Steps to Buy a House: Everything You Need to Know

Kristine Cameron


Kristine Cameron

August 5th, 2022
Updated August 5th, 2022


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Buying a house isn't as straightforward as you might think. There are several hidden fees, protocols, and required documents that most first-time home buyers don't know about.

Certain parts of the buying process — such as getting preapproved for a mortgage and negotiating with sellers — can be especially difficult if you've never experienced them before.

However, buying a house is a lot easier when you have a knowledgeable realtor on your side. Free agent-matching services like Clever Real Estate can save you time by connecting you with top local realtors. Clever can even help you find an agent who specializes in your desired neighborhood and price range and can walk you through each step of the process — all while getting you the best deal possible.

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» MORE: Want to know how to buy a house with cash? Concerned about a poor credit score? Check out these pieces instead!

Steps to buying a home

If you’ve never purchased a house before, 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.

» MORE: Find a state-specific guide for buying a home in your state

1. Determine your budget

It’s recommended to use 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.

For example, if you make $4,000 a month, your monthly housing costs shouldn’t exceed $1,120 (28% of $4,000). Then, your total debt (including your mortgage, credit card debts, student loans, etc.) shouldn't exceed $1,440 (36% of $4,000).

Housing costs include more than just your mortgage payments. You’ll also have to consider expenses such as:

  • HOA fees
  • Home insurance
  • Property taxes
  • Utilities

» LEARN: The Hidden Costs of Homeownership

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.

Curious about how much house you can afford on different incomes? Check out our guides on how much you can afford on $70K a year and $48K a year.

Save for a down payment

It’s recommended to save 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 having trouble saving for a down payment and don’t qualify for an FHA or VA loan, down payment assistance (DPA) programs can help.

What is a DPA program?

Every DPA program has its own unique requirements for eligible buyers. Participants are often required to pay a certain percentage of the down payment or take a homeowner education course.

Some DPA programs provide loans that will need to be repaid, whereas others provide grants to buyers. Make sure you understand the program's conditions before applying so you won't face any surprise fees later.

There are several state-specific and nationwide programs through the Department of Housing and Urban Development (HUD).

2. Find a great 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 like Clever

Clever’s free agent-matching platform will connect you with the top realtors in your area. Save time looking for the best agent without any risk — if you don’t like any of your matches, you can simply walk away.

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3. Get preapproved for a mortgage

Getting preapproved for a mortgage is important for three key reasons:

  1. You’ll have an exact budget to keep your home search realistic.
  2. 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.
  3. 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.

They'll look at the following information to determine your mortgage pre-approval amount:

Total income

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.

Personal debt

Lenders also consider your other debts, including credit cards, student loans, auto loans, and personal loans. They use this information to calculate your debt to income ratio (DTI) — or your total debt (including future mortgage) divided by your total income.

While some lenders will approve mortgages for buyers with DTI as high as 43%, it's best to keep your DTI under 36%.

Because of this, you might consider paying off some of your other debts before applying for a mortgage in {steps_to_buy.global_state.state}.

Cash reserves

Mortgage lenders in {steps_to_buy.global_state.state} 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.

Credit Score

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.

» MORE: How Long Does It Take to Get Preapproved for a Mortgage?

Get Pre-approved Today!

Get matched with a lender who can tell you how much house you can afford. To get started, where do you plan on buying?

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?

Bonus tips:

  • 🏡 Drive around potential neighborhoods at different times of the day.
  • 💻 Take a peek at neighborhood social media platforms, such as community Facebook groups and NextDoor.
  • 🚗 Do a test drive of your daily commute to see what the traffic is like.

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,, 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

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.

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.

For example, 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 to the seller could reveal personal details about the buyer, which 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.

An inspection contingency protects you in case the home inspector finds a serious problem. Financing and appraisal contingencies allow you to walk away from the deal if your financial situation changes.

» LEARN: What Does Contingent Mean in Real Estate?

💰 Repair credits

If a seller doesn't want to repair an issue with the home, they can offer a repair credit instead. A buyer can also request a repair credit to cover the costs of getting a problem fixed after they move in.

If the seller isn't willing to make repairs, find trusted contractors to do so after closing with HomeAdvisor.

7. Negotiate until your offer is accepted

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.

» LEARN: How Long Does a Seller Have to Accept an Offer?

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.

Differences between appraisals and inspections
In a nutshell, an appraisal estimates a home's value, and an inspection finds areas that need repair or renovations.

Home appraisal

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?

Home inspection

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.

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Enter your zip code to request hand-picked agent matches in minutes. Compare your options until you find the perfect fit, or walk away with no obligation. Try Clever's free service today!

» MORE: 7 Must-Know Home Inspection Tips for Buyers

Title search process

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.

» MORE: 7 FAQs About Title Companies and What They Do at Closing

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.

» MORE: The Complete Guide to Your Final Walkthrough

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.

Closing tip:
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.

Real estate attorneys

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:

  • Connecticut
  • Delaware
  • Georgia
  • Massachusetts
  • New York
  • South Carolina
  • South Dakota
  • Vermont
  • West Virginia

Attorney closing states

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.

» MORE: Real Estate Lawyer Cost: Cheaper Than a Realtor?

Closing costs

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.

» LEARN: ALL the Closing Costs You'll Pay

State-specific resources for buying a house

Want to learn the best tips for buying a house in your state? Check out our state-specific guides to find DPA programs, home buyer statistics, average home values, and more!

South Carolina
South Dakota
New Hampshire
New Jersey
New Mexico
New York
North Carolina
North Dakota
Washington, D.C.
West Virginia
Rhode Island

Final tips on how to buy a house

Once you understand the basic steps of buying a home, you can further improve your experience by following these recommendations:

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: Tips for Lowering the Cost of Your Move

Look for first-time homebuyer programs

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.

Tour several homes before submitting an offer

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.

Find an experienced local agent

The home buying process can seem daunting, but it’s so much easier with an experienced realtor on your side. An agent can find properties for you to tour, negotiate with sellers, help with paperwork, and connect you with local pros to make your new house feel like a home.

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Buyer FAQs

Your budget will depend on your annual income, how much debt you owe, and how much a lender actually approves for you to borrow. Many lenders use the 28/36 rule to determine how likely you are to make consistent payments.

No, you're not required to work with an agent. However, they can help you save time on your home search, connect you with local pros, and guide you through each step of the buying process — all at no cost to you! Learn more about the value of a real estate agent.

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