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Key takeaways:
- Buying your first house can be overwhelming; here’s what to expect.
- Knowing how the homebuying process works can make you a more competitive buyer.
- While the process can vary, here are the typical steps of buying your first home.
For most people, buying a house is the biggest investment they ever make. The process can be intimidating, especially for first-time homebuyers, so it helps to break things down. While there can be many variations, these seven steps are typical. So if the timing is right for you and you think you’ve got enough saved for your down payment, here’s what to do.
How to Buy a House: A Guide for First-Time Homebuyers
1. Organize your finances
Gather paperwork to document your income and employment history; this includes W-2s, current paystubs, bank statements, tax returns from the past two years, and details about any credit card debt or student, car, or other loans. You’ll also want to check your credit and correct any errors you find.
If you've placed a freeze on your credit for increased security, you'll need to lift the freeze before you apply for a mortgage. You can request the credit bureaus to temporarily lift or remove the freeze by phone, mail, or online.
2. Get preapproved
Your homebuying process will go more smoothly if you get preapproved for a mortgage. This process will tell you how much you’ll be allowed to borrow; preapproval also lets sellers know you are a serious buyer. A good loan officer will help you find the right type of mortgage for your situation.
3. Choose a real estate agent
While it is possible to buy a home on your own, a good realtor is essential, especially if this is your first real estate transaction. An agent will help you search for listings, arrange property viewings, handle negotiations and paperwork, and make sure your purchase runs smoothly. Look for a professional real estate agent with experience in your price range and target neighborhood.
4. Find a home
Start with a wish list and prioritize the things you want in your new home but know that you’ll likely need to compromise on some items to meet your budget. Consider neighborhoods and schools, access to transit, commute times, and other factors as well as features of the home itself. Be realistic in terms of how much work you’re willing to do to remodel a less-than-perfect home; it pays to be patient and wait for the right fit. Take time to look online at houses on the market, and drive by houses before asking your realtor to arrange a tour.
5. Make an offer
An offer is an initial draft of a purchase contract that includes a price, a specific closing date, contingencies based on appraisal or inspection results, and other factors. If you think you’ve found the right home, your agent will help determine an offer price that is fair and realistic—and within your budget. A seller has the choice to accept, decline or counter your offer, either with another price or with other options such as a different closing date.
6. Get the home inspected and appraised
Most purchase offers are contingent on having the home professionally inspected and appraised. If the inspector discovers any serious issues with the home (such as plumbing or structural problems), you can negotiate with the seller to either fix them or reduce the price so that you can get them repaired yourself.
Your mortgage lender will hire an appraiser to determine the fair market value of the home; this ensures that you’re not paying more than the property is worth. If the appraisal comes in lower than the price you’ve agreed to, you can try renegotiating or rescinding the offer. If the appraisal is higher than the price you’ve agreed to, it’s a sign that you negotiated a good deal.
7. The final step: closing
Closing, sometimes called settlement, is the process where ownership of the home transfers from the seller to you. Your mortgage lender will typically require that you have homeowner’s insurance (and perhaps other policies like flood or earthquake insurance) in place at closing. A title company will make sure that all the documentation and forms are signed, money is transferred, and the transaction is properly recorded. Closing is a complicated process, so don’t hesitate to ask questions.
Get the keys
Once everything is all signed, you’ll be handed the keys to your new home. Congratulations; you’re a homeowner!
