Steps to buying a house: A guide for first-time homebuyers

Buying a home is one of the most exciting and important decisions you’ll ever make. With the average person staying in their home for 12 years, this purchase can have a mighty impact on your finances for the next decade or longer. 

While buying a home can feel like a daunting process, having the right team – including a real estate agent and mortgage lender – can make a world of difference. Let’s review the steps of buying a home, so you can feel confident making the first moves of homeownership. 

Steps of buying a home: 

1. Building your house budget 
2. Create a list of non-negotiables 
3. Pick your mortgage lender 
4. Partner with a local real estate agent 
5. Shop for your home 
6. Make an offer 

Start by building your house budget 

Building a budget that you’re comfortable with can be one of the most valuable steps in the homebuying process. You’ll want to consider multiple factors including your mortgage payment, utility bills, homeowners association (HOA) fees, and regular maintenance. 

Before setting an appointment with a mortgage lender, decide the maximum you feel comfortable paying. If you’re comfortably affording monthly rent payments along with life’s additional expenses, you have a baseline budget to build from. Try using a house calculator to estimate monthly mortgage payments and total cost over the course of a mortgage. 

When using the calculator, keep in mind, you may not need to save a 20 percent down payment. If you qualify for an FHA, VA or USDA loan, your down payment minimum will be considerably lower. Your mortgage lender will be able to share more about down payment assistance programs for first-time homebuyers.  

If you’re an Empeople member and unsure where to start, our ongoing financial guidance experts can help you build your budget and connect you with an Empeople mortgage loan expert.  

Create a list of new home non-negotiables 

The thought of house hunting can be daunting for some people. Make it fun by starting with a list of need-to-haves, nice-to-haves, and non-negotiables.  

Start by filling out this worksheet for your real estate agent. Think about: 

• Number of bedrooms and bathrooms 

• Location & school district 

• Desired age of the home 

• Style: split-level, side-by-side, bi-level, country-style, etc. 

• Interior 

• Exterior 

• Community features 

In addition to giving your real estate agent a starting point, this list will also help to set reasonable expectations of what you want, versus what you can afford. Keep in mind, the typical homebuyer looks at about 10 homes before finding the perfect match for their wish list and budget. 

Pick your mortgage lender 

Once you’ve built a rough budget and have drafted your list of new home non-negotiables, it’s time to partner with a mortgage lender and secure a pre-approval. Credit unions offer some of the most competitive rates for mortgage loans, and most offer same-day pre-approvals.  

The right mortgage lender will make the experience of securing a home loan exciting, instead of overwhelming. They want you to feel comfortable with the loan terms you’re approved for, and confident that you’ll be able to make payments on time for the life of the loan. 

To do this, they’ll pull your credit report, and review basic financial information with you including your income, credit history, and other outstanding debts. Remember, some forms of debt – like a mortgage or student loans – are seen as an investment. Don’t shy away from the opportunity of homeownership because of student loans.  

Taking in the above information, your mortgage lender will then assess your creditworthiness and determine how much they are willing to lend you for your home. They’ll also share any first-time homebuyer loan programs available to you, which may impact your down payment requirements and monthly mortgage payments. Additionally, they may give you tips on how to improve your credit to get a better interest rate. Some actions like paying off collections bills can increase your credit score dramatically.  

Partner with a local real estate agent 

After you’re pre-approved with a mortgage lender, it’s time to secure a local real estate agent. In addition to setting up home tours, realtors play a special role in communicating with the seller and negotiating the terms of the sale. 

Partnering with a local agent can be extremely beneficial, as they have expert knowledge of the housing market in your desired areas. They’ll be able to assess fair pricing for the property, and may coach you on ways to make your offer more appealing to the buyers.  

Your mortgage lender may already have relationships with local realtors, making an even smoother closing process. 

Shop for your home 

Once you have a pre-approval in hand and a realtor by your side, it’s time for the fun part – house hunting! Your realtor will work with you to find your dream home, alerting you when a good match goes on the market. Good realtors will work around the clock, scheduling a tour that works with your schedule restrictions. 

While you’re touring homes, make note of any additional expenses you’ll need to work into your budget. Are there HOA fees? Does the house come with all necessary appliances? Will it require any immediate renovations or repairs? Your realtor may be able to help negotiate repairs and appliances before move-in, or they may be able to negotiate a lower asking price.  

Prepare to spend several weeks, or even months (depending on the housing market) touring homes. A big decision like buying a house requires time, and you’ll want to be 100 percent certain in the house you decide to make an offer on. 

Make an offer 

You’ve found your dream home, and it’s time to make a compelling offer to the seller. Your realtor will help with details like contingencies and earnest money – funds put down before closing on a house to show you’re serious about purchasing. According to experts, roughly 75 percent of offers will be counteroffered by the seller. This is especially true in competitive housing markets. 

Once an offer has been accepted, usually no more than a couple of days after the initial offer, you’ll start the closing process. Your mortgage lender will review your application and ensure they have everything they need for final approval. Your application is then sent to underwriting where experts will carefully review property details and your credit report.  

It’s important to avoid applying for additional loans such as an auto loan or new credit card, between the time you apply for a mortgage pre-approval and when you close on your mortgage. Changes to your credit report can hold up the closing process, or even damage your chances of final home loan approval. 

While in underwriting, your mortgage lender will order an appraisal and title search. You may also choose to order a home inspection at this time. While the home appraisal determines the value of the home, the title search confirms the seller’s right to sell their home. A home inspection offers you peace of mind, evaluating the structural integrity and condition of the property.  

Once you’ve provided all required documentation to your lender, you are cleared for closing. On closing day, you’ll provide the down payment and closing costs to your lender, and you’ll be handed the keys to your new home. 

Buying your first home can be an easy and exciting process, with the right team on your side. When you have a lender and realtor you can trust, and a budget you feel comfortable with, you can focus on finding the home you’ll build a lifetime of memories in.