Buying a home is one of the biggest financial decisions you’ll ever make. It can be exciting and overwhelming at the same time, especially if you’re a first-time home buyer. Between saving for a down payment, navigating mortgage terms, and hunting for your dream house, it’s easy to feel lost before you even start.
We’ll walk you through how to buy a house, step-by-step. By the end, you’ll feel more confident and ready to start the home-buying process.
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1. Make sure you’re financially ready.
Buying a home is a long-term commitment. That’s why the first step is making sure you’re financially prepared. Homeownership is more than monthly mortgage paymentsーthink maintenance, repairs, and property taxes.
Take a closer look at your income, expenses, debts, and savings to get a clear picture of your financial health.
- Do you have at least three to six months of expenses saved up in an emergency fund?
- Is your debt-to-income ratio below 36%?
- Do you have a stable job and reliable income?
- Is your credit score at least 620?
Also, consider your goals for the next few years. It doesn’t make sense to buy a house if you don’t plan to live in it for at least five years. Buying and selling a home is an expensive process, and relocating too quickly could mean you won’t recoup the costs when you resell.
2. Figure out how much you can afford.
If you’re ready to buy a home, the next step is determining how much of your income you can allocate to housing. You can use the 28/36 rule, which suggests that you should spend no more than 28% of your gross monthly income on housing and no more than 36% on debts.
The 28% limit includes the principal, interest, homeowners insurance, property taxes, private mortgage insurance (PMI), and homeowners association (HOA) fees.
Once you have a budget to work with, stick to it. And if you’re buying a house with your partner, make sure you’re on the same page to avoid surprises or disagreements over which homes fit in your price range.
3. Save for down payment and closing costs.
After you’ve determined the amount you can afford, it will be easy to figure out how much to save for a down payment and closing costs.
The down payment is the biggest upfront expense, so how much should you save? Aim to put 20% down to avoid PMI, a fee added to your mortgage payment to protect the lender in case you default. But if you qualify for a conventional down, you may need to put down as little as 3%. Some government-backed loans, like VA and USDA loans, require zero down payments.
You should also save 2–5% of the home’s purchase price for closing costs, expenses you must pay when finalizing a home sale. This covers costs like loan origination fees, taxes, insurance, inspection and appraisal costs, and title fees.
Open a savings account specifically for this goal and automate your finances so you don’t forget.
4. Get preapproved for a mortgage.
How much do you need to buy a house? It depends on the location, housing market trends, and size. Buying a home with cash is the best way. But if you’re like most Americans, you’re probably going to take out a mortgage. Getting preapproved is the first step to securing a mortgage.
A mortgage lender can prequalify you and give you an estimate of how much you might be able to borrow with a simple conversation. However, a prequalification isn’t the same as getting preapproved. With a preapproval, the lender reviews your pay stubs, tax returns, bank statements, debts, and credit history.
Once approved, you’ll get a preapproval letter, which you can use when making offers. Most mortgage preapprovals last between 60 and 90 days.
Remember that when getting preapproved, lenders will perform a hard inquiry on your credit, which will show up in your report. But if you get several preapprovals around the same period, it will count as one hard inquiry.
5. Find a real estate agent.
While you can buy a house alone, you may need the help of a real estate agent. The right real estate agent can make a huge difference in your home-buying process because they understand the local market conditions. They'll also help you find your dream home, negotiate on your behalf, and navigate the entire process.
Interview at least three real estate agents before you hire one. Consider their housing market knowledge, local expertise, communication skills, and whether they specialize in helping people like you buy homes. Trust and reliability are also paramount. Read online reviews and ask for referrals from friends and family.
Additionally, get clarity on the agent’s commission structure upfront, which typically ranges from 5% to 6% of the home’s sale price and is often paid by the seller.
Want to save yourself some trouble? We recommend trying Clever Real Estate. It’s a free tool where you can get matched with top agents near you. Plus, you could qualify for cash back when you buy. Get matched with the best agents in your area.
6. Shop for your dream home.
It’s time to go house hunting! This is the most exciting step, but it can also be overwhelming. To get started, create a list of must-have home features, nice-to-haves, and bonus features. If you have a partner, you should each create your own wish lists and then compare.
- Must-haves: Which essential home features can you not compromise on? For instance, the location, number of bedrooms, bathrooms, school districts, and home values in that area (are they rising or falling?).
- Nice-to-haves: These are things that would be nice to have, but you can live without. Think about large walk-in closets, a two-car garage, a kitchen island, and a finished basement. While they add comfort, they shouldn’t be deal breakers.
- Bonus features: These are dream items that would be amazing to have. For example, a backyard pool, a home gym, and smart home technology. Such features shouldn’t make or break your decision if the house meets your budget and has your must-haves.
Once you settle on the features you want in your home, share them with your real estate agent, who will use them as a foundation for your dream house search.
And if you’re already a homeowner looking for a new home, you may want to consider buying a house before you sell. This way, you won’t miss out on your dream home before your old one sells. Also, don’t overlook government-owned properties, like HUD homes that often sell below their fair-market value.
7. Make an offer.
Found a home that’s right for you? Now is the time to make an offer. Your real estate agent will help you submit a competitive offer.
As you and your agent work on your offer, consider these strategies to make it more likely to be accepted:
- Make a substantial earnest money deposit.
- Adjust the closing date to finalize the deal at the seller’s preferred date.
- Waive contingencies to make your offer more attractive.
- Add an escalation clause, which says you’ll increase your offer if the seller receives a higher one.
If the seller rejects your offer, you can make a counteroffer or walk away from the deal.
8. Get a mortgage.
If the seller accepts your offer, it’s time to get a mortgage. Your lender will thoroughly review your finances before providing the loan.
Get ready to submit a lot of paperwork, which may include:
- ID and Social Security number
- Paycheck stubs for the past 30 to 60 days
- Tax returns for the past two years
- Recent bank statements
- Information regarding your debts
Once your mortgage application is complete, you’ll go into underwriting. This is where lenders decide whether to approve your loan. The lender may also request more documents during the process.
9. Schedule a home inspection and appraisal.
Before closing on your home, you need to schedule a home inspection to evaluate the home’s condition. A licensed home inspector will check for safety hazards, necessary repairs, plumbing, electrical, and HVAC systems.
“The best thing I did was getting multiple thorough inspections, along with quotes from contractors to fix the issues that came up!” said Sain Rhodes, customer service manager at Clever Real Estate and a recent homebuyer. “At the time I was purchasing, many people were waiving inspections. Though I may have missed out on multiple homes due to being unwilling to waive my inspection, I don’t regret this move!”
You’ll also need a home appraiser to determine the market value of the house by comparing it with recent sales of similar properties in the region. Your lender will choose the appraiser, but you’re responsible for the fees.
10. Close the deal.
You’ve made it! This is the last step of the home-buying process, where your lender will send the final closing statement at least three days before your closing date. Make sure you review everything again to avoid surprises on closing day.
“If I could go back and change anything, I would have asked my agent to ask the seller’s agent to please make sure the seller has removed their personal property from the home before closing,” Rhodes said. “They left behind some items in the garage and cabinets that I had to dispose of after closing, and that was a minor inconvenience I think I could have avoided.”
On closing day, you can do a final review with your real estate agent, pay your closing costs, and sign the paperwork.
Final thoughts: Get a solid agent to guide you through it
Congratulations! You’re officially a homeowner. And while many buyers go through this process alone, working with a real estate agent makes it much easier. You can even work with a low-commission realtor, who provides the same full services but at a lower rate, typically 1.5%.