How to Buy a House in 12 Steps, and Know if You’re Ready

2. Anticipate the costs of buying a home

If you’re happy with how you stacked up against the checklist above, it’s time to get more specific about the money you’ll need to buy a house.

In general, most homebuyers are going to need available funds for:

• Earnest money
• A down payment
• Closing costs
• Fees for inspections and an appraisal
• Moving costs

Let’s take a closer look at each of these categories to help you anticipate what you may need.

Earnest money

Earnest money is a deposit many homebuyers pay sellers upon acceptance of their offers to purchase homes. It’s a good-faith deposit showing the buyer’s serious intent to close the deal — since the deposit can be forfeited if the buyer backs out for some reason not specified in the purchase contract.

How much is an earnest money deposit?

The amount of an earnest money deposit (EMD) varies depending on your locality. In some areas, it might be a standard $500 or $1,000. In others, it may be anywhere from 1% to 3% or more of a home’s purchase price. For example, if you were offering a 2% EMD on a $355,000 home, you would need $7,100.

When you have an experienced real estate agent working with you (step #4), they’ll be able to let you know what is appropriate for your area and what amount may give your offer a competitive edge — one of many reasons to team up with a top agent.

Savings for a down payment

To avoid paying for private mortgage insurance (PMI) — an extra expense baked into your monthly mortgage payment — you usually need to have enough funds ready to put at least 20% down on the purchase of your new home.

However, other options exist for qualified homebuyers who cannot or do not want to put 20% down, such as:

• FHA loans
• VA loans
• Some conventional loans
• Minority and low-income buyer assistance programs
• First-time buyer assistance programs and grants

Available funds for closing costs

You’ll also need funds for closing costs, which can add up to about 2% to 5% of the full loan amount, depending on your location, the lender you choose, and the cost of the home, among other factors.

Fees for inspections and an appraisal

Depending on the location of a home, there are a variety of inspections you may want or need before closing a sale. (More on the importance of a general home inspection later.) Typically, the buyer pays for any inspections or tests, which could include:

• General pre-purchase inspection
• Termite inspection
• Radon testing (particularly if the home includes a basement)
• Well inspection (in rural areas)
• Septic inspection

In addition, mortgage lenders typically order an appraisal of a home before closing on a loan and will require the buyer to pay the appraisal fee, which can vary depending on property type and location.

Possible expenses for moving costs

Some possible moving costs to anticipate may include:

• Moving supplies (boxes, tape, and other packaging materials)
• Professional moving services
• Moving truck rental and fuel
• Storage unit fees
• Temporary lodging (for long-distance moves)
• Utility set-up fees in your new home

3. Partner with a top real estate agent

It’s time to enlist expert help. Although some buyers may want to set a budget before approaching a Realtor, Taylor recommends choosing an experienced buyer’s agent early on since they can help educate and guide you through the home-buying process from start to finish — including deciding how much you can afford and how to find the best lender for you.

A top real estate agent can often help you:

• Set a price range
• Choose a lender, loan shop, and procure preapproval
• Set reasonable expectations within your price range
• Identify and prioritize must-have and wish-list items for your new home
• Find homes and arrange tours
• Take note of important details during home tours
• Ask important questions about properties
• Compare and contrast properties
• Communicate with listing agents to gain insights about the homes and the sellers
• Craft competitive offers based on knowledge of the specific market
• Negotiate with sellers
• Shop for home insurance
• Navigate any obstacles right up until closing on your new home

Partnering with a professional will help you proceed with confidence and overcome any challenges along the way. Blanton notes, “As a buyer agent, we have no attachment to any particular listing. We’re looking out for the buyer’s best interest.”

Need tips on how to pick a buyer’s agent? We’ve got you covered.

Plus, HomeLight can connect you with a top-performing, trusted agent in your market using our free Agent Match platform. We analyze over 27 million transactions and thousands of reviews to determine which agent is best for you based on your needs.

4. Shop for a loan

Next, Taylor also recommends finding a lender before deciding on the final amount you can spend on your home: “I think when you’re at the very beginning stages, it’s important to have both of those professionals teamed up together so that then everybody can review your finances.”

Contact several lenders

Taylor recommends her clients speak to at least three lenders “to make sure that they’re getting the best rates, the best programs, and to make sure that person is going to really work with them well.”

Compare rates and other mortgage terms

As you evaluate what each lender can offer, HUD recommends that when comparing and contrasting loans, for each one you consider:

• Interest rate
• Whether that rate is fixed or adjustable, plus applicable payment plans
• Annual percentage rate (APR)
• Points — which you can ask to be quoted to you in dollar amounts, for clarity
• Fees — such as origination fees, underwriting fees, closing costs, etc.
• Down payment requirements
• Private mortgage insurance (PMI) requirements, including cost and duration

See our mortgage and loan buyer resource page for more helpful tips. If you are buying and selling at the same time, check this link to see how HomeLight can help maximize your buying power and minimize your home loan stress.

Consider how long you plan to own the home

Which loan fits you best will also depend on how long you plan to own the home.

Taylor says, “If you know you’re only going to be in the home for a couple of years — due to an upcoming move or job relocation or it’s your starter home — and you know for sure you’re not going to want to stay there long-term, you may want to look at certain loan programs that would not be as beneficial if you were going to stay long-term.”

So speak to your Realtor and potential lender about your future goals and timelines that may affect which loan type works best for you.

Weigh the costs and benefits of discount points and buydowns

It may be worth asking lenders what kind of discount points or buydowns they offer on their loans. Blanton, for one, thinks buydowns are “a great product these days” and says many sellers will consider paying for them.

If you’re exploring these options, however, you’ll need to consider a number of factors to determine whether they will actually save you money long-term.

5. Determine how much you can afford

Now that you know the major expenses you’ll need to save up for and have partnered with a trusted buyer’s agent and lender, it’s time to see how your unique financial puzzle pieces fit together. To help you estimate what you can afford in a home — as well as how much you might expect for a down payment and closing costs — we offer three HomeLight tools:

• Home Affordability Calculator
• Down Payment Calculator
• Closing Costs Calculator

So, take note of your bank account balances, pull up your monthly budget, and crunch some numbers.

6. Get preapproved

Once you know what you can truly afford and want to spend, ask your lender for a preapproval letter. This document states that the lender has done a preliminary evaluation of your finances and given preliminary approval of how much they would be willing to lend you.

You’ll need to have this letter ready when touring homes, and your agent will also send it along with any offers you submit.

Why is preapproval so important?

“I think the most important thing is you’re showing a seller that you can afford to purchase their home in our market,” says Taylor.

She adds, “A preapproval will just show that you’re a strong buyer and that the seller should not have to worry about anything happening during the process so that you won’t make it to closing.”

7. Shop for a home

Now for the fun part — actually finding your next home!

List and prioritize your needs and wants

With your agent’s help, identify your must-have items and your wish-list items, putting them in two separate lists. From there, it’s wise to rank the items on your lists in order of importance.

Now, you and your agent can start searching for homes with the criteria you’ve outlined.

Tour multiple homes

Even if the first house seems like “the one,” be sure to visit several. As with most shopping, viewing and comparing a variety of options can bring clarity.

Tips for tours and evaluating homes

• Beforehand, review the listing (and possibly disclosures), noting the ages of major systems like the roof, HVAC, and water heater.
• Take plenty of pictures, especially of areas of concern.
• Immediately afterward, jot down notes. What stood out? How did the home compare to others? What questions do you have?
• If you’re buying solo, bring a trusted friend to help observe and discuss things with.
• Open and close all doors — including cabinet and closet doors — to make sure they work properly, but also to look for signs of damage or leaks.
• Turn on faucets and flush toilets to make sure they work properly.
• Afterward, review the property disclosures (if you haven’t already), looking for any major red flags about the home’s history and condition.
• Check out these tips for attending an open house, with excellent questions to ask about a property that interests you (regardless of whether you’re at an open house).
• Taylor recommends visiting (or at least driving by) a property at different times of the day to see how timing affects your perception of the location and could affect your commute.
• Recognize what is changeable and what is not. It’s important, says Taylor, to “really look at the layout, look at the floorplan, look at the maintenance of the home,” for example, rather than focusing too much on cosmetics.

Discover How Much Home You Can Afford With Our Home Affordability Calculator

Understand the costs associated with buying a home and find out what safe budgeting looks like.

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Consider possible “hidden” costs — especially roof-related

Blanton cautions, don’t overlook the age of a home’s roof.

While a well-maintained roof can last 30 years or more, this can vary widely based on a home’s location and the different combinations of wear and tear it might face. For example, in hurricane-prone areas of Florida, Blanton says, “You want a roof that’s no more than 10 years old, ideally,” adding that some insurance carriers will not insure a Florida home with a roof over 10 or 15 years old — and if they do, it’ll be expensive.

Even with no visible damage, an aging roof on a home may be a hidden cost you’ll eventually see on insurance and, of course, when you have to replace it in the near future. This is where home inspections can help shine a brighter light on the property (see item #9).

Other examples of “hidden costs” with certain properties could include:

• Pest control for properties near water sources or the woods
• Tree maintenance for mature trees or wooded areas
• Fireplace maintenance
• Maintenance or abatement of certain building materials, such as wood siding, logs, or asbestos
• Insurance and maintenance costs if there’s a swimming pool on the property

8. Make an offer

Have you found the home you want? That’s great! Your buyer’s agent can help you craft a strong offer.

What constitutes a good offer? “That really depends on your area because the market is so different in so many places,” says Taylor. “I think you really do have to lean on your Realtor very heavily to make sure that you’re making a competitive offer.”

This is especially true now, as many housing markets in the country have experienced significant changes due to rising interest rates and tighter inventories.

Generally, a good offer needs to appeal to the seller and also meet your needs. You and your agent may consider things like:

• Days on market
• Location
• Sales of comparable homes in the area
• Standard earnest money amounts for your market
• Your preferred moving timeline
• The necessity of an inspection contingency (Spoiler: it’s necessary! See the next step.)

9. Get a home inspection

Include an inspection contingency in your offer

In spite of how competitive the overall real estate market has been for buyers in the last few years, Taylor and Blanton still recommend that your offer include an inspection contingency to protect yourself from purchasing a home with a major issue that an inspector could have spotted.

Make it speedy

Taylor suggests you tee up a home inspector before submitting your offer. In that case, your agent can specify in the offer, for example, that you can complete the home inspection within one or two days. That way, the seller knows that even if you back out, the house will not have been off the market for long.

Plus, says Taylor, you can even ask your real estate agent to let the seller know you’re only looking for something that is major and not looking to nitpick, hopefully giving a seller confidence that you’re going to move forward quickly.

Consider writing into the offer a pre-agreed amount of seller-paid repairs

Blanton explains that in Florida, it’s common for purchase contracts (accepted offers) to state that the seller will pay up to a specified amount for repairs that come to light during a pre-purchase home inspection. However, he adds, once you have the inspection report in hand, you can still haggle, should the recommended repairs exceed that amount.

Why is a home inspection important?

Even if you already love the home, you won’t love it if you discover later that a major issue was undisclosed, concealed, or simply undiscovered when you purchased it.

In addition, the average buyer and the average real estate agent are not experts on the maintenance and condition of homes. A licensed home inspector, however, is trained to identify and assess conditions and problems with properties.

While a home inspection doesn’t guarantee that a property has no problems, it’s a worthwhile investment for your peace of mind and for protecting your very large investment of purchasing a home.

Get additional expert tips and guidance on home inspections at this HomeLight buyer resource page.

10. Negotiate repairs or credits

After the home inspection, you’ll have a short time (specified in the purchase agreement) to negotiate with the seller regarding which, if any, repairs they will complete before closing. Or, you may decide to ask for seller credits, a certain amount of money the seller gives you at closing, which can be used for the needed repairs.

If you cannot agree on repairs or credits within the specified time frame, you will not be obligated to proceed with the purchase of the house.

Your buyer’s agent will bring his or her experience to bear in helping you decide what to prioritize and how much to ask for — one of the many reasons it’s so helpful to have a professional in your corner.

11. Make a final walkthrough

You’re almost done! The day before (or within a few days of) closing on your home purchase, you and your agent will typically walk through the home one last time before it’s officially yours.

If all is well, the walkthrough may feel like a formality. It’s still crucial, however. Blanton remembers one walkthrough during which he and his client discovered some people who were trespassing had been squatting in the otherwise vacant home and had accidentally set fire to the kitchen. Needless to say, that particular sale did not close.

See more tips here for what to bring and how to manage the final walkthrough.

12. Sign papers and close the sale

It’s closing day! Your main job will be to show up, funds in hand (see below), ready to sign your name literally dozens of times.

In the days leading up to closing, in most cases, you can expect your lender to:

• Arrange an appraisal, for which you’ll need to pay a fee.
• Ask you to procure the home insurance policy you want.
• Request documentation of the home insurance policy.
• Set up an escrow account for your home insurance, taxes, and any PMI.
• Depending on your local requirements, coordinate with the title company or the attorney who will manage the actual closing procedures.
• Communicate how you’ll complete your down payment, closing costs, and any other fees (for example, in the form of a cashier’s check, which you bring on the day of closing).

If you have questions leading up to or during closing, don’t hesitate to ask your real estate agent or loan officer. You deserve to feel informed during one of the largest financial transactions of your life.

And, finally, after all those signatures, you should walk away with a set of keys and a new home waiting for you!

Make a plan and buy with confidence

Buying a home is a long process, but it doesn’t necessarily have to feel overwhelming or daunting. Here’s a quick recap of the steps you’ll take:

• Make sure you’re financially and personally ready to buy, including understanding the costs involved.
• Partner with a top buyer’s agent early in the process who can serve as your guide and connect you with a lender.
• Shop for the lender and loan terms that fit your needs, then decide what you can afford.
• Define what you want and go shopping, with a preapproval letter in hand.
• With expert help, make a strong offer — and plan to include an inspection contingency.
• Negotiate the purchase terms, as well as repairs and credits, with your agent’s help.
• Complete a final walkthrough and close on your new home!

When you’re ready to begin, HomeLight can match you with a trusted professional who meets your needs and who has the skill and experience to help you from start to closing.

If you are buying and selling at the same time, check out HomeLight’s Buy Before You Sell program. It’s an innovative way to buy your next home before selling your current house.

»Learn more: 20 Home Buying Tips for First- or Second-Time Buyers

Header Image Source: (Roger Starnes Sr / Unsplash)