17 Steps to Buying a House: Everything Buyers Need to Do

Step 1: Assess your readiness

It’s easy to get swept away by the romance of homeownership, but first things first: Is it the right time for you to make one of the biggest purchases in your life?

We typically think of homeownership as preferable to renting. And in many cases, it’s the wiser financial choice. However, there are some instances when having a lease makes more sense than taking out a mortgage loan.

As you figure out whether you’re ready for homeownership, it helps to think a few years ahead, about five or so. That’s the basis of the five-year rule for selling a home, which suggests it typically takes around that long for the costs of buying to even out and start making financial sense after all the upfront expenses.

If you have to sell your home before you break even, you’ll lose money. So, if you’re likely to move in the next few years for your career, family, a relationship, or just good old-fashioned wanderlust, it probably isn’t a good time to buy.

On the other hand, if you’re likely to stay put in your community and can see yourself staying in the same property for at least five years, this might be a great move for you. The home you choose should fit what you need right now and also what you might need down the line. For example, if you’re planning to start a family soon, it might make sense to look at places with a little more space than you actually need today.

Step 2: Research the market

The two biggest considerations for homebuyers are typically location and budget. If you haven’t yet nailed down the areas where you’d like to live, start there. The following factors can help you narrow down your list of target neighborhoods:

• Commute
• Schools
• Accessibility
• Amenities
• Property taxes
• Type of home you’re looking for (single-family, townhome, or condo)

As you zero in on areas with homes that meet most of the criteria on your list, take note of how much these homes recently sold for and how long they were on the market. You’ll want to take a look at the square footage and lot size of the home to get a sense of how much space you’ll be able to get at different price points.

If you already have a good idea of where you want to live, your real estate agent can start sending you listings in those areas that match what you’re looking for.

Step 3: Check your credit report and repair what you can

Good credit can help you get a mortgage with better terms and a lower interest rate. Lenders use your credit score to decide what loans you qualify for and what rate you’ll be offered.

There are different types of home loans (we’ll get into that in step 8), and what you qualify for usually depends on your income and credit score. Conventional loans tend to have the best terms and rates. Most require a credit score of at least 620, while a score of 740 or higher is where you’ll usually see the best interest rates.

If your credit score isn’t quite where you want it yet, it’s worth fixing it up before jumping into the homebuying process. Start by checking your credit reports to make sure everything is accurate, and dispute anything that looks off with the credit bureau.

Your credit utilization, how much of your available credit you’re using, plays a big role in your score. Try to keep your balances below 30% and pay down debt so you can build your credit fast.

Lenders also tend to tighten credit score requirements when the market feels riskier, like during a recession or when one might be coming. For example, in 2020, during the COVID-19 pandemic, many lenders raised their minimum credit score requirements

Step 4: Start saving up

You’re probably wondering, “How much money do I need for a down payment?” A down payment of 20% of the purchase price is often talked about as the standard when buying a home. It can feel intimidating for a lot of would-be buyers and even make homeownership seem out of reach. However, most first-time buyers only put down around 10%.

“You don’t necessarily need a tremendous amount of money to be a first-time homebuyer. I think a lot of first-time homebuyers don’t realize that,” confirms Russie Weidl, a top-selling agent in Sanford, Florida, who has sold 73% more single-family homes than the average area agent.

Still, homebuying costs can add up quickly, so it helps to have a simple plan for saving what you’ll need. Unless you’re using a VA or USDA loan, you’ll usually need at least 3% to 3.5% for a down payment. Just like credit scores, down payment requirements can go up when lending conditions feel riskier.

»Learn more: A Down Payment Calculator can take a lot of the guesswork out of planning and help you see exactly what you need to save. Try using one now so you can set a clear target and start moving toward your home purchase with more confidence.

Step 5: Figure out how much you can afford

Now that your finances are in better shape, it’s time to think about what budget and price range actually make sense for you. A common rule of thumb is to multiply your total pre-tax income by three, so if you earn $80,000 a year, that would put you at roughly a $240,000 home price as a rough starting point. This rule works as a quick estimate because it loosely reflects what lenders expect you to comfortably manage while still leaving room in your budget for taxes, insurance, and everyday expenses.

That said, it’s not a one-size-fits-all number. Your actual affordability will depend on things like debt, savings, interest rates, and your credit profile, which is why it’s still smart to talk to a real estate agent or mortgage broker for a clearer picture.

To get even more precise, plug your details into our Home Affordability Calculator. It’ll help you see what price range feels comfortable, what’s pushing it, and what’s likely too much for your situation.

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Step 6: Find an agent

The right buyer’s agent helps you understand your budget further and what you can realistically afford. From there, they’ll get a clear sense of what you’re looking for and send you listings that match your criteria, including new ones as they hit the market.

Once you find a home you like, they’ll arrange showings, give you insights on the property, and help you spot any potential red flags. When you’re ready to make an offer, they’ll guide you through pricing strategy and negotiate on your behalf to help you get the best deal possible.

After your offer is accepted, they’ll help coordinate inspections, appraisals, and all the necessary paperwork. Finally, they’ll walk you through closing so everything is completed smoothly and you can get the keys to your new home. To find a buyer’s agent that fits your needs, try our free, unbiased Agent Match tool.

Step 7: Learn about first-time buyer programs

Your city or state may offer first-time homebuyer programs or grants to help cover the cost of your down payment or closing costs. These programs range from buyer education classes targeted toward moderate-income residents to housing aid for educators and first responders. It’s worth it to explore all options available to you as a first-time buyer.

Step 8: Research your mortgage options

There are several loan types out there, and choosing the right one can make a big difference in your monthly payments and upfront costs. Here are some common mortgage options to look into:

Take time to compare these options based on your credit score, income, savings, and how long you plan to stay in the home.

The standard loan term is usually 30 years, but you can also go with options like 15, 20, or 25 years. Some lenders even offer custom terms if you ask. Going with a shorter term can help you save on interest over time, but your monthly payments will be higher, so it depends on what fits your budget.

In most cases, you can pay ahead on your mortgage by submitting additional principal payments. Be sure to check with your lender to ensure there are no prepayment penalty fees.

Along with loan term length, it’s also worth thinking about whether you want a fixed-rate or adjustable-rate mortgage. With a fixed-rate loan, your interest rate stays the same for the entire life of the loan, unless you refinance. That makes it easier to budget since you’ll always know what your payment looks like.

With an adjustable-rate mortgage, your interest rate can change over time. It usually starts lower than a fixed rate, but it can go up or down depending on market conditions. How often it changes depends on the specific loan terms.

Step 9: Get pre-approved for a mortgage

Getting pre-approved for a mortgage is beneficial for you and the seller. First, it helps to confirm that you can afford what you think you can afford. Second, sellers take offers from pre-approved buyers more seriously. Remember: Sellers don’t want to have to deal with an offer falling through due to a lack of financing or funds. After a cash offer, an offer with a preapproval letter is the strongest there is.

Side note: Don’t confuse a prequalification letter with a preapproval. A prequalification is a quick estimate based on the basic information you provide, while a preapproval is a more in-depth review of your finances that lenders actually verify.

Step 10: Start shopping

Here comes the fun part you’ve been waiting for! House-shopping time. Going to house showings and open houses will become a part-time job for a bit, depending on how long it takes to find the one. To save time, have your agent set you up with a feed of available homes on the multiple listing service (MLS) that meet your criteria.

Step 11: Make an offer

Once you’ve found a house that meets your criteria and budget, it’s time to make an offer. If your offer is what the seller is looking for, it might be accepted right away. After that, you’ll be under contract. Or the seller may present counter-offers until you can land on agreeable terms.

Your agent will help you put together the most appealing offer possible. In some cases, you may want to include a personal letter alongside your offer to give yourself an edge over the competition. Keep in mind that a written offer is a legally binding document. Your personal letter is just the icing on the cake (and you should talk to your agent to make sure you’re not inadvertently violating any Fair Housing guidelines in your letter).

If you’re in a highly competitive market, multiple contingencies and tight closing dates can push your offer to the bottom of the pile. This doesn’t mean that you can’t ask for what you need, but you should be aware of the potential effect these requests may have on sellers.

Step 12: Deliver your earnest money

Your earnest money shows the seller you’re serious about buying the home. It’s a good-faith deposit that helps protect the seller in case the deal doesn’t go through. It’s usually around 1% to 3% of the home’s price.

You’ll typically pay it with a cashier’s check, and it gets held by a title or escrow company until closing. And don’t worry, there are standard contingencies in place to help protect you as a buyer if something comes up and the deal doesn’t move forward.

»Learn more: Not sure how much earnest money you should offer? Our Earnest Money Calculator below lets you plug in the home’s sale price and instantly see typical deposit ranges, including low, middle, upper, and even competitive-market amounts. Use it to compare your options side by side so you can decide how strong you want your offer to be without second-guessing the numbers.

Step 13: Inspect the home

As a buyer, this is your time to make sure the house is in a condition you’re willing to accept before finalizing the purchase. A good home inspection will also give you the information you need to make a decision to negotiate repairs for any issues or simply walk away.

The home inspection typically needs to take place seven to 10 days after signing the contract. There are several different types of inspections you may want to schedule, so be sure to take a look at your options ahead of time.

Step 14: Get a professional to handle the appraisal

An appraisal is when a licensed professional evaluates the home’s value to make sure it matches the price you’ve agreed to pay. It’s usually required by your lender so they don’t end up financing more than the home is worth. Once the appraisal is done, it helps confirm you’re paying a fair market value before moving forward with the loan.

The appraisal process can take a few weeks if the appraisers in your area are busy. The actual examination of the property can last anywhere from under half an hour to a few hours.

For buyers, the key takeaway here is that you want the appraisal to come out as the same as or higher than your offer. But you aren’t out of luck if the appraisal is lower than your offer, although there are additional hoops to jump through. Your options at that point are to negotiate with the seller, pay the difference, or walk away from the deal.

Step 15: Run a title search to make sure everything checks out

The title search is all about making sure the seller has full rights to sell the house. The title company will look for any outstanding taxes, liens, or ownership issues with the property. This search has to take place before the final transaction can occur.

Your title company will also issue title insurance to protect your lender against any future claims to ownership of the property. However, this policy protects your mortgage lender’s financial interests in the property, not your own. To be safe, you may want to purchase an owner’s policy, which will cover your interest in the property for as long as you have ownership.

Step 16: Do the final walkthrough before closing

Now it’s time for one last walkthrough of the home with your agent to make sure everything looks good before closing. Here’s what you should be looking for:

• The house is clean and clear of any items you haven’t agreed to keep.
• The lights, HVAC, toilets, and sinks are in working order.
• Any agreed-upon repairs are complete and effective.
• Check all repair receipts.

Step 17: Close on your home

Completing your home closing is the final step before the house officially becomes yours. This is when all the documents get signed, the funds are transferred, and ownership is legally recorded in your name. You’ll typically meet with your agent, the seller (or their representative), and a closing agent to go over and sign the final documents.

At this stage, you’ll also pay any remaining closing costs and fees that are due. Once everything is signed and processed, the title is officially transferred to you. After that, you’ll get the keys and can finally move into your new home.

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Ready to take the next step?

Buying a home can feel like a lot at first, but once you break it down, each stage becomes much more manageable. From figuring out your budget to researching loans, making offers, and getting to closing, every step moves you closer to homeownership.

The key is staying organized, asking questions, and making decisions that fit your financial comfort zone. It also helps to have the right support so you’re not figuring everything out on your own.

A knowledgeable buyer’s agent can guide you through the process, help you avoid costly missteps, and keep your best interests in mind along the way. When you’re ready, partner with a trusted agent through HomeLight to make your homebuying journey smoother and more confident from start to finish.

Header Image Source: (Bernard Hermant / Unsplash)