Step-By-Step Guide to Buying a Home
Buying a home is one of life's most significant milestones, yet it can feel overwhelming with its complex steps and critical decisions.
With this article, you'll be equipped with the knowledge and tools to make your home-buying process smooth and successful.
On the other hand, you may not be feeling overwhelmed. You may already know what it takes to buy a home and you’re just too excited to begin the process. If that’s the case, take the first step and complete our digital mortgage application to get pre-approved.
What Are the Steps to Buying a Home?
While every scenario is unique, there are a few steps that should be shared Here are the steps to buying a home and ensuring a smooth and successful home buying process:
Step 1 - Get Finances, Credit, & Down Payment in Order
The first steps to buying a house should focus on getting your finances in order. First, check your credit score. If you’ve ever wondered what you need to do to buy a house, keeping an eye out on your credit score is one of the most important steps.
Credit scores play a huge role in the home-buying process. A higher score means better mortgage rates. If your score's not where it should be, don't panic.
You can work on your credit score by:
- Consistently paying your bills on time.
- Paying down existing credit card balances and loans.
- Avoid new credit applications as each application can result in a hard inquiry, which may lower your score.
- Check your credit report for errors and dispute any inaccuracies you find with the credit bureaus.
- Keeping long-standing accounts open to help build a strong credit history.
- Having a mix of credit types (e.g., credit cards, loans).
You can check your credit score for free using tools like Experian, TransUnion, and Equifax via AnnualCreditReport.com.
If you’re a first time home buyer, we recommend downloading this fuller First Time Home Buyer’s guide that walks you through the entire process.
Next, tackle your finances. Calculate how much you can afford. This includes not just the mortgage, but also taxes, insurance, and maintenance.
Use our home affordability calculator to determine your total monthly payments for specific loan amounts and home prices!
Then, there's the down payment. Traditionally, it's 20% of the home's price, but don't be discouraged if you can't manage that. Many loans allow for a lower down payment. Here are some tips for saving for a down payment:
- Start saving early. The sooner you start, the more time your money has to grow.
- Cut unnecessary expenses.
- Set up a dedicated savings account to keep your down payment funds separate to avoid spending them.
- Track your income and expenses to find more opportunities to save.
Step 2 - Figure Out Your Must-Haves & Find a Home
With your finances in order, it's time to dream. But not too wildly. Think practically about what you need in a home. Make a list of must-haves such as:
- The number of bedrooms
- Proximity to work or schools
- A backyard for your pets
- Any aspects of your home that you can’t live without
Next, list your nice-to-haves. These are things you’d love but can live without if necessary, like a pool or a gourmet kitchen. This helps narrow down your search and keeps you focused on what's important.
Once you have your “must-have” and “nice-to-have” list, start your hunt online. If you’ve ever wondered how long it takes to buy a home, then this part can be the longest part in your home-buying journey.
You’ll want to start looking for houses on reputable real estate websites like Zillow and Realtor.com. To narrow down the listings, set filters based on your must haves and budgets.
Then analyze these listings carefully. Don’t just look at the pictures. Read the descriptions to understand the property features and any disclosures, research crime rates, school ratings, and local amenities, use tools like Google Maps to check the commute time to work or school.
Sometimes, things aren’t as they seem online in real life, so during your online hunt, create a shortlist of the homes you love, then contact your real estate agent to arrange a viewing so you get a real feel of the homes.
During the viewing, assess the condition of the home and inquire about any concerns or details not covered in the listing. Picture your daily life in the home. Does it fit your lifestyle and needs?
Be patient and thorough in your search because this is a significant investment and you want it to feel right.
Step 3 - Get the Right Mortgage & Get a Pre-approval
Now that you have an idea of your dream home, it's time to figure out how to pay for it. This is where the mortgage process comes in - your key to homeownership. Here's how to get the right mortgage and secure a pre-approval.
Start by exploring your loan options and using our free mortgage payment calculator to understand today's rates and what you can afford. We offer top-notch technology and customer service to guide you through the process, whether it's your first home or fifth.
Then get pre-approved. Our online application takes just 10-15 minutes. With a pre-approval letter, you have a clear picture of how much you can borrow, making you a more attractive buyer.
Remember, there's a difference between pre-qualification and pre-approval. Pre-qualification is a rough estimate of what you might borrow. Pre-approval is a detailed analysis, giving you a stronger position when negotiating with sellers.
Step 4 - Make an Offer on a Home
Once you've found the home you love, it's time to make an offer. Here’s how to navigate this crucial step:
- Market Research: Start by researching the market to determine a fair price. Look at recent sale prices of similar homes in the area using tools like Redfin. This helps you avoid overpaying or underbidding.
- Draft Your Offer: Work with your real estate agent to draft a comprehensive offer. This includes not only the price but also contingencies—conditions that must be met for the sale to proceed. Common contingencies involve financing, home inspection, and appraisal.
- Submit and Wait: After drafting, your agent will submit the offer to the seller. The seller can either accept, reject, or counter your offer. If they counter, be prepared to negotiate until you reach an agreement.
Step 5 - Home Inspection, Appraisal, and Insurance
With an accepted offer, you're nearing the finish line, but there are still a few critical steps to complete:
- Home Inspection: This is your opportunity to uncover any hidden issues with the property. Hire a professional inspector to evaluate the home's structure, systems, and overall condition. If problems are found, you can negotiate repairs or a lower price with the seller.
- Appraisal: Your lender will order an appraisal to ensure the home's value matches the loan amount. If the appraisal is lower than expected, you may need to renegotiate the price or cover the difference
- Homeowners Insurance: Protect your investment by securing homeowners insurance, which covers damage or loss. For your peace of mind, we’ll help you to shop around for the best and most competitive insurance rates and coverage.
Step 6 - Close on Your Home
You've reached the final step: closing. Here's how to ensure everything goes smoothly:
- Review Your Closing Disclosure: This important document outlines your loan terms, monthly payments, and closing costs. Verify that all details match your expectations and address any discrepancies with your lender promptly.
- Final Walk-Through: Before closing day, conduct a final walk-through of the home. Ensure that all agreed-upon repairs have been completed and that the property is in the expected condition.
- Closing Day: Be prepared to sign numerous documents. While it might be tedious, this step is crucial. Bring your ID, proof of insurance, and a cashier's check to cover closing costs.
Once all documents are signed and funds are transferred, you'll receive the keys to your new home, marking the successful completion of your home-buying journey.
Start your Easy Home Buying Process with Rate Today!
Feeling the excitement of potential homeownership? Start the home buying process today and complete our digital mortgage application!
Our streamlined application makes it easier than ever to get pre-approved and understand your home affordability options, whether you're a first-time buyer or looking to upgrade.
How to buy a home FAQs
1. What should I do if my offer is rejected?
If your offer is rejected, don't be disheartened. Here are some steps to take:
- Understand the Reasons: Ask your real estate agent to get feedback from the seller. Common reasons for rejection include a low offer price, unfavorable contingencies, or better competing offers.
- Revise Your Offer: Based on the feedback, consider increasing your offer price if it's within your budget. You might also want to adjust or remove some contingencies to make your offer more attractive.
- Improve Your Position: If possible, get pre-approved for a higher loan amount or offer a larger down payment to show financial strength.
- Explore Other Options: Keep looking at other properties. The right home is out there, and it's important to stay proactive in your search.
- Consult Your Agent: Your real estate agent can provide strategic advice on how to make your next offer more competitive.
2. How do I choose the right real estate agent?
Choosing the right real estate agent is crucial for a smooth home-buying process. Consider the following:
- Experience and Knowledge: Look for an agent with experience in your desired neighborhood and type of home. They should have a good understanding of the local market trends.
- Client Reviews: Read online reviews and testimonials from previous clients. Sites like Zillow, Realtor.com, and Yelp can provide insights into an agent's reputation.
- Communication Style: Choose an agent who communicates in a way that suits you, whether it's frequent updates via text, phone calls, or emails.
- Availability: Ensure the agent has the time to dedicate to your home search and isn't juggling too many clients.
- Professional Network: A good agent will have a network of trusted professionals, such as mortgage brokers, inspectors, and contractors, to help you through the process.
- Initial Meeting: Schedule an initial consultation to discuss your needs, ask questions, and gauge their responsiveness and professionalism.
3. What is earnest money, and how much should I offer?
Earnest money is a deposit made to demonstrate your commitment to buying the home. Here’s what you need to know:
- Purpose: Earnest money shows the seller you’re serious about purchasing their home and provides a level of security that you won’t back out without a good reason.
- Amount: The typical range is 1-3%, but in competitive markets, offering a higher percentage can strengthen your offer. Discuss the appropriate amount with your real estate agent based on local customs and competition.
- Protection: The money is usually refundable if the sale falls through due to contingencies outlined in the contract, such as a failed inspection or inability to secure financing.
- Escrow Account: Ensure that the earnest money is held in a reputable escrow account. It will be applied to your down payment or closing costs if the sale proceeds.
- Contingencies: Understand the contingencies in your contract to protect your earnest money. Ensure all conditions that allow for the refund of earnest money are clearly stated.