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How to Buy a House: 15 Steps in the Homebuying Process
The steps to buying a home include getting your finances ready and finding the right mortgage lender, but there's fun stuff, too.
Kate Wood is a lending expert and certified financial health counselor (CHFC) who joined NerdWallet in 2019. With an educational background in sociology, Kate feels strongly about issues like inequality in homeownership and higher education, and relishes any opportunity to demystify government programs. Prior to NerdWallet, she wrote about home remodeling, decor and maintenance for This Old House.
Ashley Harrison is a NerdWallet writer who specializes in home lending topics. She has covered mortgages, loans, and personal finance since 2017. Before joining NerdWallet, she wrote and edited high-performing content for Forbes Advisor, USA TODAY Blueprint, and Credible. She has also spent several years as a self-employed writer and editor.
Ashley earned a bachelor’s degree in English with an emphasis in creative writing from Utah Tech University. Outside of personal finance, she is a published horror writer, and her short horror story “The Box” was produced by the award-winning NoSleep Podcast. She lives in Southern Utah, and if she’s not writing, she can usually be found playing spooky video games and wrangling her black cats, Salem and Binx.
Chris Jennings is a NerdWallet editor specializing in home lending topics. He has been writing and editing about mortgages and personal finance since 2016. He enjoys simplifying complex mortgage topics for first-time homebuyers and homeowners alike. Before joining NerdWallet, he wrote and edited content for a number of respected finance brands, including Bankrate, Forbes Advisor, and GOBankingRates.
Born and raised in the Chicago suburbs, Chris earned a bachelor's degree in English from Illinois State University. Chris now calls Los Angeles home, where he lives with his wife, daughter, and their dog.
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We’ve broken down the homebuying process into 15 main steps: Call it a buying-a-house checklist. Each step includes choices to make and things to do. Some are stressful, some are pretty cool and some are, well, kinda annoying. But each gets you one step closer to your goal of homeownership.
1. Make sure you're ready
Sure, there's being financially ready to buy a house (see Step 2 for that). But are you emotionally ready? Even if it's just your starter home, you're making a big financial commitment and putting down some roots.
You'll want to think about your other goals for the next few years. Here are some big-picture questions to ask yourself when deciding if it’s the right time to buy a house:
Are you buying with a partner? If yes, are you on the same page when it comes to money?
Is there any chance you'd need to relocate for work?
Are you thinking of starting a family? Do you already have children or pets that need extra space?
Buying a house may be the biggest financial decision you'll ever make, so before you take the plunge, you want to be sure your finances are solid.
You can use our home affordability calculator to decide on a realistic budget. This will give you a look at how your monthly mortgage payments can add up as a homeowner.
What you can afford and what a lender will approve aren't always the same thing. Once you've settled on a budget, plug your numbers into the calculator below to estimate how much you may qualify to borrow based on your credit, income and debts.
After you’ve set a budget for yourself, you can figure out how much you can afford for a down payment.
Minimum down payment
The common recommendation that gets thrown around is to put at least 20% down. But you don’t have to do this. In fact, a lot of homeowners don’t — especially first-time buyers. The median down payment for a first-time homebuyer is only 10%, according to the National Association of Realtors.
The downside of putting less than 20% down on a conventional loan is that you’ll likely be charged for private mortgage insurance (PMI) alongside your regular monthly payments. But it might be worth paying a tad more each month so you don’t have to spend as much upfront on a down payment. You can get rid of PMI after paying down your mortgage to 80% of your home’s value.
🤓Nerdy Tip
You'll need to save for more than just the down payment. Closing costs generally run from 2% to 5% of the loan amount — this could add up to thousands of dollars, depending on the cost of the home. It's also a good idea to have some emergency funds in case your home ends up needing unexpected repairs.
Look into assistance programs
If this is your first home (or if you haven't owned a house in a while), it’s worth looking into first-time home buyer programs in your state. Many offer financial help along with down payment assistance. If you have a friend or family member who can afford it, you can also use gift money to boost your down payment even more.
Rules about gift money can vary depending on the kind of loan you get, so double-check any guidelines first.
See, told you there'd be some fun steps! And coming up with a list of must-haves and nice-to-haves for your house is definitely one of them.
Whether you’re looking for a starter home or somewhere you can imagine living for years to come, there are lots of little details. Here are some of the bigger decisions you might make when drawing up your list:
Detached house or attached unit?
A few types of homes to consider include:
Single-family homes: If you're all about having a backyard and no shared walls, then a traditional single-family home is for you.
Condos or townhouses: If you live in a more heavily populated area or don’t want to deal with the maintenance of a yard, one of these attached units could be a good fit.
Co-ops: These are also an option in some cities. They can be less expensive than a condo but a bit harder to finance since you don’t technically own the unit.
School district (this can affect your home’s value whether or not you have kids)
Move-in ready or fixer-upper?
With a move-in ready home, all you have to do is move in — easy peasy.
With a fixer-upper, you’ll need to put in the work (and the cash) to make it livable, so make sure you're up to the challenge. Taking on a property that needs a little TLC can be the gateway to get into a larger house or costlier neighborhood — especially if you’re in a pricey or otherwise competitive market.
The kind of mortgage you use to buy a house will impact what you need to qualify along with how you’ll pay it back. If you’re like most borrowers, you’ll choose between a conventional loan or some type of government loan.
Conventional loans
Government loans
Who backs the loan?
Private lenders
Federal government agencies
Who qualifies?
Anyone who meets the lender's requirements
Qualifications vary by program and may depend on income, location, military service or other requirements
Lending standards
Stricter
More flexible
Down payment
Can be as low as 3%
FHA: 3.5%; VA: 0%; USDA: 0%
Mortgage insurance
Typically required with less than 20% down
FHA has mortgage insurance, while VA and USDA have different fees/requirements.
Interest rates
Tend to be higher
Tend to be lower
Property / occupancy requirements
More flexible. Can be used for primary residences, second homes, and investment properties.
More restrictive. Usually requires the property to be your primary residence, with specific property standards.
Best for
Borrowers with good credit and stable finances
First-time buyers or borrowers with lower credit/smaller down payments
Here are the main loan types in more detail, plus a few specialty options:
Conventional loans are mortgages not guaranteed by the federal government. They offer low minimum down payments but have more stringent qualifications. Conventional loans can either be conforming — meaning they follow guidelines set by Fannie Mae and Freddie Mac — or nonconforming.
Jumbo loans are a type of nonconforming conventional loan. These mortgages are used for houses that are more expensive than standard lending limits. Jumbo loans usually require larger down payments and higher credit scores.
FHA loans are mortgages backed by the Federal Housing Administration. These are generally easier to qualify for than conventional loans but have stricter requirements for mortgage insurance.
USDA loans insured by the Department of Agriculture are for low- to moderate-income borrowers living in eligible rural areas. These loans allow you to make no down payment.
VA loans from the Department of Veterans Affairs are for active or former service members and eligible spouses. Like USDA loans, VA loans don’t require a down payment.
Renovation loans let you wrap the costs of home improvements into the total amount of the home loan. Several kinds of renovation mortgages are available, including conventional, FHA and VA loans. Depending on the rate you get, you might save money on interest in the long run compared to what you’d pay with other home improvement loans, such as personal loans.
NerdWallet's ratings are determined by our editorial team. The scoring formulas take into account multiple data points for each financial product and service.
On top of deciding on the type of mortgage you want, you’ll also need to consider what type of interest rate and repayment term you want.
Interest rate type
Depending on the loan, you might be able to pick between:
A fixed-rate mortgage: With this option, your rate is static. A fixed mortgage rate can start off higher than an adjustable rate to start, but you won’t have to worry about your rate fluctuating.
An adjustable-rate mortgage (ARM): Unlike fixed rates, adjustable rates can move up or down based on market conditions. While an ARM can start off with a lower rate compared to a fixed-rate loan, that rate can increase — or decrease — over time.
Repayment term
Thirty-year mortgages are the most common, but 10-, 15- or 20-year terms might be available at lower interest rates.
You know your homebuying budget, and you've decided what type of mortgage will work for you. Now it’s time to get preapproved.
Shop around for a mortgage lender
To get preapproved, you’ll need to find a mortgage lender. There are a lot of mortgage lenders out there — including banks, credit unions and online-only nonbank lenders. When you look at lenders, you’ll want to consider:
After you’ve picked a few lenders you like, you can focus on getting preapproved. A mortgage preapproval basically says how much a lender is tentatively willing to lend you. It’s not a guaranteed approval offer, but it can help you determine your budget more accurately.
A lender will use detailed info about your finances — like W2s, bank statements and debt statements — to preapprove you. A hard credit inquiry will also be part of the process. This will show up on your credit report and could cause a slight, temporary drop in your score (usually just by a few points).
🤓Nerdy Tip
If you apply with multiple mortgage lenders within a 45-day period, all of the hard credit checks from these applications will be treated as just one hard pull. This means you can shop around and compare options without stressing about your credit along the way.
The documents you’ll receive from a preapproval are worth the effort. These include:
A preapproval letter: This states how much the lender is willing to lend you. It also shows sellers and real estate agents that you're a serious buyer who can get financing, which can give you a crucial edge over competing home shoppers. A preapproval letter is typically valid for up to 90 days, after which it’ll need to be updated.
A Loan Estimate: This standardized form isn't a finalized offer, but it lets you easily compare lenders' rates, fees and other costs.
Did you know...
Mortgage pre-qualification is different from preapproval (even though lenders often use both terms interchangeably). Pre-qualification gives you a rough estimate of what you might be able to borrow based on self-reported data. Preapproval takes this to the next level since it uses your financial documentation, so it usually carries more weight. Neither are a total guarantee that you'll close the loan, though.
You've got your preapproval in hand and know what kind of house you're looking for, so let's find someone to help you look. The right real estate agent can make a huge difference throughout the process of buying a house — from knowing the ins and outs of the local market to providing moral support when the search feels endless to helping you negotiate with a seller.
Here are some ideas for where to find a real estate agent:
Get a referral from people you know who’ve recently bought a home.
Get a referral from another agent, lender, broker or home builder.
Search online listings and social media.
Pay attention to local “for sale” signs and print ads in your community.
Attend open houses.
It's a good idea to interview at least three agents. Ask each candidate about not only their real estate experience but also how they’ll support you through the home buying process.
It’s also usually best to avoid using the real estate agent who's selling the home you're hoping to buy. You want your own agent who will advocate and negotiate on your behalf.
Nerdy Perspective
Can I hire a friend as my buyer’s agent?
When we got serious about buying, we narrowed our list down to two potential agents. The first had decades of experience and a huge local presence… a “billboards with his face on it” kind of guy. The second, a friend, recently earned his license after years of buying and managing rental properties.We chose our friend and never regretted it. First, he’s a trustworthy guy with deep knowledge of our local market. He had connections in the small, competitive neighborhoods where we were looking — that was huge for us, as two recent transplants to the city. And with fewer clients on the roster, he had more time to focus on us.The key: We hired him because he was the right fit, not because he was our friend. If a friend pressures you to hire them or can’t keep clear professional boundaries, that’s your cue to keep looking.
Yes, this step merits an exclamation point. It's time to take scrolling through online real estate listings to the next level and actually see some homes in person.
Here are some tips to keep in mind as you see the sights:
Make the most of your showing. You might only see a home once in person before you make an offer, especially in a hot market.
Try not to be thrown off by other home shoppers or by the seller's agent. They may or may not be in attendance — if they are, don’t let them psyche you out.
Take photos to jog your memory when you're deciding whether to make an offer. You might easily remember that charming breakfast nook or the extra bedroom that would make a perfect home office. But the aging appliances or decking that needs replacement could be out of sight, out of mind. Issues like these can also affect the amount you offer (and be worth mentioning to a home inspector).
Did you know...
In most cases, you’ll have to sign a buyer agreement with your real estate agent before touring a home. This is a written contract stating what compensation the agent will get — though this can be negotiated. You as the buyer are technically required to pay your agent’s commission, but many sellers will cover the cost to make their listing more attractive.
Found a home that's right for you? Now you’re ready to make an offer.
Let your real estate agent guide you
Your real estate agent can be a massive resource here. They can give you comparable sales information to shape your offer. Plus, they might have intel from the seller’s agent — like if they've already found a new place and are extra motivated to sell.
Consider a real estate attorney
You might also want help from a real estate attorney if the transaction is complicated — for example, in a forsale by owner (FSBO) deal or other tricky situations. In some states, a lawyer is required to be part of any real estate transaction.
Get an answer from the seller
Now you wait on pins and needles for a response from the seller.
If the seller accepts your offer, congrats! Now you've got just a few more steps to go. You'll also likely write your first check at this point. Earnest money is a deposit you'll make toward the purchase of the house — this will usually go into an escrow account.
If the seller rejects your offer, you can make a counteroffer or walk away. The right move really depends on why they turned you down. If the seller counters, talk it out with your agent to make a decision — either to accept or make your own counteroffer. (It's during these negotiations that a buyer's agent really earns their keep!)
Nerdy Perspective
Will a personal note to the sellers help get my offer accepted?
A “buyer love letter” can seem harmless, but it might create fair housing concerns if it reveals personal details — like family status or religion — that can’t legally factor into a seller’s decision. To avoid that risk, some sellers’ agents won’t pass letters along at all.If you’re considering one, talk it through with your buyer’s agent first. When we made an offer on our house, I included a short postcard thanking the seller for the years of care he’d put into the house and its garden. We got the house — but did the postcard help? I’ll never know. It was a small courtesy, not the backbone of our offer.
You know the property you want to buy and how much you'll have to pay for it. Now you'll choose a lender to get a mortgage from. You can go with a lender that preapproved you or start fresh with a different one. Even with an online-first lender, you'll usually work closely with a loan officer to complete the actual application.
This is a paperwork-heavy process, so get ready to do a lot of uploading. Here's what you're likely to need:
W-2 forms from the past two years (possibly more, if you've changed employers).
Pay stubs from the past 30 to 60 days.
Proof of other sources of income, including documentation of any gift money.
Federal income tax returns from the past two years.
Recent bank statements, usually for the past couple of months.
Details on long-term debts like car or student loans.
ID and Social Security number.
Once your mortgage application is complete, you'll go into underwriting. During this process, the lender makes a final decision on whether to give you the loan. Essentially, the lender makes sure there isn't anything about the deal that's too risky. The lender will also look at the home you've chosen via an appraisal (see Step 13 below) and request a title search.
It might feel a little strange to take out an insurance policy on a home you don't actually own yet. But if you’re going to get a mortgage, your lender will likely require you to get homeowners insurance as part of the deal.
Typically, you should:
Have the policy take effect on your closing date.
Get enough coverage to fully replace the home (this might not be the same as your purchase price or the appraised value).
A basic home inspection can raise issues you might face down the road and point out any necessary repairs. This visual assessment covers all aspects of the house and its systems — from the foundation to the roof. If the home has features like a pool, septic system or retaining walls, you might want to have these inspected, too.
There are also more specialized types of home inspections to help with particular concerns, like mold or radon. The standard inspection will usually reveal if you need one of these.
You should choose the home inspector and pay for the inspection. If it uncovers problems that weren't included in the seller's disclosures, you might be able to negotiate with the seller (see Step 14).
Nerdy Perspective
Is it ever OK to skip the home inspection?
Yes, with the biggest asterisk ever. I would never say you don't need it, but I would say there are situations where it's a lot less necessary — and I'm telling you this from experience, because I didn't do an inspection on my last home.Here's the context: This was an 18th-century home that had been foreclosed on. I didn't actually move into the home until I had owned it for something like eight months, because it needed a lot of work to be habitable.It was a situation where a home inspection would have told me that pretty much everything needed to be updated or fixed, and that was already very obvious. Under those circumstances, I felt fine not having the inspection. I was already very prepared to sink a lot of money into repairs, and trust me, I did.Under normal circumstances, however — please, get an inspection! Even in a fairly new house, there may be issues that aren't obvious to the untrained eye, and the inspection ensures you know what you're getting into.
A home appraisal looks closely at the home you're buying and at comparable recently sold homes to determine the market value of the property. This is different from an inspection: The inspection is for your peace of mind, while the appraisal is really for the lender, which doesn’t want to lend you more money than the home is worth.
Your lender will choose the appraiser, but you'll pay for the appraisal.
🤓Nerdy Tip
If you're buying a house with cash, you might want to hire an appraiser yourself to be sure about your investment even though it isn’t required.
14. Negotiate any repairs or credits with the seller
Some items — like prorating property taxes or HOA fees — will have been addressed in your offer letter. But you might have other things to negotiate before closing.
Your negotiating power can hinge on what kind of market you're facing:
In a buyer's market, almost any aspect of the transaction can be negotiated. This includes having the seller pay some of your closing costs or loan points.
In a strong seller's market, it can be difficult to get concessions, since the seller can simply move on to their next offer. But if it's an issue that will come up with any buyer — for example, a necessary repair that’ll get flagged by any home inspector — you might have some leverage.
🤓Nerdy Tip
If the home needs repairs, consider asking the seller for a credit at closing. This way, the transaction won’t hit a standstill while you wait for the seller to get the work done. Instead, the seller can simply rebate you an agreed-upon amount to cover the repairs after closing, and you can get them done however you want.
You've finally made it to the last step! Getting familiar with the standard closing documents ahead of time can make the closing process less nerve-wracking.
Here are a couple of things to expect as you approach your closing date:
Closing Disclosure: Your lender must provide you with the Closing Disclosure at least three days before the actual closing. You can compare it with your Loan Estimate to see whether and how any closing costs have changed. This will let you know how much total cash you’ll need to close.
Final walk-through: On or near closing day, you'll do a final walk-through with your real estate agent. You'll probably be buzzing with excitement, but make sure to check that everything’s as agreed upon. (For example, that all the appliances that are supposed to be included in the sale are still there.)
It's been a whirlwind of emotion and seemingly endless paperwork. And you might have just written the biggest check of your life. But now you're getting the keys to your new home. Congratulations, you did it!
