Homebuyer Readiness Checklist

Your credit score determines whether you can get a mortgage and at what interest rate. Check your score before you do anything else.

• Pull your free credit reports at AnnualCreditReport.com (Equifax, Experian, TransUnion — all three)Free, no impact on your score
• Check your credit score — free through your bank, credit card app, or Credit KarmaAim for 680+ minimum; 700+ for best mortgage rates
• Review each report for errors (wrong balances, accounts you don't recognize, incorrect late payments)Dispute errors at each bureau's website before applying for a mortgage
• Check for any open collections, charge-offs, or judgmentsThese need to be resolved before most mortgage approvals
• Verify no missed payments in the last 12 monthsRecent lates hurt mortgage applications significantly

You need more than a down payment. Budget for down payment + closing costs + post-move reserves.

• Know your down payment target — minimum 3% (conventional) or 3.5% (FHA), ideally 5–10%Lower down payments require private mortgage insurance (PMI), adding $80–$200/month
• Budget for closing costs — typically 2–3% of the purchase price in AlabamaIn Tuscaloosa on a $220,000 home: $4,400–$6,600 in closing costs
• Keep 2–3 months of mortgage payments in reserve after closingLenders and common sense both require this buffer for the unexpected
• Check AHFA Step Up program for down payment assistance (available to eligible Alabama buyers)See Alabama First-Time Buyer Programs
• Verify source of down payment funds (bank statements going back 60 days required)Gift funds are OK but require a gift letter — document everything

Lenders use your DTI to determine how much mortgage you can qualify for. Front-end DTI (housing only) should be under 28%; back-end DTI (all debt) under 43%.

• Back-end DTI is below 43% with the estimated mortgage paymentFHA allows up to 50% in some cases; conventional is stricter at 43%
• No plans to take on new debt before closing (car loan, credit card, etc.)New debt after pre-approval can kill your closing — don't open anything
• Income is stable and documentable (W-2, tax returns, pay stubs)Self-employed? You'll need 2 years of tax returns showing consistent income
• Two years of steady employment history in the same fieldJob changes are OK if you stayed in the same industry

Pre-approval is not the same as pre-qualification. Pre-approval requires actual documentation and gives sellers confidence that your financing is real.

• Gather required documents before contacting your lenderW-2s (last 2 years), pay stubs (last 30 days), bank statements (last 60 days), tax returns (last 2 years), photo ID
• Contact TVACU for a mortgage pre-approvalAs a credit union member, you benefit from local underwriting and competitive rates — start here before going to a bank or online lender
• Understand your pre-approved amount vs. the amount you should spendLenders tell you what you qualify for — not what you can comfortably afford. Stay under your limit.
• Compare at least 2–3 lenders before committing (rate shopping within 14–45 days counts as one hard inquiry)Even 0.25% rate difference on a $220K loan saves ~$10,000 over 30 years
• Pre-approval letter in hand, dated within 60–90 days of making offersAgents and sellers require this before scheduling showings in many cases

Beyond finances, make sure you're prepared for the practical realities of buying a home.

• Identified a buyer's agent (ideally a Tuscaloosa-area specialist who works primarily with buyers)A good buyer's agent costs you nothing — seller pays both agents' commissions
• Defined your non-negotiables: neighborhood, school district, bedroom count, commute limitWrite these down before touring — emotional decision-making is expensive
• Understand flood zone risk in Tuscaloosa — check msc.fema.gov for any property before making an offerProperties in Zone AE require mandatory flood insurance ($800–$2,500/year additional)
• Budget for a home inspection ($300–$500) — always get one, no exceptionsNever waive an inspection to compete in a bidding war — hidden issues can cost tens of thousands
• Understand earnest money (typically 1% of purchase price) — this is at risk if you back out without a contingencyInclude inspection contingency and financing contingency in every offer
• Reviewed Alabama first-time buyer programs (AHFA Step Up, MCC tax credit)See Alabama First-Time Buyer Programs — these can reduce your rate or provide down payment help
• Know what homeownership costs beyond the mortgage (taxes, insurance, maintenance, HOA if applicable)Rule of thumb: budget 1–2% of home value per year for maintenance ($1,800–$3,600 on a $180K home)

Use this as a final check. All five areas should be green before you start making offers.