Buying a House: Step-by-Step

The Home Buying Process

Buying a home and taking out a mortgage is likely among the biggest financial decisions you’ll make in life. It should be exciting, but can get overwhelming at times if you don’t have the right knowledge and tools – especially if you’re a first time home buyer.

It’s important to do your research, think things through, and make your first home purchase count. Think of your home as an investment – if you secure a great deal on your first home and build equity in the property while living there, you’ll be in a great spot when you sell it and move on to your next home! 


On the flip side, if you are to rush things and end up with a suboptimal first time home experience, it can make that next move more difficult than it needs to be.

1. Figure Out What You Need and Want in a Home

The first step to home buying is to determine what you are looking for in a house. This should separate your needs and wants and consider anyone that will be owning the house with you such as a spouse or partner.


Here are a few questions to get you thinking. Make a list and review it often throughout the home buying process to ensure you’re thinking clearly and keeping your goal top of mind.

What are my “must-haves”?

Think about what you feel your home needs to include for you to be comfortable and happy living there. How many bedrooms or bathrooms should it have? Do you require a basement or certain lot size? If you have or plan to have kids, how is the school district?

What are my “nice-to-haves”?

Now think about what you want, but wouldn’t necessarily be a dealbreaker for purchasing the home. Do you want a finished basement, walk out porch, a fenced in yard, or something near or on the water? Keep these things in mind as you’re house hunting, but avoid using them as hard rules to disqualify properties from your radar.

How long will I live here?

You may not know exactly how long you want to live in your new house, but this is an essential question to think about. Most mortgages have 15, 20, or 30 year terms. Is this a long-term home that you plan to pay off some day, or a stop along the way on your journey? If you plan to buy a house to live there for only 5 to 7 years or less, be sure you consider your options such as renting a home before committing to a mortgage and home ownership.

Is a mortgage right for me?

Building on the last question – consider your options for home ownership. There are many pros and cons to buying and renting a house, and neither one of them is the “right” option for everyone. 


Buying a home allows the opportunity to build equity in your house and avoid dealing with a landlord and rental policies. However, taking the mortgage route also comes with plenty of other expenses and responsibilities like homeowners insurance, property taxes, and its fair share of maintenance (regardless of the condition it was bought in).

Communication and Planning is Key

It all comes down to communication and planning. If you’re not buying your home solo, be sure to communicate with the person or people who will be owning the home with you. Get all of your differences of opinion out on the table and address them so there are no surprises later in this process. However, if you are going to be the homeowner and simply have a roommate (that won’t actually own the house), make sure you put yourself first and do what’s right for you.


Do your research and plan ahead. The more you can determine what it is you want, secure the best tools and resources to achieve that goal, and acquire knowledge upfront, the more smoothly your home buying experience will be.

2. Determine Your Budget

Next, you’ll need to determine how much you can afford for housing. Your income, current expenses, spending habits, and credit score all play a part in determining how large of a mortgage you’d likely be approved for. In addition to your mortgage payment, be sure to consider other homeowner expenses like property taxes and homeowners insurance.


Spending beyond your means when it comes to your mortgage can put you in a tight spot financially and snowball to negatively impact your credit if things aren’t thought through.


Consider how your payments would change with different mortgage terms as well. The most common mortgage terms are 15 year, 20 year, and 30 year.

3. Prepare Your Finances

Once you have an idea of what your home buying budget looks like, it’s time to prepare your finances to start making moves. On top of the recurring home ownership expenses that we just mentioned, there are several finance aspects to consider at the time of purchase.

Check Your Credit

Your credit can have a major impact on your mortgage approval. Be sure to review your credit scores and reports to ensure that there are no inaccuracies that can hurt your approval. Having a current view of your estimated credit score can also help with gauging estimates to set the right expectations for you on your home buying journey.

Down Payment and PMI

You’ll want to save up for a down payment prior to moving forward with the purchase of a home. A substantial down payment can help your approval chances, make your monthly payments more manageable, reduce interest, and help you avoid paying PMI.


PMI, or private mortgage insurance, is a type of insurance that is often required for conventional loans with down payments less than 20 percent of the home’s purchase price. Depending on your target home’s value and current savings, 20 percent may be challenging. But, if you can swing it for your down payment, it can save you significant money in the long run that can go towards paying down the loan principal.

Moving Costs

One home buying expense that is often overlooked until the last minute is the cost of moving. This cost of course depends on several factors such as where you’re moving from and to, how much you’re moving, and how much you plan to handle yourself.

Needed Renovations and Home Repairs

You want to be comfortable in your new home. Sometimes it makes sense to buy a home that you know upfront will need some work. Or maybe you’re intentionally buying a “fixer upper”. 


No matter your intentions with short-term renovations and repairs for your new home, or if you plan to minimize that as much as possible, be sure to account for this in your budgeting plans. Try to separate what you need to repair and more aspirational repairs.

4. Choose a Lender

Selecting the right lender can make all the difference in your mortgage. It’s worth the time to do your research and shop around. Here are a few things to make sure you compare when choosing a lender for your mortgage.

  • Current mortgage rates
  • How much of the closing costs will you be responsible for?
  • What other commissions or fees will you be required to pay?
  • Down payment requirements

Don’t limit your options to mortgage companies when shopping around either. Take a look at these companies in addition to banks and credit unions that may offer comparable rates and terms.

5. Get Pre Approved for Your Mortgage

Once you find a lender for your mortgage, it’s time to get pre approved. This will solidify your budget estimates up to this point and get you ready to shop. 


Keep in mind that pre approvals are only valid for a short window, typically 60 to 90 days. When you go to submit an application for a mortgage pre approval, be sure you have all the required documentation ready.

Mortgage Pre Approval Documents Checklist

  • Driver’s License (with copies)
  • Social Security Card (with copies)
  • Existing Loan Statements
  • Recent Bank Statements
  • Pay Stubs
  • Proof of Employment
  • Checking, Savings, & Investment Account Statements
  • Tax Returns (last 2 years)

This list covers the standard essential documents required to obtain a pre approval. Be sure to communicate with your lender to confirm any different or additional required documentation.

6. Find a Real Estate Agent

A good portion of your house searching will likely be online, but securing a great real estate agent can give you a huge advantage. An experienced real estate agent can help you narrow down what it is you’re looking for in a home, highlight homes before they hit the market, and help you negotiate pricing and terms.


When finding a real estate agent, be sure you focus on their experience and ability to help you find a great house at a great price – nothing more. Buying a house is a huge commitment and you should take it seriously, even if that means not going through your friend or family that is in real estate.

7. Start House Hunting

At this point in the process, you’ve probably already done quite a bit of searching. There are many ways you can go about searching for homes.

  • In person by appointment
  • Open houses
  • Home buying apps like Zillow or Trulia
  • Other online home listing sources
  • Opportunities from your real estate agent

House hunting can be fun, and it should be! Just be sure to keep your budget in mind and continuously reference that list of needs and wants.

8. Make an Offer

After finding a house you’re interested in, you’ll need to submit an offer. An offer is submitted in writing and outlines how much you’re willing to pay for the home and other information about payment responsibilities. 


Before submitting an official offer, double check your finances and make sure everything is in order for your pre approval, down payment funds, and earnest money deposit (also known as a “good-faith deposit” and is typically around 2% of the purchase price). 


Your offer will either be accepted, rejected, or the seller may propose a counteroffer. If your initial offer is not accepted, don’t worry – this is common. You have the option then to negotiate with the seller with the help of your real estate agent to agree upon pricing and terms.

9. Get a Home Inspection and Appraisal

After your offer is accepted, it’s crucial to get the home appraised and inspected. Make sure that both of these processes are done professionally. Don’t try to DIY this portion or trust online estimates alone.

Home Inspection

During a home inspection, a professional inspector will go through the home and look for issues, safety concerns, and flag any needed repairs. This is critical in the home buying process because it can uncover red flags that could cause you to rescind your offer, or allow you to modify your offer in some cases.

Home Appraisal

An appraisal of your home is required to provide both you and your lender an estimate of the property value. These appraisals are conducted by home value experts to ensure that the mortgage lending value does not exceed the value of the home.

10. Adjust Your Offer

If the results of your inspection and appraisal include some surprises or needed repairs, consider further negotiating your offer on the house. If there are safety issues that are preventing the home from passing inspection or other concerns that are uncovered, you may have the option to request repairs or credits to lower the selling price or cover the closing costs.

11. Close on Your New House

Once everything is sorted out with the home inspection and your mortgage approval, it’s time to finalize the sale of the house, which is referred to as “closing”. You’ll do a final walkthrough and finalize all of the needed paperwork. 


A summary document called a Closing Disclosure will be provided outlining all of your loan details and associated payments and fees. Be sure to thoroughly review this document and ask any questions you have before signing.


Once you review all paperwork and terms, you’ll attend a closing meeting to finalize the sale of your new house. Then it’s time to move in!