring (fire hazard in some cases)
- Knob and tube wiring (very old and dangerous)
- Outlets that do not work or spark when used
- Burning smells or warm outlet covers
Major electrical upgrades can cost $5,000-15,000 or more. Factor these costs into your buying decision.
Heating, Ventilation, and Air Conditioning (HVAC)
HVAC systems keep homes comfortable year-round. These systems are expensive to replace and important for energy efficiency.
HVAC Inspection Points
Heating System:
- Age and condition of furnace or boiler
- Recent maintenance records
- Proper venting and safety features
- Energy efficiency ratings
Air Conditioning:
- Age and condition of AC unit
- Refrigerant levels and cooling capacity
- Ductwork condition and insulation
- Air filter condition and accessibility
Ventilation:
- Proper ventilation in bathrooms and kitchen
- Attic ventilation and insulation
- No moisture problems or mold growth
Furnaces typically last 15-20 years, while air conditioners last 10-15 years. Replacement costs range from $3,000-8,000 depending on size and efficiency.
Sewage and Septic Systems
Waste disposal systems are critical for health and safety. Problems can be expensive and unpleasant to fix.
City Sewer Connections
Most homes connect to city sewer systems. Key inspection points include:
- Main sewer line condition and location
- No backups or slow drains
- Proper connections for all fixtures
- No tree root intrusion in sewer lines
Septic Systems
Homes in rural areas often use septic systems. These require more maintenance than city sewer connections. Check:
- System age and last pumping date
- Drain field condition and location
- No standing water or odors around system
- Proper permits and inspections
Septic system replacement can cost $15,000-25,000. Regular maintenance helps systems last 20-30 years.
Roof and Exterior Inspection
The roof protects everything inside the house. Roof problems can cause extensive water damage throughout the home.
Roof Inspection Checklist
Exterior Roof Condition:
- Shingle age and condition
- Missing or damaged shingles
- Proper flashing around chimneys and vents
- Gutter condition and drainage
Interior Signs of Roof Problems:
- Water stains on ceilings or walls
- Attic inspection for leaks or damage
- Proper insulation and ventilation
- No signs of pests or animals
Roof replacement costs $10,000-20,000 or more depending on size and materials. Minor repairs may cost $500-2,000.
Windows, Doors, and Insulation
Energy efficiency affects comfort and utility costs. Poor insulation and old windows can make homes expensive to heat and cool.
Energy Efficiency Inspection
Windows and Doors:
- Age and condition of windows
- Proper sealing and weatherstripping
- Energy-efficient glass if newer
- No drafts or air leaks
Insulation:
- Adequate insulation in attic and walls
- No gaps or compressed insulation
- Proper vapor barriers where needed
- Basement or crawl space insulation
Poor energy efficiency can add hundreds of dollars per year to utility costs. Budget for improvements if needed.
Recommended Read: Emergency Home Repairs: How to Pay Without Hurting Your Credit
Final Walk-Through Before Closing
The final walk-through happens 24-48 hours before closing. This is your last chance to verify the home's condition and ensure any agreed-upon repairs were completed.
Home Buying Checklist
- All agreed-upon repairs completed properly
- No new damage since the inspection
- All systems working (heat, AC, plumbing, electrical)
- All included appliances and fixtures present
- Seller has moved out completely
- No unexpected problems or changes
If you find problems during the final walk-through, address them before closing. You have more negotiating power before you sign the final papers.
Closing Day Preparation
Closing day is when ownership officially transfers to you. Come prepared with:
- Government-issued photo identification
- Certified funds for closing costs and down payment
- Proof of homeowner's insurance
- Final loan documents from your lender
Review all documents carefully before signing. Ask questions about anything you do not understand. This is a major financial commitment, so take your time.
After Closing: Protecting Your Investment
Once you own the home, take steps to protect your investment:
- Change all locks for security
- Set up utilities in your name
- Schedule regular maintenance for major systems
- Keep detailed records of improvements and repairs
- Review homeowner's insurance annually
Buying a home is a complex process, but following this checklist helps ensure you make a smart purchase. Take time to understand each step and do not rush important decisions. A good home inspection and proper preparation can save thousands of dollars and prevent major problems later.