Checklist: How to Find the Right Home
Buying a home may be the culmination of a long-term goal. It might even be tied to other goals, such as starting a family. The fact is, we do develop strong emotional bonds with our homes. The challenge is not to let emotion rule the day when you’re shopping for that home.
A strategic approach to home buying
Savvy shoppers know to take a strategic approach to the home buying process. They think critically about what to look for in a new home, prioritize needs, tap into expertise, and are realistic about their decisions. Those decisions will, after all, have long-term implications.
The good news is that anyone — even a first-time homebuyer — can adopt this strategic approach. As you embark on your house hunting journey, follow these tips.
1. Know how much house you can afford
Buying a home you can afford is perhaps the most essential homebuying rule. It helps ensure you’ll live comfortably while having money for other things, including saving for the future. Reaching for a house that’s above your means may stretch your finances, increase your stress, and strain your relationships.
You may read about “rules of thumb” that help determine affordability. For example, some people say that your mortgage payment, property taxes, and homeowners’ insurance shouldn’t be more than 28% of the monthly pre-tax income and 36% of your total debt. The truth is that rules are different for every homebuyer. Things like type of loan program, monthly expenses, down payment and more will affect how much you can afford.
You can use our home affordability calculator to get started. Simply add some information about your income, planned down payment, debts, and loan details. The calculator will provide an instant estimate of what you can afford.
2. Get pre-approved for your mortgage
Having mortgage pre-approval tells sellers that you’re serious as a buyer, and lets you make an offer with confidence that you’ll have financing. While pre-approval is not required, real estate agents in some hot markets will show homes only to potential buyers who’ve gone through the process.
Pre-approval is relatively straightforward, with much less involved than your final mortgage loan approval. Some mortgage lenders even let you start the pre-approval process online and complete it in just minutes. Once you’ve contacted the lender, you answer a few questions about your finances and consent to allow the lender to pull your credit report. The lender will then let you know how much you’re qualified to borrow and provide you with a pre-approval letter that you can share with sellers’ agents.
Here’s one caveat: Once you’ve received your pre-approval, try to avoid doing anything that might negatively affect your financial picture. Going deeper into debt (for instance, buying a car or missing credit card payments) or quitting a job and losing that income may impact your eligibility for the mortgage for which you were initially pre-approved. If your loan falls through for this type of reason, you may have to forfeit any deposit you’ve made toward the home purchase. You can find more on what lenders look for when determining interest rates on our guide to understanding mortgage interest rates.
3. Make a wish list of your priorities
Is the “perfect” home out there? Maybe. But chances are you’ll need to make at least some compromises balancing the home’s sale price with the features you need and want.
So sit down and make a list of priorities. This list should be topped by your must-haves. Along with purchase price, this may include the home’s location (including things like community services and the quality of the local school district, if appropriate), whether it’s a condo or a single-family home, the floor plan and square footage, the number of rooms and bathrooms, and the presence of an attached garage. Then list out your nice-to-haves. This may include the type of flooring and décor, the quality of the bathroom and kitchen fixtures, outdoor features such as a swimming pool, and whether the basement is finished.
Typical must-haves (higher priority)
- Under $350k
- Single-family home
- Suburban location with less than a 30-minute work commute
- Above average or better-rated school district
- Minimum 3BR, 2BA
- Minimum 2,000 square feet
- Attached 2-car garage
Typical nice-to-haves (lower priority)
- Walk-in closets
- Updated kitchen with gas
- Updated bathrooms
- Hardwood floors
- Large, landscaped backyard
- Deck or patio
Consider not just what you need now but what you’ll need in the future. For instance, if you’re planning to start a family in the home, you’ll need a certain number of bedrooms and bathrooms for your family members to live comfortably.
The U.S. Department of Housing and Urban Development offers this worksheet to help you think through your priorities when home shopping.
4. Work with a real estate agent
Real estate agents are licensed professionals held to an ethical standard to act in your best interest. They’re also experts in the local housing market. They can assist you not only with locating a home but with some of the more complex parts of the buying process, such as closing. And remember that the seller typically pays the real estate agent’s commission.
Referrals from friends, family, and coworkers are a great place to find an agent. You can also use the “Find a Realtor” tool at realtor.com.
Once you’ve located an agent, communication is vital. Start by sharing your list of priorities. This will remove some of the guesswork and give the agent a jumpstart in lining up potential homes for you.
5. Be critical when looking…
Now for the fun part: going to home showings and open houses. Of course, you’ll be looking at homes within your budget and with your real estate agent by your side. Just be sure not to get too carried away with emotion, and look at these homes with a critical eye.
Importantly, you’ll want to consider areas such as the roof, HVAC, plumbing, electrical, and any structural or safety issues (especially with older homes). Do these important functional elements need to be repaired or updated? If so, how much will it cost? Can that cost be negotiated in the home’s price?
Be realistic about what you can afford to fix and what you can do yourself. A “great deal” on a fixer-upper may not be so great once you’ve poured tens of thousands of dollars (or more) into repair work just to make the house livable.
You’ll also want to make sure the homes you’re looking at meet most or all of your “must-have” priorities. If you’ve shared your list with your agent, they can better steer you towards homes that will meet your needs.
6. …but not too critical
While it’s important to identify homes that meet your needs, it’s also possible to go a bit overboard with the critical eye. Remember that items like flooring, paint, and other décor can be updated relatively inexpensively (and many DIYers can do these minor upgrades themselves).
As a brand-new homeowner, updating an out-of-date bathroom or kitchen might be outside your budget. But ask yourself if you could live with it for a little while until you’ve saved enough money to renovate.
All of this is where your “nice-to-have” priorities come into play. You don’t have to settle for something that will never work for you. But a little open-mindedness can go a long way in finding a home that you’ll love for years to come. Once again, your real estate agent can help, this time by providing advice about what might be workable within a reasonable budget.
7. Strategize your offer
If you’ve followed this checklist so far, you should be in an excellent position to take the next step: making an offer on a home. This is another point in the process where it’s essential to think strategically.
Your real estate agent can perform comparative research (commonly referred to as “comps”) to help determine the fair market value of a for-sale home. You’ll want to consider including some reasonable contingencies, such as a home inspection and the final approval of your mortgage loan.
Your agent can also make recommendations based on the current market conditions. Making an offer in a competitive seller’s market means you may need to match or exceed the listing price. You may also need to remove some or all of your contingencies.
A buyer’s market gives you more leverage, but you’ll want to any urge to make a lowball offer so far beneath the asking price that it might insult the seller. Instead, discuss with your agent a reasonable opening bid while leaving yourself some wiggle room for the seller’s likely counteroffer.
If you and the seller can’t agree on a selling price, don’t be afraid to walk away. Yes, it’s one more instance where it’s important not to let emotions rule. It’s indeed very disappointing to be so close! But there will be other homes that meet your needs.
Frequently asked questions
What is the first thing I should do when looking for a house?
The first thing to do when looking for a house is to figure out what you can afford. A good rule of thumb recommends that your monthly payment (mortgage, taxes, and insurance) be no more than 28% of your monthly gross income or 36% of your total debt. Buying a home you can afford means you’ll live comfortably while still having money for entertainment, vacations, education, emergencies, and more.
How many houses does the average person look at before buying?
A January 2022 study by the National Association of Realtors found that buyers in 2021 viewed only eight homes before buying. This is down from 12 homes viewed before buying in 2011.
Your American Dream is within reach
Experienced homebuyers know that getting into the right house doesn’t usually happen by chance or happy accident. Instead, smart homebuying is a rational process that keeps you within your financial means, gets you what you need, and gets you what you reasonably want. Your goal of home ownership is within reach when you put emotion in the back seat and let strategic thinking take over.