The House Buying Process: 11 Steps to Become a Homeowner

The house buying process is really confusing. There are a lot of moving pieces and a lot of considerations that you need to take. If you go through the house buying process hastily or sloppily it can cost you THOUSANDS of dollars. But don’t worry, I’ll help walk you through the process and help you avoid some costly mistakes.

Also, if you choose a good realtor they will help walk you through the process as well. (Or at least they should.) A realtor does this day-in and day-out. They know the drill. They know the market. They know what roadblocks to anticipate. They know what to do. They will also be able to walk you through this process if it differs somewhat from this article based on your state.

Here we go!

Step 1: Clean Up Your Credit Report

This process should start several months (or maybe even more than a year) before you want to purchase a house. 

Your creditworthiness is going to be the largest factor when being approved for (or not approved for) a mortgage.

If you have collections that’s okay. Just start cleaning them up. Here’s how.

If you are behind on payments, make sure that you get caught up ASAP.

From the moment you decide that you want to buy a house, do NOT let anyone pull your credit. Don’t let the cashier at BestBuy, Target, Academy Sports, etc. pull it because you applied for a credit card. Do not go purchase a car, boat, camper, etc. on a loan.

Do NOT let someone pull your credit until you are ready to formally apply for a mortgage.

Having an unnecessary credit inquiry will bring down your credit score for a while and you don’t want that then you are trying to lock in the lowest interest rate possible on a mortgage.

If you use Credit Karma, the Experian app, or any of the other credit monitoring services, that is fine. Those companies use a soft credit pull method. Just don’t let anyone make a hard pull on your credit.

Step 2: Save, Save, Save Your Money

There has never been anyone in the history of homebuying that was upset because they saved too much money. The more money that you have, then the more power you will control in the house buying situation.

If you have a lot of money to put down on the house as well as enough money to cover all the closing costs, you will have a lot more bargaining power over other potential bidders on a house.

The amount of money that you should save for a house is entirely dependent on your situation, where you live, what type of loan you have, etc. Because of this, I can’t tell you how much to save. 

However, if you start saving money for a home AGGRESSIVELY about a year in advance you will probably be in pretty good shape.

Avoid as much impulse buying as possible. Don’t go out and purchase a new car, take a lavish vacation, etc. Just save money as aggressively as you can.

Additionally, if you save a bunch of money and then don’t need that money to close on the house, you can use that money for repairs, maintenance, upgrades, etc. on your home as well.

Step 3: Interview and Choose a Realtor

Although this one might seem controversial, I am in the camp that you should use a realtor 99.9% of the time in the house buying process. And if you are thinking that you are the 0.1% of people that don’t need one, you’re wrong.

I will get into more depth with this topic in a later article, but you NEED a realtor. 

Yes, they will cost money. But there are a LOT more benefits to having a realtor than drawbacks.

1. They will get a better price.
2. They will save you time.
3. They have access to houses that you won’t.
4. They have professional networks that you aren’t part of.
5. They have certain ethical standards that they are held to as part of their career.
6. They understand the market in your area (this one is huge).
7. They understand the complexities and intricacies of real estate contracts.

All that being said, you need to pick the right realtor for YOU. Not everyone is a great fit for everyone else. 

Find someone that you like, has good references, has been in the industry for at least a couple years, and who doesn’t seem desperate to sell a house.

When you find a good realtor, they will probably feel more like a good friend than someone who is working for you.

Step 4: Get Pre Approval From Lenders

The next step in the house buying process is to get pre approval for a mortgage. The reason that I have this step as #4 and not #3 is because your realtor will often have lenders that they have partnered with and who they know. This will make the process even smoother. 

You don’t have to necessarily go with the person that your realtor suggested, but you should consider them.

Remember when I told you not to have your credit pulled for any reason?

This is when you have your credit pulled.

When you are ready to get approved for a mortgage have lenders pull your credit. 

Within TWO WEEKS have your credit pulled for a mortgage application by 3-4 lenders. I suggest going to these entities:

1. Your local bank/credit union
2. The suggested lender from your realtor
3. Any other bank/credit union that you have/had a (good) relationship with
4. Any online bank or mortgage lender of your choosing

The reason for the two week window is that you can have your credit pulled by multiple sources in a short period of time and it only counts as one credit pull. It might show up on your credit report as four separate pulls, but it will only negatively affect your credit one time.

Some people will argue that you have 30 days, 60 days, or even 90 days to have your credit pulled and have it only count as one credit hit but that is not my experience when I was a banker. If you wait too long in between times of pulling your credit, it will count as multiple pulls and you don’t want that.

Also, you don’t want to wait too long because you don’t want to draw this process out any longer than you must.

So to avoid all of the confusion and potentially dragging your credit down unnecessarily, give yourself a two week window to do this. 

Plus, you don’t want to drag this part out very long anyway because the next part of the house buying process is really fun!

When you apply for a mortgage, all of the hard work that you did in Step 1 and Step 2 will start to pay off. Your credit will be repaired, and you will have cash in the bank. This will make you a much more attractive risk for the mortgage company to lend money to.

After this is done, do NOT have your credit pulled again for any reason until after you have closed on your house. The mortgage company will pull it again right before closing (which is perfectly normal). But don’t go out and get a new credit card, a new boat, car, etc.

Step 5: Go House Shopping

This step in the house buying process is the fun part! 

I know I loved walking into other people’s houses and silently judging their choice of wall color and tile shape, their decorations, and just overall judging these home sellers every decision. Ah, good times.

Step 6: Putting in an Offer on a House

This step in the house buying process is where the stress can start. 

When you decide on a house that you want to purchase you can put an offer on it.

The offer will consist of several things. Your realtor will be able to walk you through how to structure it. Here are some of the things that can go in an offer:

1. The purchase price (duh).
2. How much of the closing costs you will pay and how much the seller will pay.
3. Any contingency clauses, escalation clauses, etc.
4. What type of loan you have.
5. How fast you can close on the loan.
6. If you want any repairs done to the house by the current owners.
7. And a few other things that might be specific to your area/market.
8. The time frame in which the seller is to respond to your offer.

Once you have submitted an offer one of three things will happen:

1. The sellers will accept your offer as is (Woot woot!).
2. The sellers will reject your offer.
   1. If this happens, then you will not be buying that house and you have to keep looking for another house.
3. The sellers will counter your offer with another one.

If the sellers counter, you will have a specified time to respond and either counter back again to them or accept their counter offer.

Then if you counter back to them again, and they reject the offer, then the deal is done and you will not be getting that house.

If you can both agree on an offer (whether it be the original offer, a counter offer, a second counter offer, etc.), then you are now under contract. Woot woot!

Step 7: Send Your Escrow Money

After you are under contract you will need to send in money to the title company that is called an “escrow payment”. 

This money is simply there as a deposit to all parties involved that you will not just walk away because you found a better house, changed your mind, etc. 

The amount that is required depends on a number of things but $1,000-5,000 is pretty typical.

Remember, this is why you saved as much money as aggressively as you could earlier in the process!

Your realtor or lender will be able to tell you where to send the money and how much to send.

This will also be applied to the closing costs or any additional fees that there are when you close on the house. 

Step 8: Get Insurance on the House

Before you close on the house, the lender will require that you have insurance on it. So either search online or ask your realtor, banker, or lender for the contact info for some home insurance agents.

Shop this around as well. Get 3-4 quotes and go with the one that you feel the most comfortable with.

You won’t have to start paying for the insurance policy until you close on the house btw. The lender just wants to make sure that you do, in fact, have insurance on it.

Your realtor will most likely have some good contacts that they work with in your area that offer homeowners insurance as well.

Step 9: Get the House Inspected

Your realtor will set this up. You will likely have to have a general inspection on your home and you will also want to consider a termite inspection, chimney inspection, sewer inspection, etc. as well. 

After the inspection is done, you will get a report of all the things that are wrong with the house and may need to be repaired. 

At this point, you can choose to ask the seller to make the repairs, you make the repairs, or just not worry about the repairs. 

Please note: Depending on your loan type, there might be repairs that are mandatory to be completed.

If there are repairs that you want the seller to do and they refuse, at this point you could back out of the contract. You would most likely get your escrow money back, but it depends on the situation.

But if you and the seller agree on the repairs to be made or not be made, then you move onto Step 10 of the house buying process.

Step 10: Get the Appraisal Completed

After the inspection is completed, you may need to have an appraisal done as well. Your realtor will order this as well. (Are you starting to see why a realtor is SOOOO important?!)

The home appraisal will appraise the home based on its characteristics, the market, the neighborhood, and other comparable homes. 

As long as the appraisal amount comes out to be the same or more than what you offered the seller, you are good to go!

But if the appraisal amount comes out to be lower than what you offered to pay for the property, you have a couple choices:

1. Request that the offer be lowered to the appraised value.
2. Don’t worry about it and just pay the difference in the appraised value and the offer.

For example, if you offered $400,000 to buy a home and then it appraised for $375,000, you can either ask the seller to lower the price to $375,000 or just pay the $25,000 difference out of pocket.

If the sellers don’t want to lower the price and you don’t want to pay the difference in the appraised value and the selling price then you can back out of the contract. In most cases you would get your escrow money back, but your realtor will know for sure.

Once you have gone through the appraisal process, you are good to move to the LAST step of the home buying process!

Step 11: Closing

Closing the loan means just finishing out the loan. On that day, the house will be yours!

The realtor will tell you where it is, how much money to bring (if any), and what IDs/documents you will need.

You will go to a title company in your area and sign a stack of paperwork that is bigger than any other stack you will ever sign in your life unless you go into the military.

It might seem scary, but it’s not too bad. 🙂

After that, the house is yours. 

Final Thoughts

Whew. I know it seems like a lot. And it is.

The house buying process is a lot of legwork. But then again, if you are buying an asset that you will live in, raise your family in, and grow in, that’s probably okay. 🙂

I really hope this list helps you when you buy your next (or first) home. 

If there is anything that I can do for you, please let me know!

You can do this!

Until next time!