1. Check your credit score. Get a copy of your credit report at Annual Credit Report. The three credit bureaus (Equifax, Experian, and TransUnion) are each required to give you a free credit report once a year. Mistakes in your credit report can be very costly, review your reports now to save you money when you are ready to shop for a loan. 
  2. Determine how much house you can afford. Lenders look for a total debt load of no more than 43% of your gross monthly income (called the debt-to-income ratio). This figure includes your future mortgage and any other debts, such as a car loan, student loan, or revolving credit cards. Remember there are many cases were lenders are happy to lend you more than you are comfortable with, so be sure to determine where your individual comfort level is. 
  3. Make a plan to save for a down payment. Conventional mortgages generally require a 20% down payment. However, if you’re not quite able to save the full amount, there are many programs that can help. FHA & VA offers loans with little to no down payment. But they may require mortgage insurance premiums, which will drive up your monthly payments. Don’t forget to check with your credit union, as sometimes they have better rates for their members. Finally, some employers have housing assistance available, remember to check with your human resource department. 
  4. Collect your loan paperwork. Some of the items they’ll want from you include:
    • W-2 forms — or business tax return forms if you’re self-employed — for the last two to three years
    • Personal tax returns for the past two to three years
    • Your most recent pay stubs
    • Credit card and all loan statements
    • Your bank statements
    • Addresses for the past five to seven years
    • Brokerage account statements for the most recent two to four months
    • Most recent retirement account statements, such as 401(k)
  5. Research lenders/mortgage brokers.  A mortgage broker will shop for a competitive loan rate for you among multiple lenders, unlike a bank, which can only offer its own products.
  6. Get pre-approved for your loan. Make an appointment with your lender or mortgage broker and bring all your paperwork. They will run a credit check on you and tell you how much of a loan you’re approved for. It often makes sense to borrow less than the maximum the lender allows so you can live comfortably. Remember, just because you are approved for an amount does not mean you need to go up to that amount. Look back on the budget you set before. Check this out!
  7. Prioritize what you most want in your new home. Have everyone in your household make a list of what’s most important in your new home, and rank them by priority. This will help to start the conversation as to what are actual needs, and what are wants.
  8. Start interviewing REALTORS®, specifically buyers’ agents. A buyer’s agent will work in your best interest to find you the right property, negotiate with the seller’s agent, and shepherd you through the entire process. Remember, if you do not sign a buyer’s agency agreement with the agent, then they are working for the SELLER. Watch this for more information about signing a buyer’s agency agreement.  
  9. Research neighborhoods and start visiting open houses. Walk through any neighborhoods you are interested in. And not just once, but several different times throughout your search.  Consider taking a test drive of your commute from the neighborhoods that interest you. Research the schools, find out what amenities are nearby – shopping, restaurants, parks, pools, gyms, etc. Get a real sense of what it would be like to live in this area.
  10. Visit open houses in your desired neighborhoods. Get a real sense of what your budget will get you in this area. Seeing potential homes will also keep you motivated to continue reducing your debts and saving for your down payment. 
  11. Budget for miscellaneous home buying expenses. Buying a home has some miscellaneous upfront costs including home inspections, property survey and contract fees, i.e. due diligence fee and earnest money deposits. Costs vary, but expect to pay at least a few thousand dollars. If you don’t have the cash, start saving now. (See average closing costs here)
  12. Start shopping for your new home.