Couple speaking to their accountant.

Step 1:
Determining Finances

When buying a home, there are a few factors you should consider to determine how much home you can actually afford:

  1. Credit score: One of the most important factors in determining how much you can afford is your credit score. Chances are you'll need a credit score of at least 620 to get a conventional mortgage loan. Higher is obviously better.
  2. Down payment: We'll need to determine how much down payment you'll be able to pay up front. For most loans, you'll need a down payment of anywhere between 3.5% and 20%.
  3. Closing costs: These are the final costs and fees associated with buying a new home. You can end up totaling between 2% to 5% of the total costs. So a $200,000 home would be between $4,000 and $10,000.
  4. Extra homeownership costs: These are also known as maintenance costs, and you can estimate them to be about 1% of the home's total worth each year, at least at first.

Once you figure all these numbers out, you'll be able to get a price range of homes in your budget.

Step 2: Pre-Approval

Once you've saved up enough money and worked out your finances, it's time to get pre-approved for a mortgage. That is of course unless you're wealthy enough to be buying a house in cash. Getting a mortgage pre-approval is an important part of buying a home as many sellers won't even show you a house unless you have a pre-approval letter. A mortgage pre-approval letter is usually valid for 90 days and essentially indicates that the bank expects you to qualify for the loan, and they're ready to proceed with getting you a mortgage as soon as you have a house in mind. Having a pre-approval letter can increase seller confidence and will allow you to secure financing details and move into deciding on a home for real.


Step 4: Offer Submission

Once you've found a house that you really love, the next step to buying that home is to make an offer to the seller. There are a few key things to keep in mind:

It's always important to move fast, as sellers usually get rid of their homes free quickly. Don't wait around to make an offer, as most homes only spend a few days on the market before a reasonable offer is made.

Always speak to you agent about creative ways to make you offer more desirable.

signing paperwork
Business people having meeting in modern office

Step 5:
Appraisal & Inspection

The next step in buying a house consists of due diligence. Even after you make an offer and a seller accepts that offer, you should still get inspections and appraisals of the property to make sure that nothing is out of order. You should hire a licensed home inspector to check things like a house's roof, electrical system, HVAC system, plumbing, and so on. Once we get past the inspection negotiations your lender will have the appraiser come out to the property.

Step 6: Closing & Moving

If you've made it this far, you're almost there! Now it's just time to dot your I's and cross your T's. Do a final inspection of the home and test all the appliances, then perform the closing agreements with your real estate agent and the title company.