Understanding how to buy a house before you start will make the process much easier. There are many variables to consider, from the property price to the location and everything in between. If you know what’s coming you’ll be well-equipped to handle any curveballs thrown your way.
What to consider before you buy a house
It can be overwhelming to sort through information about how to buy a house, such as learning about first-time homebuyer credits or buying mortgage points with a larger down payment, but there are many online resources for first-time homebuyers that outline and summarize every important detail.
First, from a financial point of view, see if you’re ready to buy a home by looking at the following variables:
- Credit score
- Income
- Amount of recurring debt
- Savings
With this information, you can figure out which types of mortgages may be a better fit for your needs.
For the house budget, you’ll want to consider:
- Location
- Size
- Number of bedrooms
- Amenities
- Property taxes
- HOA fees
- Home insurance
- Future resale value
Once you understand the overall picture, consider reading through some homebuying tips from people who’ve done it themselves so you can avoid common pitfalls.
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How to buy a house
Once you understand your finances and home budget, you can move on to buying a house. Here are the steps you need to take:
- Check your credit score: Your credit score determines your interest rate with your lender, but it may also be a factor in how much of a down payment you’ll need to make. If your score is lower than you think it should be, it may be because there is an error on your reports. If you spot any, the Consumer Financial Protection Bureau has online instructions detailing how to begin the dispute process.
- Save up for a down payment and closing costs: Even if you can afford the monthly payment, you’ll probably still need to make a down payment and pay closing costs. If saving up for a down payment will be difficult, there are first-time homebuyer down payment programs. Some are considered first-time homebuyer loans, while others are listed as first-time homebuyer grants.
- Get pre-approved: Make sure you’re pre-approved before you go house hunting. Apply with several lenders and compare mortgage rates and don’t forget to compare both rates and fees. While one lender may offer the lowest rate, it may charge a higher loan origination fee.
- Look for first-time homebuyer incentives: Hud.gov lists down payment assistance programs in each state. Some incentives are available statewide, while others are county- or city-specific. Most are intended for first-time buyers, but if you haven’t owned a home in the past three years, you may still qualify as a first-time homebuyer.
- Make a must-have list: Try to determine what your must-haves are. Do you need to be within walking distance of the metro? Are you looking for a gated community? If you have an area you’re determined to live in, check to see if you can afford everything on your list. If not, you may have to buy in a different location or reconsider your bare minimum requirements.
- Find a local real estate agent: When it’s your first time buying a house, a good REALTOR® or real estate agent can make the process go smoothly. Look for someone who can provide referrals and knows the area you’re looking in.
- Go house hunting: Visit the homes you’re considering and consider how you would use each space. Map out how far each would be from your work and friends and relatives. You may fall in love with the first house you see, but try to see a few so you can compare.
- Make an offer: When you’ve found the perfect house, it’s time to make an offer. There are a few things to consider when you do, such as whether you want to have an inspection contingency in place or need to close by a specific date.
- Get a mortgage: There are many types of mortgages available to homebuyers, but your credit score and down payment may steer you toward a specific one. Common mortgages include conventional loans, FHA loans, USDA loans, and VA loans.
- Get an inspection: Buyers typically pay for inspections. After the inspection, the inspector will send a detailed report outlining any defects in the property and the estimated cost to repair each.
- Negotiate: You can ask the seller to pay for repairs, or you can renegotiate the purchase price. They may do neither, or they may do both. Each seller is different.
- Do a final walkthrough: Even if you didn’t ask for any repairs, it’s important to do a final walkthrough to check for any accidental damage the seller may have done while moving out.
- Close: Closing often takes around an hour and may take place at an attorney's or notary’s office. You’ll need a cashier’s check that covers the down payment and closing costs.
What to do after you buy a house
After you’ve bought your first house, there are a few things you’ll want to do to protect your investment. These include:
- Taking advantage of first-time homebuyer tax credits in your state
- Monitoring interest rates for a possible refinance
- Tackling immediate repairs
- Saving money for future repairs (common expenses are new water heaters and new roofs)
Your house needs daily maintenance and upkeep to make sure everything stays in good condition.
How to buy a house FAQ
What is the first thing to do when you want to buy a home?
The first thing you should do after learning how to buy a home is to check your credit score. A low credit score can limit your borrowing options and may affect how much of a down payment you’ll need. If it’s low, consider taking steps to improve it before applying with a lender.
How much should you save before you buy a house?
It depends on what type of loan you use. An FHA loan, for example, requires a 3.5% down payment for borrowers with credit scores above 580, but borrowers with scores between 500 and 579 will need to put 10% down. A conventional loan, on the other hand, may only require a 3% down payment if you’re a first-time buyer.
What are the most important factors when buying a house?
The most important factors you should consider when buying a house are monthly payment, location, and resale potential. When determining your ideal monthly payment, make sure to include room for HOA fees, home insurance, mortgage insurance, and property taxes.
What credit score do you need to buy a house?
It depends on the lender and the loan. While it’s possible to get an FHA loan with a 500 credit score, the financial institution itself may have its own requirements, otherwise known as lender overlays, which is when the lender has its own criteria for borrowers to meet.
What down payment amount do you need to buy a house?
The minimum down payment depends on a few factors, such as the loan type, the lender, and the borrower’s credit score. For borrowers with good credit and stable incomes, a conventional loan may only require a 3% down payment. Keep in mind that you might have to pay for private mortgage insurance (PMI) with certain mortgages if you put down less than 20%.
