The Home-Buying Checklist Jose Wishes He’d Had at 23

Around 2005, right before the housing bubble, a 23-year-old Jose walked into the sales office of the first neighborhood he looked at and said he wanted to buy a house. He signed the paperwork, they built it from scratch, and he put no money down. He even got a check back.

What he got along with it: a primary mortgage and a second mortgage, a balloon payment, and a variable interest rate. The rates went up. For about five years he was, in his words, house broke.

And the reason he bought it? Mostly to prove a point, not because the numbers made sense. He’s the first to say it worked out over time, and he’s bought several homes since. But he got there the hard way. This is the checklist he didn’t have.

Why a checklist and not a lecture

We’re not mortgage professionals, and this isn’t financial advice. What we can give you is the list of questions that would have slowed a 23-year-old down for one afternoon. That’s usually all it takes.

They didn’t tell me all the details, and I didn’t bother to read the fine print, but they didn’t say no.

“They didn’t say no” is not the same as “this is a good deal.” A lender approving you tells you what they’re willing to do. It doesn’t tell you what you can comfortably live with.

The pre-purchase checklist

Go through this before you sign anything. If you can’t answer a question, that’s your homework, not a reason to skip it.

1. Why am I buying, really? Write the honest answer in one sentence. “I want to build equity and I plan to stay a while” is a reason. “I want to prove I don’t need anybody” is a feeling. Feelings are allowed, but they shouldn’t be signing loan documents.
2. What am I putting down, and what does no money down actually cost me? Zero down can feel like a gift. It usually means you’re borrowing the whole thing, which can mean a bigger payment, extra costs, and no cushion if prices dip.
3. How many loans is this, and who holds each one? If there’s a first and a second mortgage, get the terms of both in writing and read them separately. They can behave very differently.
4. Is the rate fixed or variable? If it’s variable, ask how often it can change, how much it can change each time, and the highest it can ever go. Then calculate your payment at that highest rate.
5. Is there a balloon payment? A balloon means a large lump sum comes due at a set point. Ask when, how much, and what your plan is if you can’t pay it or refinance at that moment. “I’ll figure it out” is not a plan.
6. Are taxes and insurance escrowed? If they’re included in your monthly payment, you’re paying a little at a time. If not, you’ll owe them separately, often in big chunks. Jose’s weren’t, and the tax bill showed up at the end of every year.
7. What’s left over after the house? Take your monthly take-home pay and subtract the true monthly cost (see the worksheet below). Is there enough left for food, gas, car, savings, and an emergency without reaching for a credit card?
8. Could I handle this if my income dropped? If the payment only works when everything goes right, it doesn’t work.
9. Did I shop around? Jose didn’t. He walked into the first neighborhood. Look at more than one house, and get more than one loan quote.
10. Who read the fine print? If the answer is “nobody,” stop. Read it yourself, or pay someone qualified to read it with you.

The true monthly cost worksheet

People think you buy the house, it’s the mortgage payment. No, it’s the mortgage, it’s the taxes, it’s the insurance, it’s the maintenance, the upkeep, the furnishings.

Jose said it on the show, and he also admitted that even today he sometimes forgets to include some of those things. So write every line down and add it up as a monthly number:

1. Mortgage payment (principal and interest; both loans if there are two)
2. Property taxes (yearly bill divided by 12, even if you pay once a year)
3. Homeowners insurance (yearly premium divided by 12)
4. HOA or neighborhood fees, if any
5. Utilities (a house usually costs more to cool, heat, and water than an apartment)
6. Yard and upkeep (Jose’s weekends were mowing and watering grass; tools and water aren’t free)
7. Repairs and maintenance fund (set aside something every month; things break on their own schedule)
8. Furnishings and “making it yours” (empty rooms have a way of filling up on credit)

The total is your real housing cost. Use it, not the mortgage number, when you answer question 7 on the checklist.

House broke vs. every other kind of broke

Jason asked Jose about “choosing your broke.” Jose’s answer was honest: being house broke isn’t the worst thing in the world, because at least the money was going into an asset that eventually appreciated. Going-out broke gets you nothing back.

I chose my broke for the wrong reasons, but fortunately for me, it was into something that gave me something in return.

Notice the word “fortunately.” Jose credits a little luck and a little ignorance. A good checklist is how you stop relying on luck. Being house broke on purpose, with a cushion and a plan, is a very different five years than being house broke by accident.

The outside view is not the inside view

From the outside, Jason saw his friend with a house, extra rooms, and people over playing Halo. From the inside, Jose was watching every penny. If you’re comparing yourself to a friend who “has it together,” remember you’re comparing your inside to their outside.

Your turn

What’s the one question you wish someone had made you answer before your first big purchase, a house, a car, or anything else? Tell us in the YouTube comments on the episode so the next person sees it.