How to Buy a Home: The Complete 2025 Guide

More and more home buyers are finding that buying a home is even more challenging than expected. A 2025 study found that around 46% of buyers, including 58% of first-time buyers, say purchasing a home was more stressful than they expected.[1]

Making such a large purchase is a big deal, but it doesn't need to be completely draining. Being prepared and getting good advice from your buyer's agent can help you avoid all of the pitfalls of home buying.

A good buyer's agent can help you get pre-approved for a mortgage, assist with making an offer, and guide you through closing.

🔎 Get started: Match with top buyer's agents near you and get cash back at closing.

Step 1: Determine your budget and timeline

Before you start house hunting, you need a clear picture of your finances. Understanding just how much house you can afford will help you make other important decisions as you shop for your new home.

How to figure out what you can afford

To keep your price limit within your budget, use the 28/36 rule, which says:

• Your total monthly housing costs should be less than 28% of your gross monthly income
• Your total monthly debt payments should be less than 36% of your gross monthly income

Here's how to calculate your budget:

How to get help with a down payment

The standard down payment on a home is usually 20%, which works out to about $94,400 based on the national median home value of $369,147.

If you don't have this much saved, government-backed loans can help. The Federal Housing Administration and Veteran's Affairs are two places to start.

In addition to FHA and VA loans, there are down payment assistance (DPA) programs available to help eligible homebuyers with a grant or a second mortgage to help with closing costs or a down payment.

Most states have their own DPA programs in place, as well. See our guide to buying a home in your state for more details.

Step 2: Find a real estate agent

Having a knowledgeable buyer's agent on your side will make your home search more efficient and help you save money.

A good buyer's agent will help you:

Be particular when selecting an agent to help you find a home. Even if an agent comes highly recommended, be prepared to ask them a few questions before signing a contract. Look for an agent who has a recent transaction history with buyers in your area and price range. Check online for reviews from recent clients.

Step 3: Get pre-approved for a mortgage loan

Getting pre-approved for a mortgage is a crucial step to take before you start browsing for homes. Once you have a pre-approval letter from a bank, you know your budget and sellers know you're serious about buying.

What is a pre-approval letter?

A pre-approval letter is a document from a bank they would be willing to lend you for a mortgage based on your credit and other financial information.

Getting a pre-approval letter is different from simply pre-qualifying for a loan. Pre-qualification is a lender's best guess at the amount and terms of your loan based on a snapshot of your credit history.

A pre-approval letter, on the other hand, is issued by the lender after a deep-dive into your finances. The pre-approval letter provides an accurate description on how much you can borrow, the mortgage rate, and other detailed terms of the loan. With a pre-approval letter, you can feel confident in making offers on homes you're sure you can take out a mortgage for.

How to choose a lender

Choosing a mortgage lender and loan is more complicated than just picking the lowest rate. You'll want to make sure you choose a lender with a good customer service record that provides the loan product that fits your needs. What might seem like ideal loan terms now might not fit your needs later in life.

Fortunately, you don't need to be able to see the future to choose a lender. You just need good advice. A good buyer's agent can educate you on what loans might work best and recommend multiple lenders for you to interview.

🔎 Our agent-matching service is a hassle-free way to find buyer's agents to interview. Match with top buyer's agents near you and get cash back at closing.

What will I need for pre-approval?

Here are some of the documents you can expect the bank to ask you for during the pre-approval process.

Step 4: Make a wish list

Before you start touring homes, create a detailed wish list. This keeps you focused and helps your agent find properties you'll like.

Location priorities

Consider these factors when choosing where to buy:

Practical considerations	Safety and community
🚗 Commute time to work	🚨 Crime rates and neighborhood safety
🏫 School district quality (affects resale value even if you don't have kids)	🏗️ Future development plans
📍 Proximity to family and friends	📈 Property value trends
🛒 Access to shopping and amenities	🌳 Community amenities (parks, libraries, rec centers)

Size and amenities needs

Think about your current and future needs for space and home features:

Layout	Amenities and features
🛏️ Number of bedrooms and bathrooms	🍳 Updated kitchen and bathrooms
💻 Home office space	🧹 Hardwood floors vs. carpet
📦 Storage needs (closets, garage, basement)	❄️ Central A/C or heat
🏡 Yard size and maintenance level	🅿️ Garage or covered parking
👶 Room for guests or future family growth	🐶 Fenced yard for pets/kids

Consider your home insurance costs

Home insurance rates are expected to rise as much as 8% in 2025.[2] It's important to consider the environmental factors that will impact your home insurance costs and factor them into your budget.

These are the most expensive states for home insurance in 2025:

Step 5: Start house shopping

Time for the fun part! But successful house hunting requires strategy and patience. Expect to take around one to three months before you're ready to make an offer. 

If you're not in a rush to find a new house, consider waiting until the best time to buy. Market timing affects both selection and pricing.

Choose your location

Pare down your list of possible neighborhoods by researching the affordability and desirability factors of towns that you're interested in.

Stay within your budget

Set your maximum budget before you start looking and stick to it. Here are some smart shopping strategies to avoid taking on more house than you can afford.

• Look at homes 5-10% below your max budget.
• Factor in potential bidding wars.
• Stick to your budget even if you're approved for a larger mortgage.
• Consider renovation costs for fixer-uppers.

Step 6: Make an offer

Submitting an attractive offer in a competitive market requires both strategic thinking and thorough preparation. Your goal is to present an attractive package to the seller while protecting your interests and managing costs effectively. 

Remember, most buyers make multiple offers before closing a deal on a home, so understanding the key components of a strong offer is essential.

Essential elements of an offer

💲Purchase price: Your offer amount should be based on current market conditions and be supported by comparable sales data. In competitive markets, you may need to offer more than the seller is asking, while slower markets might allow for below-asking offers. A good agent's advice is indispensable when drafting an offer.

💰 Earnest money deposit: Typically ranging from 1-3% of the purchase price, this deposit demonstrates your serious commitment to the purchase. For the U.S. median-priced home, this could range from approximately $3,691 to $11,074. This amount will be credited toward your down payment if the sale proceeds.

✅ Pre-approval documentation: Include your lender's pre-approval letter, as many sellers won't consider offers without this crucial financing verification.

📄 Contingencies: Protect yourself with appropriate contingencies, such as inspection, appraisal, and financing conditions. These safeguards allow you to withdraw from the purchase if specific requirements aren't met.

⏳ Closing timeline: Propose a realistic closing date that accommodates both parties' needs. While 35 days is typical, this can vary based on your financing type and market conditions.

🤝 Additional considerations: Depending on your situation, you might include seller concessions for closing costs, ask for repair credits for known issues, or make other adjustments to help seal the deal. Your agent will help you determine which elements will make your offer most competitive while serving your best interests.

Step 7: Negotiate with the seller

When sellers respond to your initial offer, they typically have 72 hours to accept, reject, or present a counteroffer. This opens the door to negotiation, and the statistics are encouraging: 52% of home buyers attempt to negotiate their purchase, with an impressive 94% achieving some level of success.[3]

Successful negotiation extends far beyond simply adjusting the purchase price. Smart buyers understand that multiple elements can be leveraged to create a win-win scenario while addressing their primary concerns.

How to negotiate strategically

• Ask the seller to contribute toward closing costs or buyer's agent commission. About 93% of buyers who tried this approach said it was successful.[3]
• Offer repair and improvement credits. Instead of requesting specific repairs, negotiate credits at closing that give you control over the work quality and timeline. About 83% of buyers who asked sellers to cover necessary repairs were successful, and an even higher percentage (89%) were able to negotiate for the seller to cover cosmetic updates.[3]
• Ask for points toward mortgage. Consider asking sellers to contribute toward mortgage points to lower your interest rate. About 77% of buyers found success with this tactic. [3]
• Ask for furnishings. If not included with the home sale, ask the seller if they are s interested in including desirable appliances and furniture in the deal. About 91% of buyers reported success with this request.[3]

One key to successful negotiation process is keeping the seller's interests in mind. If faced with a counteroffer or "highest and best" request, you can enhance your offer's appeal through increased earnest money deposits (increasing it to 3-5% of purchase price, for example), timeline flexibility that accommodates the seller's needs, or modest price increases of 1-2% that demonstrate serious intent.

Step 8: Review inspection and appraisal

Once your offer is accepted, you enter the "due diligence" period to verify the property's condition and value.

Due diligence is your opportunity to thoroughly investigate the property before finalizing the purchase. Typically lasts 7-14 days and includes inspections, appraisal, title search, and financing finalization.

Home inspections

The national average cost of a home inspection is $249–$347, and the cost is usually paid by the buyer.

A professional inspection typically covers:

• Foundation and structural elements
• Electrical systems and safety
• Plumbing systems and water pressure
• HVAC systems and air quality
• Roof condition and drainage
• Insulation and ventilation
• Windows, doors, and exterior

Ask your agent about any additional specialized inspections they think may be important. Which type of special inspection may be needed depends on the home's location and condition.

Home appraisal

Your lender orders an appraisal to ensure the home's value supports the loan amount. This costs around $233–$361 on average nationwide, and is paid for by the buyer.

During an appraisal, a licensed appraiser visits property and examines the location, condition, and features of the property. The appraiser will compare the property to recent similar sales in the neighborhood to provide a detailed valuation of the property.

Title search and insurance

A title company performs a property title examination, which looks at ownership records to verify that the seller has legitimate ownership rights to the property.

This title search also uncovers any existing liens against the home. A lien represents a legal right against real estate that serves as security for outstanding debt obligations.

Because liens remain connected to the real estate rather than following the individual owner, you could inherit financial obligations from prior owners. Without proper title examination, responsibilities such as overdue property taxes, HOA dues, or other outstanding debts could unexpectedly transfer to you.

Step 9: Complete the financing process

While you're inspecting the property, your lender is verifying your finances through underwriting. Underwriting is detailed verification of your ability to repay the mortgage.

Underwriters verify:

• Income stability and employment
• Credit history and current debts
• Assets and down payment source
• Property value and condition
• Debt-to-income ratios

The underwriting process usually 1-2 weeks, but can take longer if there are complications.

📄 Documents you'll need for underwriting

What to do (and avoid) during underwriting

Your finances are being intensely scrutinized during the underwriting process, so it's important to be extra diligent with your bill paying and creditworthiness during this time. 

Step 10: Close on your new home

You're almost there! A few days before closing, you'll need to wire your down payment and closing costs to your escrow agent as directed by your lender. 

This is also a good time to schedule a final walk-through with your agent to ensure the property remains in expected condition, all agreed-upon repairs are complete, and no new issues have emerged.

What to expect at closing

On closing day, plan to spend approximately 1.5 to 2 hours at a title company, real estate attorney's office, or lender's location to finalize the transaction. You'll review and sign numerous documents, including the closing disclosure, deed, mortgage or deed of trust, settlement statement, and various affidavits and insurance documents. 

Don't hesitate to ask questions about anything unclear—verify that all names and property details are accurate and request copies of every signed document.

Understanding your closing costs

Buyer closing costs typically range from 3-5% of the purchase price, which translates to approximately $14,156–$23,594 on a median-priced home nationwide.

These expenses include:

Agent and professional fees: Unless negotiated otherwise, you'll cover your buyer's agent commission (averaging 2.67% nationwide) along with various lender fees for loan origination, underwriting, and processing.

Property-related expenses: You'll pay for the home inspection, appraisal, title search, recording fees, and title insurance.

Prepaid homeownership costs: Expect to pay upfront for homeowners insurance, property taxes, and HOA dues where applicable.

After completing all paperwork and financial transactions, you'll receive the keys to your new home! Remember that your first mortgage payment will typically be due within a month of closing, so coordinate with your lender about payment schedules and automatic payment options.

Frequently asked questions about buying a house

Methodology

In researching this article, our team used historical housing data from Realtor.com, Redfin, and Zillow, mortgage rate data from Freddie Mac, and home loan information from multiple government websites. Local service costs were gathered using price quotes and Thumbtack.

Related articles