For decades, homeownership has been a core component of the American dream.
But for many, buying a home is a daunting process that carries the risk of financial missteps and regrets. In fact, our recent survey of 1,000 homeowners found that 52% are surprised by the true cost of homeownership — and 60% have experienced some level of buyer's remorse.
These challenges can be even greater for first time home buyers, who tend to be less familiar with the process and don't have the ability to leverage equity from a previous home purchase.
To help you feel prepared from start to finish, our guide breaks the entire process down into 10 steps to buying a house.
These steps, along with the help of an expert realtor, can give you the confidence you need to secure a great deal — even if you're buying a home for the first time.
If you're still looking for a real estate agent near you, Clever can help. Our free agent matching service makes it simple to connect with pre-vetted agents who meet our rigorous standards for customer service, successful past sales, and more.
Our team of fully licensed real estate professionals will present you with hand-picked agents from leading brokers such as Keller Williams, Century21, RE/MAX, and more. Meet the best agents near you today!
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10 steps to buying a home
If you're a first-time home buyer, it can be hard to know where to begin. We’ve outlined the 10 key steps necessary for every home buyer, from making a budget to officially sealing the deal.
Looking for information about your state? We've put together guides for all 50 states and Washington, D.C. Find a state-specific guide for buying a home.
1. Determine your budget
Experts recommend using the 28/36 rule to estimate how much you’ll be able to borrow.
The rule states that you shouldn’t spend more than 28% of your monthly income on housing expenses and no more than 36% of your monthly income on all of your combined debts.
Although different lenders might have higher thresholds than the standard 28/36 rule, most won't approve you for a mortgage if it will cost over 28% of your monthly income. This is because they want to be confident you'll be able to consistently make payments.
How much should you save for a down payment?
Traditionally, experts recommend saving at least 20% of a home’s total cost to use as a down payment. This will let you avoid paying private mortgage insurance (PMI), which is usually required for conventional loans until you reach 20% equity.
However, not all loans require a 20% down payment. Loans by Veterans Affairs (VA) and the Federal Housing Administration (FHA) only require 0–3.5%.
The catch is that FHA loans require borrowers to pay mortgage insurance for the life of the loan, and VA loans include a one-time funding fee. They also have stricter requirements for qualifying for a loan than a conventional mortgage.
If you’re eligible, make sure to take advantage of first time homebuyer programs to save money. Most states offer special programs for first-time buyers, which you can find through HUD.
Budget for moving expenses
As you budget for your down payment and closing costs, don’t forget about the costs of moving to a new house! Depending on how far you’ll have to move, you might need to hire movers, rent a truck, or find a place to stay between moving out of your old house and into your new one.
Also, think about when to move. Buyers in northern states probably shouldn't try to move during the coldest winter months — most sellers won’t want to move then, either!
» MORE: 11 Ways to Money on Moving
2. Find a real estate agent
Once you have a budget and a general area in mind, a realtor can help you make the most of your house-hunting goals.
An experienced agent will have a good understanding of the community and be able to offer valuable insights about different neighborhoods. They'll also be able to narrow down your housing options to those that fit your desired criteria and budget.
A realtor will help you tour houses, submit an offer once you find a home you love, and negotiate as needed on your behalf. Plus, the seller will cover the cost of your agent's commission after closing on your house!
To make sure a realtor is the right fit for you, it's always a good idea to ask your agent questions before signing an agreement with them. You can also narrow down your options by:
- Checking online reviews
- Asking friends for recommendations
- Using an agent-matching service to find pre-vetted agents
Clever Real Estate’s free agent-matching platform connects you with the best realtors in your area. To join our network, agents must meet competitive standards for customer service and past sales — making it simpler for you to interview agents and shop around.
3. Get preapproved for a mortgage
Getting preapproved for a mortgage is important for three key reasons:
- You’ll have an exact budget to keep your home search realistic.
- You’ll be able to make an offer right away if you find a home you love, which can be a gamechanger in a fast-paced market.
- A preapproval letter will show the seller you're serious about buying, since there's less chance your financing will fall through.
When you go to a lender to apply for a mortgage, you'll need to have your ID, employment information, proof of income, and a list of your current debts. Lenders will consider you less of a risk if you have a reliable source of income and a history of on-time payments for other debts.
How long it takes to get preapproved for a mortgage can vary. However, lenders will look at the following information to determine your mortgage preapproval amount:
Lenders need to know that you earn enough to make your mortgage payments each month. Most lenders want your monthly housing costs to be less than 28% of your monthly income.
Lenders also consider your other debts, including credit cards, student loans, auto loans, and personal loans. Paying off some of your other debts before applying for a mortgage may help you get preapproved.
Lenders use this information to calculate your debt to income ratio (DTI) — or your total monthly debt (including future mortgage) divided by your total monthly income.
While some lenders will approve mortgages for buyers with DTI as high as 43%, it's best to keep your DTI under 36%.
Mortgage lenders want to see that you have enough cash in the bank to cover your down payment and closing costs without completely draining your cash reserves.
While this requirement varies by lender, most want you to keep at least enough to cover two mortgage payments including insurance and taxes.
Lenders typically rate credit scores on this scale:
- ✅ Excellent: 800–850
- ✅ Very good: 740–799
- ✅ Good: 670–739
- ⚠️ Fair: 580–669
- ⛔ Poor: 579 or below
It’s possible to get a mortgage with poor credit, but be prepared for higher interest rates that will make your monthly mortgage payment more expensive. Both FHA and VA loans allow for lower credit scores, but they may ask for a higher down payment than their standard requirements.
Lastly, make sure to get quotes from multiple lenders. Each loan company might offer you a different rate, so it's worth it to shop around for the best deal. Ask for recommendations and check with both local and national lenders to see what your options are.
4. Research locations
Before looking at houses, decide on a few potential locations first. During your hunt for the ideal neighborhood, here are some things to research and consider:
- Crime rates
- Distance to key resources (hospitals, grocery stores)
- Commuting distance to work/school
- Public school district ratings
- Walkability/public transportation availability
- Community (age of residents, local events, community groups)
- Restaurants and amenities
It may also be a good idea to review home value trends in each prospective area. For instance, are homes in the neighborhood increasing in value quickly? Will buying a house here be a good investment several years from now?
5. Start the home search
From the start, know that there probably won't be a “perfect” house that checks off every one of your wants and needs. Keep your options open by making a list of your must-haves and try to limit your search to these top features.
You can search for houses by:
- Checking online listing sites (Zillow, Realtor.com, Facebook, etc.)
- Finding "For Sale" signs in your desired neighborhoods
- Asking your agent to look for off-market properties that match your criteria
- Attending open houses
- Scheduling private tours of homes
Don’t put in an offer on the very first house you see! Touring at least a few homes will help you compare different features, amenities, and layouts to choose the best option for you.
Experienced realtors also have a professional network of investors and other agents who might have insights about potential sales before they come on the market. These listings are the perfect way to snag a great property before other buyers even know about them.
Finding an expert realtor doesn't have to be a challenge. Clever's agent-matching service can pair you with a knowledgeable agent from a well-known brokerage like Century 21 or Keller Williams. With their help, you can find hidden gems before other buyers get to them.
6. Draft and submit an offer
Once you find a house you love, you'll have to draft up an offer. Your offer should include the following items:
- Offer amount: In a competitive market, you might need to go above the actual listing price, regardless of the house's condition. If the market is slower, you could try offering below the asking price and see if the seller accepts.
- Seller concessions: If you might have trouble covering your closing costs, you can ask the seller to pay for some of these expenses. This is called a concession. A seller concession could include paying attorney fees, title search fees, or appraisal fees.
- Letter to the seller: Including a letter to the seller is a bit of a gray area in the home buying process. Some brokerages claim that a letter could potentially violate Fair Housing Laws. If you’re not sure if you should include a personal letter with your offer, ask your agent for their advice.
- Contingencies: A contingency states that you'll only move forward with the sale if specific requirements are met. The most common types include inspection, financing, and appraisal contingencies.
- Repair credits: If a seller doesn't want to repair an issue with the home, they can offer a repair credit instead. This will cover the costs of getting a problem fixed after you move in. Find trusted contractors to help you with repairs after closing with HomeAdvisor.
7. Negotiate with the seller
After you submit your offer, the seller can decide to accept, reject, or counteroffer.
In most locations, sellers generally respond within 72 hours of receiving an offer. However, if the home is being sold by a bank, it can take several days to a month before you hear a response.
If a seller responds to your offer with a counteroffer or requests all prospective buyers for their “highest and best offers,” you have a few options.
First, you could increase your offer amount if your budget allows you to. If you can’t stretch your budget any further, you can try to sweeten the deal by removing contingencies or being more flexible with your move-in date. Otherwise, you might have to cut your losses and keep looking for houses.
Once your offer is accepted, you’ll need to:
- Pay the earnest money deposit.
- Sign several legal documents, such as the agreement of sale and estimated closing cost sheet.
- Get in touch with your mortgage/loan officer so they can start the underwriting process.
8. Get an appraisal, inspection, and title search
Before you can close on your home, your lender will require you to get an appraisal and title check. You'll also want to get an inspection for peace of mind.
Appraisals are conducted by state-licensed appraisers who estimate a home's value based on comparable houses in the area, local market trends, and a visual inspection of the home.
An appraiser will be selected by your lender. The appraiser’s report will determine how much you’ll actually receive for your loan. For example, if an appraisal comes back low, you'll either have to pay the difference out of pocket, renegotiate with the seller, or walk away from the sale.
» MORE: What Is a Home Appraisal?
A home inspection is supposed to uncover any defects that the seller didn't catch or disclose. An inspector will check out key areas, such as the:
- 🔌 Electrical system
- 🏗 Foundation
- 🔥 HVAC system
- 🚽 Plumbing system
- 🏚️ Roof condition
If serious issues are found, you can ask the seller to make repairs before you move in or offer you repair credits.
As the home buyer, it's up to you to hire a home inspector. If you’re not sure who you can trust, your agent will likely have great recommendations for local pros.
A property title search is usually conducted by a title company or an attorney. It involves reviewing property records to make sure that the seller is the rightful owner of the home.
Conducting a title search will also reveal if there are any liens on the home. A lien is a legal claim against a property that can be used as collateral to repay a debt.
Since liens are attached to the property itself (not the property owner), you may end up facing the consequences if a previous owner had any debt. For instance, things like unpaid property taxes, HOA fees, or other bills might become your responsibility without a title search.
9. Do a final walkthrough
Final walkthroughs usually happen a day or two before closing. This is your opportunity to make sure that everything the seller agreed to take care of has been repaired or replaced.
Make sure to bring your realtor with you and thoroughly check each room of the home. It helps to bring along a copy of your home inspection or contract for reference.
If you find a minor problem, you can ask the seller to fix it before closing. For a more serious issue, you may need to move back the closing date to give them enough time to repair it.
You could also ask for repair credits to cover the cost of repairs after closing.
10. Close on your home
A few days before your closing date, you should send your down payment and the money you need for closing costs to your escrow agent through a wire transfer. Your lender should tell you when and where to send these funds, but it never hurts to ask if you're unsure.
On the actual closing day, you'll usually meet at a title company to sign documents and finalize the property transfer. Documents to review and sign will include the closing disclosure, promissory note, deed of trust, and certificate of occupancy.
For buyers, it takes about 1.5–2 hours to review and sign all necessary documents.
If possible, try to avoid closing on a Friday. Most lenders close over the weekends, so if the closing process goes over schedule, you won't be able to finish closing until Monday.
Which states require a real estate attorney?
Some states — known as attorney closing states — require an attorney to be present at real estate closings to protect both the buyer and seller. These states currently include:
- New York
- South Carolina
- South Dakota
- West Virginia
Even if you live in a state where a real estate attorney isn't required, it's still not a bad idea to hire one. They can make sure your sale goes through without a hitch and that you cover all your legal bases.
How much are closing costs for buyers?
Average closing costs for buyers make up 3–6% of the loan amount. Note that closing costs do not include your down payment — that’s another fee altogether.
So, if your mortgage is $200,000, your closing costs will likely fall between $6,000 and $12,000.
Closing costs for buyers can include:
- Lender fees. Lender fees cover any costs related to your loan, such as appraisal and survey fees, origination fees, and underwriting expenses.
- Title and escrow charges. These are charged by the title company for conducting the closing process, performing the title search, and providing title insurance.
- Prepaid costs. Lenders often require new homeowners to pay for certain expenses up front, such as property taxes and homeowners insurance.
- Other closing costs. Miscellaneous fees, such as natural disaster certification fees or real estate attorney fees, fall into this category.
How to buy a house in your state
Want to learn the best tips for buying a house in your state? Check out our state-specific guides to find first-time home buyer programs, home buyer statistics, average home values, and more!
First-time home buyer FAQs
To buy a house, you need to determine your budget, find an agent, and get preapproved for a mortgage. Then, you can start researching locations, looking for houses, and submitting offers. After the seller accepts your offer (perhaps after negotiations), you'll get an inspection and appraisal. Finally, you'll do a walkthrough before closing! Learn more about the steps to buy a house.
Think of the home buying process as three stages: preparing to buy, making an offer, and sealing the deal. In the first stage, you'll prep your finances, find an agent, and browse for homes. The second phase involves crafting an offer and negotiating. In the last stage, you'll finalize the sale and become a new homeowner. Learn more about the home buying process in your specific state.
Buying a house usually requires you to have a decent credit score (above 670). You'll also want a down payment. A traditional down payment is 20% of a home's purchase price. However, there are plenty of first-time home buyer programs that require a smaller down payment. Our guide to first-time home buyer programs can help you find the right program for you.
When you buy a house, your agent will submit your offer to the seller. They'll accept it, reject it, or send you a counter offer. If they accept, it usually takes 30 to 45 days to close. During this time, you should have the home appraised and inspected to make sure there are no issues. Your mortgage company will also use this time to finalize your loan.