Penny Mac Blog A Comprehensive Home Buying Checklist for First-Time Buyers

Buying your first home is a big step, but it doesn't have to be overwhelming. Use this checklist as your guide to help you feel more confident, avoid common mistakes and make informed choices as you put your home-purchasing plans into action. Determine Your Budget Set the stage for your home search by establishing a realistic budget from the start. This will tell you how much you can comfortably afford and the type of mortgage you may qualify for. Determine your budget by thoroughly assessing your financial situation, including your: Monthly income Expenses based on typical monthly spending habits and obligations Debt such as student loans, car loans and credit cards Savings, including how much you will be using for your down payment and closing costs, as well as the amounts in your emergency savings and other savings accounts Anticipated future expenses, such as education or expanding your family Keep in mind that your budget should also account for the new expenses you will have as a homeowner, such as taxes, insurance premiums, any homeowners association (HOA) dues and higher utility and maintenance costs. Define Your Must-Haves in a Home Have a solid understanding of what you want and need in a home, now and in the future. Some thought starters to consider: What type of home do you want? One-story, two-story or multi-family? An older home or new construction? Maybe you prefer a condominium or townhouse. How many bedrooms and bathrooms do you need? Will you be expanding your family or will older relatives be moving in? What type of yard are you looking for? Do you want to build a pool or install a swing set? Do you have dogs that need a fenced-in space? Do you want a patio, porch or area to garden? How much work are you willing to do? Do you prefer a move-in ready home or are you up for some projects? What kind of kitchen, living room or other shared spaces do you want? Do you need a home office? Do you want a garage, attic or basement? Along with the must-haves, come up with your list of nice-to-haves, as well as dealbreakers. Research Neighborhoods A home is only perfect if it resides in your ideal neighborhood. Define your priorities and research the area you want to live in. You may want to think about: Proximity to family, stores, highways, public transportation, houses of worship, parks and healthcare facilities Property and school taxes School district Crime and safety Your commute Diversity Some tips for vetting a neighborhood include: Asking your realtor for feedback, but keep in mind that they cannot legally answer certain questions that may violate the Fair Housing Act Visiting at different times of day to get a better idea of noise levels, traffic and other activity Researching the crime rate Reading school rankings and reviews Searching government websites and town social media pages Talking to area residents and shop owners Gather Your Important Documents The mortgage process and paperwork go hand in hand. Determine what you'll need to provide ahead of time so you can start gathering it all now. While required documents can vary by lender, you'll typically need to submit the following: Income and Asset Documents Pay stubs W-2 forms and 1099 statements Self-employment documents Statement of assets, such as copies of bank statements Other income paperwork, including child and spousal support payments, rental property income and gift funds Debt Documents Credit report Statements of outstanding debt such as your existing mortgage, car loans, student loans, home equity lines of credit and other debts Understand Your Mortgage Options Understanding your mortgage options is essential for making informed decisions about this significant financial commitment. You'll want to find a loan that meets your specific needs, helping ensure affordability and long-term financial stability. Familiarize yourself with some of the most common types of home purchase mortgages and then talk about your options with your Pennymac Loan Expert. Conventional Loans Low fixed or adjustable rates for qualified borrowers Flexible terms to match your financial needs As little as 5% down Avoid mortgage insurance with a 20% down payment Can be used for many types of properties, from single-family homes to condominiums Adjustable-Rate Mortgage (ARM) Low, fixed rates for the initial introductory period Ideal for homeowners planning to relocate or pay off mortgage in 10 years or less Take cash out of your equity while maintaining a low monthly payment Wide range of down payment options Federal Housing Administration (FHA) Loans Low down payment requirements Mortgages insured by the government Allow a broader range of income, debt and credit history than conventional mortgages Jumbo Mortgages Loan amounts up to $3 million Allows borrowers to finance higher loan amounts in counties where the financed amount exceeds the conforming loan limit No prepayment penalty VA Loans Government-backed loans reserved for U.S. service members and their spouses No down payment required No monthly mortgage insurance payment Typically lower interest rates than conventional loans Get BuyerReady Certified The unique Pennymac BuyerReady Certification process estimates your likely mortgage qualification amount so you can shop for a home with peace of mind. Here's a brief overview of the steps involved: Speak with a Pennymac Loan Expert and complete a mortgage application. Submit key financial documents, including recent pay stubs, W-2 forms and bank statements. Our underwriters will review your documents, credit history and debt-to-income ratio. You'll receive BuyerReady Certification, indicating your likely approval for a designated loan amount, as long as certain conditions and the home meet requirements. It's valid for 120 days. Start your house hunting with confidence, knowing which homes align with your budget. BuyerReady Certified homebuyers also qualify for Pennymac's Lock & Shop program, which allows you to lock in a rate before locating a property. Protect yourself from future rate increases and potentially save thousands of dollars in the lifetime cost of your mortgage.* Find a Real Estate Agent A skilled real estate agent offers invaluable guidance, especially for first-time homebuyers. Leverage their negotiating expertise, neighborhood knowledge and market insights to help streamline the home-buying process. Pennymac Home Connect** powered by HomeStory can help you connect with a top real estate agent in your area. Begin House Hunting Once you've narrowed down your budget, property type and desired location - and secured a BuyerReady Certification - it's time to start searching for your new home. Your real estate agent will have access to new homes on the market, but you can also check for listings on house-hunting apps and websites like Trulia and Zillow. Visit Open Houses and Set Up Tours While your real estate agent will arrange home tours and keep you updated on open houses, you can also locate properties available for viewing by: Taking a drive or stroll around the neighborhood and looking for open house signs Searching real estate websites and social media for open house announcements Submit Your Offer Found a house that checks all the boxes on your must-have list? It's time to make an offer. Lean on your real estate agent for guidance, as you may need to negotiate. The seller may counter, and you may counter again in return. Once you've mutually agreed upon a price, you and the seller will be under contract, also known as being in escrow. Get a Home Inspection Once you're in escrow, you'll need to arrange a home inspection. This thorough examination covers nearly all aspects and systems of the property, including: Roof Attic Heating and cooling systems Electrical system Plumbing Major appliances Basement Interior and exterior structure Energy efficiency Curb appeal Both you and the seller will receive a comprehensive report outlining the inspector's findings, potentially leading to additional negotiations, especially if repairs or updates are deemed necessary. Get a Home Appraisal The home appraisal determines the unbiased fair market value of the property. A lender-selected licensed professional conducts the appraisal to ensure accuracy for the benefit of the buyer, seller and mortgage lender. A home appraiser is responsible for: Evaluating the property's worth based on various factors, such as the condition of major interior and exterior systems and structures Checking the prices of recent comparable home sales in the area Providing the buyer, seller and lender a report detailing how they calculated the home's value Renegotiate if Necessary If the home appraisal comes in lower than the agreed-upon purchase price, you may want to renegotiate a lower price. Lenders want borrowers to borrow only what is necessary, and you should avoid paying more than the home is worth. In addition, home inspections may reveal issues that justify renegotiation. You can request that the seller fix major safety or structural problems. Alternatively, instead of asking for repairs, you may opt to negotiate a price reduction or seek a contribution toward closing costs. Secure Homeowners Insurance Most states don't legally require homeowners insurance, but mortgage lenders do since they want to protect their investment. You'll need to provide proof of homeowners insurance on the property before a lender will move forward with your mortgage. Homeowners insurance helps protect you financially against the unexpected. Typical hazards covered by most policies include: Fire and smoke damage Hail damage Lightning strikes Windstorms, such as tornadoes Theft or vandalism Water damage from plumbing leaks Explosions from gas lines Damage from vehicles or aircraft Homeowners can choose from various policy types, ranging from basic to comprehensive. Talk to an insurance agent to compare your options. Close on Your Home Your loan has been approved, and now you're in the home