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How to buy a house in ten steps [VIDEO]

Maggie Overholt
The Mortgage Reports editor

2019 is your year

Home buying is a lot more approachable than many people think.

True, there are a ton of moving parts. But if you know what to expect — and what order to tackle things in — the pieces will fall into place.

That’s where this 10-step home buying guide comes in handy.

You can explore the full guide below, but we’ll lead with a spoiler: Finding a house is not the first step.

The first step is to figure out your budget and get pre-approved so you know what you can afford.

Start by seeing what mortgage rate you qualify for — that will have a huge impact on your budget and overall home search.

Get a head start. Compare personalized mortgage rates today (Dec 15th, 2019)

How to buy a house in 10 steps

If you have no idea where to start, start here.

We’ve broken down the entire homebuying process into 10 approachable steps. No prior homebuying knowledge required.

Determine your budget. Get a mortgage rate today (Dec 15th, 2019)

1. Check in with yourself

If you’re thinking about buying a house, your mind probably jumped straight to house hunting. Maybe you already started surfing Zillow or found a place you love.

But before making any moves, it’s important to ask yourself a few key questions:

  • How’s my credit score?
  • What can I afford based on my income and monthly expenses?
  • Am I ready to buy a home?

Here’s why those questions are so crucial:

Checking your credit

Your credit plays a huge role in your mortgage application. If you have poor credit — think, below 580 — you’ll have to raise your score before you can qualify for a home loan.

And even if you have great credit, in the high 600-700’s, you should take a look at your report and make sure there are no errors. If there are, get them cleared up before you apply. It can make a big difference in your mortgage payment and the home you qualify for.

Setting your budget

Of course, you’re looking for a house within your budget. But when it comes to getting a mortgage, budget isn’t always as straightforward as it seems. Buyers are often surprised at how much house they can (or can’t) afford.

That’s because your home buying power hinges on so many different things. Your income, yes. But also your month-to-month debts, the location you’re shopping in, and mortgage rates — which can change daily.

Get an estimate of what you’ll be able to afford using the “by income” tab on our mortgage calculator.

Being “ready” for homeownership

Honestly, it’s pretty affordable to buy a home these days. You might not even have to save for a down payment. But that doesn’t mean buying a house is always the right choice.

Ask yourself a few questions first. Will you need to move and sell the house in 3-5 years? Do you tend to have a hard time making rent? Do you think you might switch jobs within a year or so?

If you answered yes, it might not be the right time to buy. Renting is still a better investment if it keeps financial strain low and gives you the flexibility you need at this point in your life.

Related: Should I buy a home or continue to rent?

2. Get pre-qualified before you shop

Hands down, this is the most important step.

Get pre-approved for a mortgage before you start shopping for a house, not after you’ve already found one.

Like we mentioned above, your home buying budget depends on a number of different factors. Online calculators will give you an estimate, but getting pre-approved is the only way to know exactly what you can afford.

The danger of not getting pre-approved is that you could fall in love with a house, only to find out you can’t afford it. Or, without a pre-approval letter in hand, it might get snapped up by a buyer who came more prepared.

Start the process by finding a great loan officer. Ask friends and neighbors for recommendations and check online reviews.

Related: What to look for in a mortgage company

When you’ve found the right fit, start your pre-approval. The lender will ask about your down payment, income, credit, debts, and more — so have your financial information at the ready.

Once you have the approval in hand, do a final gut check. Don’t move forward with a loan that’s too big for comfort, or too small for the house you really need.

And once you have an approval in hand? Do one more gut check. It’s possible for people with great credit to qualify for more than they’re comfortable paying. They might choose not to use their full budget.

On the other hand, some people end up qualifying for less than they expected.

Instead of buying right away, this might be the time to double down on paying off debts, improving credit, and saving for a bigger downpayment. All these steps will increase your home buying power next time you apply.

3. Get a pro real estate agent

A great real estate agent takes a lot of the pain out of buying a home. They’ll do much of the negotiating, navigating, and — best of all — paperwork on your behalf.

They should also be intimately familiar with the area you’re buying in. They’ll know how to spot a good deal or a bad one, and help you get the best price on your home.

Related: Do I need a real estate agent to buy a home?

Find a great real estate agent using local resources. Ask friends and family who they’d recommend, or anyone you know living in the area you want to move to.

It’s also worth checking Yelp, Google, and other first-hand reviews of the person you’re considering working with.

4. Find the perfect place

Finally — house hunting. You probably didn’t think it would take four steps to get here.

We won’t go into too much detail since house hunting is such a personal journey. We just have a couple pieces of sound advice:

  • Write down your “must-haves” and “nice-to-haves.” It’s easy to get roped in by a good deal or flashy home, but don’t settle for any place that’s missing a “must-have.” You’re going to be there for a long time, and compromising on something like the number of bathrooms or commute length can easily become a big regret
  • Think long-term. If the home won’t fit you for 5-7 years, keep looking. Generally, you want to be in your new home at least 5-7 years before selling. Otherwise, you’re likely to lose money. If you find a house you love but could see yourself outgrowing it quickly, it’s better to keep looking

One other tip: Think about buying off-season. Many people shop for a home in spring or summer, when the weather is fair and touring is pleasant. But these seasons see fierce competition and higher prices.

If you can wait it out, we recommend shopping in fall or even winter. This is when competition drops and sellers tend to get motivated. You’re more likely to get an amazing deal within your budget.

5. Make an offer they can’t refuse

You got pre-approved and found a house you love within your budget. But unfortunately, that doesn’t make it a done deal.

There are a couple things to keep in mind when you get to the make-an-offer stage:

  • Be prepared to walk away, even if your heart is set on a home
  • Have cash on hand so you can move quickly when the time comes

In hot markets, you probably won’t be the only person putting an offer on the house. There’s a chance someone with a bigger down payment or stronger financial portfolio could outbid you.

Go in with the mindset that you’ll have to make offers on several houses before one gets accepted.

And when your offer is accepted, you’ll have to put down earnest money within a day or two.

Related: How to buy a house with little or no money out of pocket

Earnest money can total 2-7% of the home’s value. It’s no small sum, so make sure you have liquid savings or a checking account that can be tapped on short notice.

At this stage, you’ll be glad you found a pro real estate agent. They’ll help you through the process, negotiate price and terms, and handle issues for you as they come up.

6. Submit the paperwork to your lender

A pre-approval letter means your lender has approved you to borrow — but they haven’t approved the home yet.

Before they’ll sign off, your lender needs to review the purchase agreement, order an appraisal, and make sure the house meets lending criteria.

If an unexpected issue arises, don’t worry. There’s language in your purchase agreement that protects your money if you can’t get financing due to an issue with the property.

If you’ve been house hunting more than a month, double-check with your lender to make sure your pre-approval documentation is still valid.

This is also a good time to ask whether your lender needs any updated information.

Most pre-approval documentation is only valid for 30-60 days. If you’ve been house hunting longer than that, you may need to re-verify your financials.

7. Lock in your mortgage rate

Your home buying power hinges on your mortgage rate. If rates rise, it could price you out of the home you just found.

For example: If rates go up just 0.25%, that’s $50 per month extra on a $350,000 mortgage — enough to kick some buyers out of ‘approved’ status.

Related: Low rates mean big buying power. See how much home you can afford

But your mortgage lender won’t let you lock in a rate until you’re approved for a specific property.

Once you’re approved, try to lock as soon as possible. Don’t try to wait for rates to fall by a fraction of a percent.

Don’t wait to lock if your rate is low enough to afford the house. Especially in today’s environment, with rates near historic lows, it’s more likely they’ll go up than down.

In addition, make sure you lock long enough to reach your closing date with a few extra days of wiggle room. So if you’re going to close in 35 days, don’t lock your rate for 30 days. Lock it for 45 days instead.

This will protect you against losing your rate to an unexpected delay. And it’s cheaper to get a long lock at the outset than to extend it partway through.

Find out what rate you qualify for today. Start here (Dec 15th, 2019)

8. Get an inspection, and don’t be afraid to negotiate

A home inspection is the last chance to uncover any defects before sealing the deal. You should attend along with the inspector.

Related: What to expect on inspection day

This is also your last chance to negotiate repairs with the seller. If there are major issues, see if they’ll fix them or drop the purchase price to cover your costs.

Every property comes with defects. Don’t sweat the small stuff, but make sure major structural defects are addressed before you buy.

What constitutes a “major issue”? Think structural problems; things like aging roofs, bad siding, or potential safety hazards in the construction.

Smaller, more cosmetic defects are to be expected. Those can be your first projects after moving in.

9. Cross the t’s and dot the i’s

Buying a house probably seems like a never-ending parade of paperwork, but you’re close to the finish line.

Once all the approvals, appraisal, and inspection are complete, you’ll go into the escrow office and sign a stack of closing documents. Expect the process to take about an hour.

Plan to be physically present and sign your papers in person. Make sure you have liquid funds available to cover all your closing costs at this time.

We recommend asking for your closing documents beforehand so you can review them and speed up the process day-of.

Related: Home closing — what you need to read and what you can skim

These documents will also state your exact closing costs. Closing costs include lender fees, escrow fees, pre-paid taxes and insurance — really, any of the behind-the-scenes costs to originate your mortgage.

Make sure you have already sold stocks or liquidated other funds you planned to use for your mortgage. You’ll need that money available at this point.

10. Be ready for last-minute requests on closing day

A few days after you sign, your lender will get the signed loan documents back.

Sometimes, the lender needs last-minute items on closing day. You may have missed a signature on the loan documents, or the lender may have discovered that it needs a new bank statement.

These requests are pretty common. Just make sure you’re keeping an eye out for messages from your lender so you can respond as quickly as possible.

A done deal

Once your lender and escrow company have confirmed everything is complete, the sale will officially close, and your lender will record new ownership with the county.

That’s when you pick up your keys from the real estate agent and hug your landlord goodbye.

Congratulations — you just bought a home!

For more information about any of the topics covered here, see our complete step-by-step guide to buying a home.

Get started today

If you plan to buy in the near future, there’s plenty to do before you begin checking listings.

Start by checking your credit and figuring out a budget as soon as possible. Check today’s mortgage rates to learn what you could afford.

See what rate you qualify for today. Start here (Dec 15th, 2019)