Buying a house is the largest financial transaction most people make. The process has about a dozen distinct steps — and skipping or mishandling any of them can cost thousands of dollars or kill the deal. This guide walks through every step in order.
Step 1: Check Your Credit Before Anything Else
Your credit score determines which loan programs you qualify for and what rate you'll pay. Check all three bureaus for free at AnnualCreditReport.com. Dispute any errors — even small ones — before applying.
| Loan Type | Min. Credit Score | Min. Down Payment |
|---|---|---|
| Conventional | 620 | 3–5% |
| FHA | 580 (500 w/ 10% down) | 3.5% |
| VA | No official min (lenders: 580+) | 0% |
| USDA | 640 recommended | 0% |
Tip: Give yourself 3–6 months to improve your score before applying if you're close to a tier boundary. Going from 679 to 680 can unlock a better rate tier.
Step 2: Figure Out What You Can Afford
The standard rule: housing costs (PITI — principal, interest, taxes, insurance) should stay below 28% of gross monthly income. Total debt (housing + all other payments) should stay under 36–43%.
Don't forget the costs beyond the mortgage: property taxes (0.5–2.5% of home value annually), homeowner's insurance (~$1,500/year average), HOA fees (if applicable), and maintenance (budget 1% of home value per year).
Step 3: Save for the Down Payment and Closing Costs
Down payment is only part of the upfront cash needed. Also budget for closing costs — typically 2–5% of the purchase price for a purchase mortgage. On a $400,000 home, expect $8,000–$20,000 in closing costs on top of your down payment.
Closing costs include: lender origination fee, appraisal (~$500), title insurance (~$1,000–$2,000), prepaid interest, and property tax/insurance escrow setup. You'll receive an itemized Loan Estimate within 3 days of applying.
Down payment assistance: Many states and cities offer DPA programs for first-time buyers. Check your state housing finance agency — some offer forgivable grants up to $10,000–$25,000.
Step 4: Get Pre-Approved (Not Just Pre-Qualified)
Pre-approval means the lender has verified your income, assets, and credit — and is committing to lend a specific amount. Pre-qualification is just an estimate based on unverified self-reported info. In competitive markets, sellers often won't consider offers without a pre-approval letter.
Apply to 3 lenders within a 14-day window — multiple mortgage inquiries in this period count as one on your credit report. Compare their Loan Estimates side-by-side, specifically the APR and total closing costs column.
Don't do this during pre-approval: Don't open new credit accounts, don't quit your job, don't make large unexplained deposits, and don't co-sign anything. Any of these can reverse an approval at closing.
Step 5: Start House Hunting
Get a buyer's agent — their commission is typically paid by the seller. Your agent writes offers, negotiates, coordinates inspections, and guides you through the contract. Interview 2–3 agents before choosing.
When evaluating homes, look beyond the list price: check property tax rates by parcel (not just the county average), HOA financials if applicable, flood zone status (add flood insurance if in Zone AE), and age of major systems (roof, HVAC, water heater).
Step 6: Make an Offer
Your offer includes purchase price, earnest money deposit (typically 1–3% of price, goes toward closing), contingencies (inspection, financing, appraisal), and a closing date. Waiving contingencies is risky — the financing contingency protects your deposit if your loan falls through.
Step 7: Home Inspection
Hire your own inspector (not one recommended by the seller's agent). A good inspection costs $400–$700 and can reveal issues worth negotiating: roof age, foundation cracks, HVAC condition, electrical panels, plumbing, and pest damage. Use inspection findings to request repairs or price credits — or walk away if issues are severe.
Step 8: Appraisal
Your lender orders an appraisal to confirm the home is worth at least the purchase price. If it comes in low (below the agreed price), you have options: renegotiate the price down, pay the difference in cash, or walk away. Conventional loans won't fund above the appraised value.
Step 9: Underwriting and Final Approval
The lender verifies everything: income (tax returns, W-2s, pay stubs), employment (sometimes called day-of-closing), assets (bank statements), and the property (title search, appraisal). Respond quickly to any "conditions" — missing a document can delay closing.
Step 10: Lock Your Rate
A rate lock guarantees your rate for 30–60 days while the loan processes. Longer locks sometimes cost more. Lock when you're under contract and confident in the timeline. If closing delays push past your lock expiration, you may need to pay to extend it.
Step 11: Closing Day
You'll sign 50–100 pages of documents. Bring a government ID and a cashier's check or wire transfer for closing costs. Review the Closing Disclosure (provided 3 business days before closing) and compare it to your Loan Estimate — question any new or increased fees.
After signing, the lender funds the loan, the seller receives proceeds, and you get the keys. The deed is recorded with the county. You're a homeowner.
After closing: Set up autopay for your mortgage. Keep your first statement showing loan details. Budget for your first property tax bill if escrow wasn't set up. And resist the urge to immediately furnish everything — a cash reserve for unexpected repairs matters more.