How to Buy a House: Complete Home Buying Guide
Buying a home is the biggest financial decision most people make. Here's exactly how to navigate the process without costly mistakes.
1. Check Your Financial Readiness
Before looking at houses, look at your finances. You need: a credit score of 620+ (740+ for best rates), a debt-to-income ratio under 43%, 3-6 months of emergency savings after the down payment, and stable income for at least 2 years.
Use our Mortgage Calculator to estimate what you can afford before you start shopping.
2. Get Pre-Approved
A pre-approval letter shows sellers you're serious and know your budget. Shop with 3-5 lenders within 14 days (multiple inquiries count as one). Compare interest rates, fees, and closing costs — not just the rate. A slightly higher rate with lower fees can be cheaper overall.
3. Save for the Down Payment
Conventional loans: 3-20% down. FHA loans: 3.5% down. VA loans: 0% down (military). USDA loans: 0% down (rural). Aim for 20% to avoid PMI (private mortgage insurance), but 5-10% is fine if you're ready to buy. First-time home buyer programs can help with assistance.
4. Budget for Closing Costs
Closing costs are 2-5% of the purchase price on top of your down payment. They cover: loan origination, appraisal, title insurance, escrow, recording fees, and prepaid taxes/insurance. On a $300,000 house, expect $6,000-$15,000 in closing costs.
5. Find a Good Realtor
A great realtor is worth their commission. Look for someone who works full-time, knows your target neighborhoods, has good reviews, and communicates clearly. Ask friends for referrals. Interview 2-3 agents before choosing.
6. Make an Offer
Your realtor will help you determine a fair offer based on comparable sales. Include contingencies: inspection (must-have), financing (protects your earnest money), and appraisal (ensures the house is worth the price). A 30-60 day closing timeline is standard.
7. Get a Home Inspection
Never skip this. A $400-600 inspection can save you from a $20,000 foundation repair. Attend the inspection and ask questions. If major issues are found, you can renegotiate or walk away. Also consider: pest inspection, radon test, sewer scope.
8. Close the Deal
Do a final walkthrough 24-48 hours before closing. Verify repairs were made and nothing is damaged. Bring a cashier's check or wire funds for closing costs. Sign the paperwork (lots of it). Get your keys. Congratulations — you're a homeowner.
Pro tip: Don't make major purchases (car, furniture, new credit cards) until after closing. Lenders check your credit right before funding and a new debt can kill the deal.