5 Things Every First-Time Homebuyer Should Do Before Closing

Did you know 64% of buyers worry about high mortgage rates, according to a TD Bank survey? Buying a house is one of the biggest financial decisions you’ll make. It’s exciting but can feel overwhelming without the right guidance.

The process involves more than just picking a home. From securing a loan to budgeting for inspections, each step matters. A solid plan helps avoid costly mistakes and ensures a smoother closing.

This guide breaks down five key steps to prepare financially and emotionally. Whether it’s improving your credit or setting aside emergency funds, these real estate strategies put you in control.

Key Takeaways

• High mortgage rates are a top concern for buyers.

• Follow a structured process to stay on track.

• Budget for inspections—they’re worth the money.

• Keep housing costs below 25% of your income.

• Work with vetted professionals for expert advice.

1. Strengthen Your Financial Foundation

Your financial health determines what you can afford and how lenders view your application. Smart planning now prevents stress later. Focus on three pillars: credit strength, accurate budgeting, and emergency preparedness.

Check and Improve Your Credit Score

A high credit score unlocks better interest rates, saving thousands over your loan term. Follow these steps:

• Review reports weekly: Use AnnualCreditReport.com to check for errors.

• Lower credit utilization: Keep balances below 30% of limits.

• Pay on time: Even one late payment can drop scores by 100+ points.

Scores above 750 qualify for the lowest rates. Dispute inaccuracies immediately with Equifax, Experian, or TransUnion.

Calculate Your True Homeownership Budget

Many forget hidden costs beyond the mortgage. For a $300,000 home:

• Closing fees: $6,000-$18,000 (2-6% of loan)

• Property taxes: Varies by location; check county records

• Maintenance: 1-3% of home value yearly ($3,000-$9,000)

"Housing costs exceeding 25% of income risk becoming house poor." — Steve Sivak, Real Estate Analyst

Build a Separate Emergency Fund

Your down payment isn’t for emergencies. Save 3-6 months of living money separately. This covers:

• Job loss or medical crises

• Unexpected repairs like roof leaks

• Insurance deductibles

Compare lenders for PMI differences—FHA loans charge 1.75% upfront plus 0.55% annually.

2. Master Your Down Payment Strategy

Planning your down payment wisely can save you thousands over time. The right approach balances upfront money with long-term savings on loans and insurance. Focus on three key areas: hitting the 20% target, exploring assistance programs, and preparing for closing costs.

Aim for 20% to Avoid PMI

Putting down 20% eliminates Private Mortgage Insurance (PMI), which protects lenders if you default. On a $300,000 loan, PMI costs $1,380–$4,500 yearly. That’s $115–$375 extra per month.

• Conventional loans: PMI rates range 0.46%–1.5% annually.

• USDA/VA loans: Require 0% down but have higher fees.

• FHA loans: Need just 3.5% down but include lifetime mortgage insurance.

"PMI is avoidable with disciplined saving. Every dollar upfront lowers your monthly burden." — New American Funding

Explore Down Payment Assistance Programs

14 states offer grants or low-interest loans through programs like California Homebuyer’s Down payment Assistance. Research carefully:

• Grants: Free money (no repayment).

• Deferred loans: Repay when selling or refinancing.

• Forgivable loans: Canceled after living there 5+ years.

Avoid programs adding debt obligations. Check eligibility at HUD.gov.

Save for Closing Costs (3–4% of Home Price)

Closing costs include appraisal fees, title insurance, and origination charges. For a $300,000 home, expect $9,000–$12,000. Negotiate seller concessions to split these costs.

• Appraisal: $300–$500 (verifies home value).

• Title insurance: $1,000–$2,000 (protects against ownership disputes).

• Origination fee: 0.5%–1% of loan ($1,500–$3,000).

Set aside money early—these fees are due at signing.

3. Get Mortgage-Ready

Mortgage readiness separates confident buyers from stressed ones. The right loan and lender save you thousands in interest rates and fees. Start by comparing options, securing preapproval, and locking in competitive terms.

Compare Loan Types: Conventional vs FHA vs VA

Conventional loans often need 3% down but require a 620+ credit score. FHA loans accept scores as low as 580 with 3.5% down but add mortgage insurance. VA loans offer 0% down for veterans but include funding fees.

• 15-year fixed: Lower interest rates but higher monthly payments.

• 30-year fixed: Higher rates but manageable payments.

• ARMs: Avoid—introductory rates spike after 5–7 years.

Churchill Mortgage provides manual underwriting for those with non-traditional credit histories.

Get Preapproved (Not Just Prequalified)

Preapproval involves a hard credit check and verified documents. It shows sellers you’re serious. Prequalification is just an estimate—lenders don’t verify your money or credit.

"Preapproval letters expire in 90 days. Time your application to align with house hunting." — Rocket Mortgage

Choose a Lender With Competitive Rates

Compare at least three lenders. Rocket Mortgage offers 1% down conventional loans, while NBKC boasts low fees. Ask for:

• Loan Estimate (LE) forms to compare costs.

• Rate lock policies to avoid surprises.

• Customer service reviews for responsiveness.

Even a 0.25% lower interest rate saves $15,000 over a 30-year loan.

4. Partner With the Right Real Estate Agent

A skilled guide transforms complex transactions into smooth successes. Your real estate agent shapes everything from price negotiations to closing timelines. Selecting the wrong one risks missed opportunities or costly delays.

Look for Local Market Expertise

Agents with hyperlocal knowledge spot undervalued properties and emerging trends. Keller Williams Intown agents, for example, use neighborhood scouting tactics like tracking school district changes. Verify their expertise with:

• Comparative market analyses: Request samples for recent sales in your target area.

• ZIP code transaction volume: Top performers handle 20+ deals yearly in your preferred location.

• Mobile alerts: 47% of buyers find homes faster through apps—ask if they use them.

Verify Negotiation Track Record

RamseyTrusted® agents must close 50+ deals annually to qualify. Ask candidates:

• “How often do you secure offers below asking price?” (Aim for 30%+ success.)

• “Can you share escalation clause strategies for bidding wars?”

"Boutique agencies often negotiate harder than Zillow Premier Agents—interview both." — Homebuying Institute

Confirm Responsiveness

Delayed responses lose properties in competitive markets. Demand:

• 24-hour response guarantees: In writing, with penalties for violations.

• Backup contacts: Who handles inquiries if your primary agent is unavailable?

Test their speed before hiring—email a question and time their reply.

5. Essential First-Time Homebuyer Tips for House Hunting

Smart buyers know house hunting requires strategy, not just luck. With 64% of buyers worried about affordability (TD Bank), focusing on priorities saves time and money. A disciplined process helps you avoid overpaying or compromising on must-haves.

Differentiate Needs vs. Wants

List non-negotiable features like bedrooms or commute time. Use Realtor.com filters to exclude homes missing essentials. Compromising on location or school districts risks 22% lower resale value.

Sample priorities:

• Needs: 3+ bedrooms, 10-minute drive to work.

• Wants: Granite counters, walk-in pantry.

Research Neighborhoods at Different Times

Visit areas during rush hour and weekends. Check FEMA maps for flood zones—ignoring this could raise insurance costs by 25%.

"A 1% price reduction on a $300,000 home saves $3,000. Patience pays." — HomeLight

Consider Resale Potential

Analyze MLS trends for average days on market. Avoid properties sitting unsold for 60+ days—they often have hidden flaws. Schools and low crime rates boost demand.

Resale red flags:

• Nextdoor crime reports exceeding police stats.

• Declining enrollment in local schools.

6. Conduct Thorough Due Diligence

Due diligence separates informed buyers from those facing costly surprises. Skipping critical checks risks money, time, and future insurance claims. A disciplined process uncovers flaws before they become your problem.

Never Skip the Home Inspection

14% of buyers renegotiate price after inspections reveal issues. Always hire a licensed inspector and request:

• Sewer scope: Essential for homes older than 20 years ($250–$500).

• Foundation checks: Cracks or uneven floors signal structural costs.

• Roof age: Replacement averages $12,000–$15,000.

"Inspectors miss 20% of defects without specialized tools. Pay extra for thermal imaging." — HomeAdvisor

Review Property Tax History

Property taxes vary wildly—Texas averages 1.8% vs. California’s 0.73%. Challenge assessments with:

• Recent sales of comparable homes (lower valuations mean lower fees).

• Exemptions for veterans or seniors (saves 10–50%).

Check county records for pending rate hikes that could spike costs.

Verify HOA Rules and Fees

53% of buyers regret ignoring HOA fine print. Demand:

• Reserve studies: Underfunded HOAs levy special fees ($5,000+).

• Rental restrictions: Bans limit investment potential.

• CC&R violations: Document broken fences or unapproved sheds.

Late HOA payments can trigger liens—budget for monthly costs upfront.

7. Negotiate Like a Pro

The right negotiation approach makes the difference between overpaying and getting a fair deal. In competitive markets, real estate success hinges on data, timing, and flexibility. Use these tactics to secure the best price and terms.

Use Comparable Sales Data

Redfin’s Compete Score analytics reveal how buyers stack up against rivals. Pull recent sales of similar homes within 1 mile—adjust for upgrades or lot size. If a comparable sold for 5% less, cite it to justify a lower offer.

• Appraisal gaps: Cover the difference if the appraisal falls short (common in bidding wars).

• Repair credits: Request $2,000–$5,000 off for issues found in inspections.

Request Seller Concessions

23% of sellers pay closing costs in buyer’s markets. Ask for:

• 2-1 buydowns: Lowers interest rates for the first two years.

• Leaseback options: Sellers rent back the home post-closing for flexibility.

"Cash offers close 11 days faster—but concessions can level the playing field." — Zillow

Consider Flexible Closing Dates

A 30–45-day closing suits most sellers, but adjust based on their needs. If they’re building a new home, propose a rent-back agreement. Earnest money (1–3% of price) shows commitment without locking you into rigid terms.

8. Prepare for Closing Day

Closing day marks the final step in your journey—ensure nothing slips through the cracks. The process involves signing documents, transferring money, and verifying details. One misstep could delay ownership or inflate fees.

Audit Your Closing Disclosure

Under TRID rules, you’ll receive a Closing Disclosure three days before signing. Compare it to your loan estimate—19% contain errors (CFPB). Focus on:

• Interest rate: Confirm it matches your locked rate.

• Fees: Challenge any unexplained charges (e.g., $500 "processing" fees).

• Escrow amounts: Overestimates tie up your money unnecessarily.

"Lenders must fix errors before closing. Demand revisions in writing." — Consumer Financial Protection Bureau

Conduct a Final Walkthrough

Visit the home 24 hours before closing. Test all appliances and check for damage post-inspection. Bring a checklist:

• Run water faucets and flush toilets.

• Verify agreed repairs (e.g., replaced roof shingles).

• Confirm HVAC systems work—repairs average $5,000+.

Organize Required Documents

Your lender will need:

• Cashier’s check: For exact closing costs (no personal checks).

• Government ID: Driver’s license or passport.

• Proof of insurance: Policy must start on closing day.

Avoid wire fraud—call your lender to verify account details before transferring funds.

Conclusion

Buying a house is a major milestone. Stick to the 25% housing cost rule to avoid financial strain. This keeps your budget balanced and future secure.

Partner with a trusted real estate agent for expert guidance. They help navigate the process smoothly, from offers to closing. Their negotiation skills can save you money and time.

Use online mortgage calculators to plan ahead. Even after approval, monitor your credit score weekly. Any changes could affect your loan terms.

Stay disciplined until the keys are in your hand. Double-check documents and keep funds ready. This ensures a stress-free closing day.

FAQ

How can I improve my credit score before buying a house?

Pay bills on time, reduce debt, and check for errors on your credit report. A higher score helps secure better mortgage rates.

What’s the difference between preapproval and prequalification?

Prequalification estimates what you might borrow, while preapproval involves a lender verifying your finances for a stronger offer.

How much should I save for closing costs?

Typically 3-4% of the home’s price. Budget for appraisal fees, title insurance, and loan origination charges.

Why is a 20% down payment recommended?

It avoids private mortgage insurance (PMI), lowering monthly payments. Some loans allow less, but 20% saves long-term costs.

What should I look for in a real estate agent?

Choose someone with local expertise, strong negotiation skills, and responsiveness. Read reviews and ask for referrals.

How do I decide between needs and wants in a home?

Prioritize essentials like location and safety. Compromise on upgrades like finishes—they’re easier to change later.

Why is a home inspection important?

It uncovers hidden issues like structural problems or outdated systems. Skipping it risks costly surprises after purchase.

Can I negotiate closing costs with the seller?

Yes. Request concessions, especially in buyer’s markets. Sellers may cover part of fees to close the deal.

What documents do I need for closing?

Bring ID, proof of insurance, cashier’s check for down payment, and the Closing Disclosure. Your lender will confirm specifics.