Before you buy a house, get pre-approved, save for more than just the down payment, and understand the true monthly cost of homeownership. The purchase price is just the beginning — taxes, insurance, maintenance, and repairs can add 30-50% on top of your mortgage payment.
12-Step Pre-Purchase Checklist
| # | Action | Why It Matters |
|---|---|---|
| 1 | Check your credit score and reports | Determines your rate and loan options |
| 2 | Pay down existing debt | Lowers your DTI ratio for better approval |
| 3 | Save for down payment + closing costs + emergency fund | You need all three, not just the down payment |
| 4 | Get pre-approved with 2-3 lenders | Know your true budget and compare rates |
| 5 | Calculate the full monthly cost (PITI + maintenance) | Mortgage + taxes + insurance + repairs |
| 6 | Research neighborhoods, not just houses | Schools, commute, flood zones, HOA rules |
| 7 | Understand your loan options | FHA, conventional, VA, USDA have different requirements |
| 8 | Budget for moving and immediate expenses | Moving costs, new furniture, repairs |
| 9 | Don’t make big financial changes | No new debt, job changes, or large deposits during the process |
| 10 | Get a home inspection (non-negotiable) | Saves you from buying a money pit |
| 11 | Review the seller’s disclosure carefully | Required in most states — reveals known issues |
| 12 | Understand what you can walk away from | Contingencies protect your earnest money |
True Monthly Cost of Homeownership
| Cost Component | Typical Amount ($350K Home) | Notes |
|---|---|---|
| Mortgage payment (P&I) | $1,800-$2,200 | Varies by rate and down payment |
| Property taxes | $290-$730/month | Varies dramatically by state (0.3%-2.5%) |
| Homeowners insurance | $125-$250/month | Higher in disaster-prone areas |
| PMI (if under 20% down) | $100-$250/month | Drops off at 80% LTV |
| HOA fees | $0-$500/month | If applicable |
| Maintenance and repairs | $290-$580/month | Budget 1-2% of home value per year |
| Utilities | $200-$400/month | Often higher than renting |
| Total | $2,805-$4,910/month |
How Much House Can You Afford?
| Gross Annual Income | Max Monthly Housing (28% Rule) | Max Home Price (Estimated) |
|---|---|---|
| $50,000 | $1,167 | $180,000-$220,000 |
| $75,000 | $1,750 | $280,000-$340,000 |
| $100,000 | $2,333 | $370,000-$450,000 |
| $125,000 | $2,917 | $460,000-$560,000 |
| $150,000 | $3,500 | $550,000-$670,000 |
Based on 28% DTI rule, 6.5% rate, 30-year term, 10% down. Actual amounts vary by taxes, insurance, and other debts.
Down Payment by Loan Type
| Loan Type | Minimum Down | PMI? | Key Requirements |
|---|---|---|---|
| Conventional | 3-5% | Yes (until 80% LTV) | 620+ credit score |
| Conventional (20% down) | 20% | No | 620+ credit score |
| FHA | 3.5% | Yes (for life of loan) | 580+ credit (500+ with 10% down) |
| VA | 0% | No | Active/veteran military |
| USDA | 0% | Guarantee fee | Rural areas, income limits |
Upfront Costs Beyond Down Payment
| Cost | Typical Amount | When You Pay |
|---|---|---|
| Closing costs | 2-5% of purchase price | At closing |
| Home inspection | $300-$600 | Before closing |
| Appraisal | $300-$500 | During underwriting |
| Earnest money deposit | 1-3% of purchase price | With offer (credited at closing) |
| Moving costs | $1,000-$5,000+ | Move-in day |
| Immediate repairs/updates | $1,000-$10,000+ | First month |
Red Flags During the Process
| Red Flag | What It Means |
|---|---|
| Seller won’t allow inspection | Likely hiding problems |
| Home priced well below market | Foundation, flood, or legal issues |
| Multiple price reductions | May be hard to sell — investigate why |
| High days on market | Possible undisclosed issues or overpricing |
| Seller’s disclosure is vague or incomplete | Ask specific questions and get answers in writing |
| HOA with pending lawsuits or low reserves | Future special assessments likely |
The Bottom Line
The best time to prepare for buying a house is 6-12 months before you start looking. Get your credit above 700, save at least 10% for a down payment plus 3-5% for closing costs, build a 3-6 month emergency fund, and get pre-approved with multiple lenders. The 28% rule (housing costs under 28% of gross income) is a reliable guide — stretching beyond that puts you at risk when unexpected costs hit.