How to Buy a House in 7 Simple Steps

Are you planning to buy a home this year? Like any big life step, buying a house should be done only after careful preparation and research. Before you begin, make sure you’re aware of everything that goes into the home-buying process.

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1. Check your credit score

What credit score do you need to buy a home? It depends on the type of loan you’re looking to get. For a conventional loan, the minimum credit score is set at 620. However, if you’re looking to get an FHA loan, the minimum credit score is set at 580. While mortgage lenders take into account multiple financial factors during the pre-approval process, such as debt and income, credit score plays the biggest role in determining whether you get approved or rejected for financing. Check your credit score for free on Credit Karma and see where you stand.

2. Get pre-approved for a mortgage

Meeting with a mortgage lender will help you answer the question “how much house can I afford?” The lender will evaluate your overall financial state, including income, debts, and assets, and determine whether you qualify for a loan and at what rate.

Your assets would include how much you have saved up for a down payment. Most conventional mortgages require a 20% down payment, or $60,000 for a $300,000 home. It may take a long time to save up that much money, and it’s a scary thought to put that all down at once. Luckily, there are low- and no-money down options available when buying a home.

The Federal Housing Administration (FHA) insures a portion of the balance with your mortgage lender, meaning you can put down as little as 3.5%.

Fannie Mae and Freddie Mac are two other government-sponsored companies that can help you secure a 3% down payment on your home loan.

If you’re a member of the U.S. military or live in a rural area, the Department of Veterans Affairs and the Department of Agriculture’s Rural Development program have no money down options available for qualifying members. When you meet with a mortgage lender, make sure you ask about the different loan options you may qualify for.

A common misconception of first-time home buyers is that mortgage lenders are one-size-fits-all. In reality, you should shop around to several different mortgage providers, to see who can offer you the best interest rate.

When determining how much home you can afford, it’s important to take into account all of the costs associated with home ownership: costs such as maintenance, property taxes, and homeowner’s insurance. InsuranceGeek.com offers free home insurance quotes, so you can have an idea of what you’ll be paying once you purchase the home.

3. Find a real estate agent

Finding the best real estate agent for you is crucial to ensuring a smooth and secure home-buying process. Real estate agents are experts in the housing market, neighborhood, and the buying process, and will help you find the perfect home for your needs. And since the commission is paid by the seller and not the buyer, you have nothing to lose and all to gain by enlisting the help of a realtor to buy a home.

How do you find the right real estate agent? Ask your friends and family in your desired neighborhood for any referrals. Now that everything is online these days, client reviews of real estate agents are also available on websites like Realtor.com and Zillow. Get in contact with a few highly-rated agents and set up in-person meetings to make sure that they have the qualifications to help you in your house hunt.

4. Go house-hunting

And now for the fun part: looking at homes!

Before you tell your real estate agent to set up a list of homes to visit, make a list of wants and needs when it comes to your first home. Some things to keep in mind:

Old or new?

Will you be putting in the effort and money to fix up the leak in a 20-year-old roof? Would you prefer to have a home with a brand-new HVAC that you won’t have to worry about for the next ten years? Make sure you consider these things when looking at the age of a home.

Do you have or plan to have kids?

If so, school ratings will be something you want to take into account. Check a website like GreatSchools to check the school rating to help you decide which neighborhood you want to settle in.

Look for the ugliest house in the nicest neighborhood

You can change cracked shingles, but you can’t change where the house is sitting. Consult your real estate agent to see whether the home values in the neighborhood are going up or down.

About how long will it take to find the right home? According to the National Association of Realtors, it takes the average home buyer around 10 weeks before finding the right house. Make sure to take your time to find the right fit, rather than rush the process and settle on a non-ideal home.

5. Submit an offer

You’ve done the research, driven around to countless as houses, and now you think you’ve found the one. Congratulations! Unfortunately, it’s not time to celebrate yet. You’ll first have to see whether your offer is accepted.

Your real estate agent will help you draw up an offer, taking into consideration factors such as the asking price, the market, and the financing terms. In this seller’s market, it’s likely that you’ll be facing competition with other bidders. To stand out from the competition, you may want to write a letter to the seller explaining why you want the home. This personal touch showing the seller that you love their home as much as they do can be the difference between having your offer accepted or rejected.

It’s likely that your initial offer will spur a series of negotiations. This can be an emotional process, but make sure to keep a cool head. Your real estate agent will help you decide what terms you’re ok with bending to make the process go smoother, and when to stand your ground.

6. Get a home inspection and appraisal

Once you get to this step, the house is officially under contract. Hooray! But before closing the sale, you will need to go through the contingencies in the contract. Contingencies are important steps that need to be taken in order to secure the purchase of a home. They offer a safety net in case something comes up and you need to back out of the sale.

The first contingency is the home inspection. You have every right as a buyer to inspect the home before purchasing it, as the inspection can reveal faults such as structural damage or expensive repairs. This is another time when your real estate agent’s negotiation chops will be put to the test: depending on the extent of the damage, your agent can negotiate to have the seller fix it before selling the home, or lower the initial price. If the negotiations don’t pan out or the damage is irreconcilable, the inspection contingency also gives you a chance to back out of the contract.

The next contingency is the appraisal evaluating the value of the property. This step is required by the mortgage lender, to ensure that they won’t be financing the home for more than it’s worth. If the appraisal comes in at more than the price you offered to pay, consider it like a nice discount on your home. If it happens to come in lower than your offering price, you may need to go back into negotiations to make sure you’re not paying more than the home’s worth.

7. Close the sale

You’ve gone through the house-hunt, endured the negotiation sessions, and now you’ve finally made it to the closing table. Now it’s time to celebrate! Well, almost. Before you pop open the champagne, you’ll need to sign the closing documents. This is an agreement that you’ll pay all of the closing costs, which typically include attorney fees, appraisal fees, your down payment, homeowner’s insurance, and property taxes. Your real estate agent will be with you during the closing, so make sure to ask them any questions you have about the fees. After all, this is likely one of the biggest purchases of your life, and you’ll want to be fully aware of what you’re signing.

Once you pay the closing costs, the keys to the home will finally be yours. The home-buying process is long, but being able to call your dream house your home makes it all worth it.