A personal yard, closet larger than the typical microwave, and the flexibility to decorate as you see fit! Moving from renting to owning is thrilling, but many first-time home buyers find the process more complex than anticipated.

Here's a First-Time Homebuyer 12 months Checklist so you can avoid common pitfalls like paying too much interest or being stuck with the wrong house - and yes, it does happen!

Twelve Months Ahead

Examine Your Credit Score Visit annualcreditreport.com to obtain a copy of your credit report. You can receive a free credit report from each of the three credit bureaus—Equifax, Experian, and TransUnion - once a year. According to a study by the Federal Trade Commission, 5% of Americans had errors on their credit reports that could result in higher loan rates. You can avoid bombshells at the last minute and work hard to fix any errors by checking your score long before you're ready to make an offer.

How Much House Can You Afford? The bank will happily lend you as much money as your debt allows. But will that amount turn you cash-poor? Be honest with yourself and determine how much house you can and want to buy. Lenders prefer you to have a debt-to-income ratio of no more than 43 percent of your gross monthly income. Your future mortgage and other debts, like a car loan, student loan, or revolving credit card, are included in this amount.
You can use various online calculators to determine what you can afford, like this one. If you're exceeding the limits, reduce your debt-to-income ratio immediately. Use this worksheet to get a sense of how much you might actually be spending each month.

Plan your down payment. A 20% down payment is required for most conventional mortgages. If you can afford it - do it. You'll pay much less for your loan and get a better interest rate. However, several programs can assist you if you can only save part of the amount. The FHA lets you get a loan with just 3.5 percent down. However, they require premiums for mortgage insurance, which will increase your monthly payments and stay for the life of the loan. The U.S. Department of Housing and Urban Development (HUD) provides a list of nonprofit home-buying programs organized by state. Check with credit unions as well, and it's possible that your employer has an assistance program.
Keep in mind that banks want you to "season" your money when you plan your savings strategy. That is, before applying for a loan, they want to see that your account has had steady funds for 60 to 90 days. No worries: A financial gift from a family member or a bonus received close to the time of purchase can still be used.

9 Months Ahead

Set priorities for the things you want most in your new home. What's important in your new home? Work proximity? A large yard? An open layout? Finding a peaceful street? If you concentrate on the most important things, you will be in a much better position to choose a home. To avoid frustration and time wastage now is the time to settle any disagreements if the decision is jointly made. Perhaps most significant is: Know the compromises you are prepared to make.

Start looking into neighborhoods and go to open houses. The fun begins now. Find out about neighborhoods, public transportation, and living costs by browsing property listing websites like this site.
Start going to open houses to find out what kinds of homes are available in your price range and which areas are most appealing to you. You'll also be inspired to keep paying down debt and saving for a down payment by seeing potential homes.

Set aside money for various home-buying costs. There are various initial costs associated with purchasing a home. Examples include home insurance, a title search, a property survey, and a home inspection. Although prices vary by location, anticipate spending at least a few hundred dollars. Start saving right away if you need more money.

Create a saving account for home maintenance. Talking about saving, get into the habit of setting aside a small amount each month to cover home emergencies, repairs, and maintenance. To have to call a plumber is terrible enough. It's even worse if you have to pay interest on that plumbing bill with your credit card.

6 Months Ahead

Gather your paperwork for the loan. Mortgage loans are handled with extreme care by banks. They require a lot of documentation. They'll need the following from you:

• W-2 forms (or self-employed business tax returns) for the past two to three years
• Personal tax returns for the past two to three years
• Your most recent pay stubs
• Credit card and loan statements for the past two to four months
• Bank statements for the past five to seven years
• 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 a 401(k)Bonus

You will also be able to remain focused on saving for your down payment and maintaining a low debt-to-income ratio by carefully reviewing your loan documents each month.

Research and interview real estate agents and lenders, particularly buyers' agents. A buyer's agent will work to your greatest advantage to track down for you the right property, haggle with the seller's agent, and guide you through the closing. Your agent can also help you find a lender who is familiar with programs for first-time homebuyers.

Even better, in contrast to a bank, which can only offer its own products, look for an independent mortgage broker who will shop for you among multiple lenders for a competitive loan rate.

3 Months Ahead

Get your loan pre-approved. Your paperwork, down payment, and credit score should all be on track if you've followed this timeline. You've investigated as needs of banks and buyers' agents. It is now time to begin collaborating with them. Getting pre-approved for a mortgage is the first step.
Send all of your paperwork to your mortgage broker or lender. They'll check your credit and tell you how much of a loan you can be approved for. In order to live comfortably, it often makes sense to borrow less money than the lender will let you borrow. Create a budget that considers mortgage payments, insurance, repairs, and other expenses.
Begin looking for a new home. The buyer's agent you have chosen should be able to target homes in your price range that meet your priorities once you have been pre-approved. You won't have to waste time looking at homes you can't afford because of this.

2 Months Ahead

Make a home-buying offer. Closing on a home typically takes four to six weeks. Therefore, if you have a set move-out date, give yourself enough time to deal with any problems that could keep closing delayed or changed.

Get the house inspected. After making an offer, one of the first things you should do is to have a home inspector look at the property. A common example of something that can delay closing is when a home inspector finds something that needs to be fixed.

Last Month

Before closing, double-check that all your financial documents are in order and look over all the lending documents. The final stretch is here! These last steps are the easiest if you've kept your documents current and saved your down payment. The mortgage documents are probably the most difficult to review. You can get through them with the help of your agent.

Cover your new house with insurance. Shop for home insurance. Your lender will ask you for information about your chosen insurance company before closing.

Perform a final inspection. Usually, on the day of closing, before the closing, conduct a final walkthrough of your new home to ensure that it is in the condition you and the seller agreed upon.

For the cash needed at the closing, the closing attorney will tell you how much cash you'll need to wire before the closing. That amount will be provided to you a couple of days before the closing so you can obtain a cashier's check or arrange for the money to be wired. Bring your checkbook to the closing just in case a small change happens.

That is all. Congratulations!