8 Steps to Buying a House

Too often, first-time buyers jump headfirst into the homebuying process, arranging home tours without taking the time to understand crucial aspects of homebuying or even home ownership. It's important to know real estate laws that apply to the state you're looking to buy in, know your budget and purchasing capabilities, and more.

The best way to stay informed throughout the homebuying process is to partner with a trusted real estate agent. Your agent will help you understand what you need to know about buying a home and what you need to do to buy a house before you arrange your first tour.

It's crucial to speak with a lender and get prequalified to know the price range you can afford. Your lender will evaluate your income and current debts to determine a reasonable budget that suits your financial situation.

Knowing what you can reasonably afford before you start shopping will significantly improve your house-hunting experience. After all, it's easier to stick with the houses that are priced within your budget than spend time, energy, and heartache looking at houses that are out of reach or would ultimately break the bank. To get an idea of your budget before prequalification, check out our Home Affordability Calculator.

Your real estate agent will have access to a complete and current list of the homes available and listed on the Multiple Listing Service (MLS) system. Many times, this system will feature homes that have not made it to public-facing listings yet, meaning your agent will be privy to some of the hottest homes on the market that fit your needs and your budget. This access gives you a more competitive edge over other homebuyers and more comprehensive access to the market.

As you find homes you are interested in, let your agent set up tours so that you can explore the homes, ask questions, and narrow down your search.

During the house-hunting process, you'll narrow down your search and begin zeroing in on a couple of options. This is the time to get pre-approved for a loan. Preapproval means you have proven your creditworthiness, and your lender has verified that you are in a position to take out a loan should you make an offer on a home and it is accepted. Preapproval not only streamlines the loan origination process for you, but it also tells the seller that you are serious and ready to buy.

You've found the home you want to buy. Congrats! Now is the time to submit an offer, also called a purchase agreement. If the seller accepts your offer, the home will be under contract, and you and the seller will enter the due diligence phase.

The due diligence period is the time when your lender will order an appraisal, and you or your agent will arrange a home inspection.

An appraisal is an unbiased evaluation of the home's fair market value, which ensures you are not paying more than what the home is worth. An inspection ensures that everything in the house is functioning properly and uncovers any problems that are not evident before the sale is made final.

Based on the results of the inspection, you can negotiate with the seller to fix any issues that are revealed or ask to lower the selling price. The seller has the right to accept or deny your requests. Should they deny them, you should have the ability to back out of the contract without penalty as long as the contingencies (or dealbreakers) in the contract include inspection results.

You've made it through the due diligence phase, the deal is still on, and you are moving closer to the closing date. Now is the time to talk to your insurance company and utility companies. It's essential to establish homeowners' insurance and set up things like water, electricity, and gas so everything is covered and ready for use on day one of ownership.

You've made it this far, all the way to your closing day. At closing, you and your agent, the seller and their agent, and the real estate lawyer will meet to execute documents, transfer the title, and exchange funds. After a lot of signing, you'll be handed the keys to your new home!