You’ve finally decided you’re ready to buy a house after months or even years of deliberating. Well, now what? For many people, buying a home can be an exciting experience, especially if you’re a first-time homebuyer. Every stage takes you closer to your goal, from checking your credit score to finding the perfect home and making an offer. A lot of work goes into the entire process, but it helps when you know the steps to buy a house. After all, it is a big purchase that requires a lot of planning.
To make things faster and simpler for you, here are the steps to buying a home:
1. Get your finances in order
The easiest way to get off to a good start is by getting your finances in order. Your credit score is a core element of your financial health, and improving it is necessary if you want to qualify for competitive loans. A good credit score signals that you are more trustworthy, which could help lower the interest rates you qualify for. The higher your credit score, the better your interest rate options. You can kick off homebuying on a good foot by:
Working to improve your credit score
Lenders look for a positive credit history to determine your eligibility for a mortgage. A solid credit score plays a crucial role in your interest rate options. You’ll not only improve your chances of approval by boosting your credit score but also get better rates on your mortgage, which can help you save more money.
Saving for your down payment
Once you have an estimated purchase price of the home you wish to buy, you can start saving for your down payment. Remember to make a budget that’s easy to stick to every month. Many potential homebuyers believe that 20% is the "standard" down payment amount. However, you can get a mortgage with as little as 3–5% down. 72% of first-timers end up putting down less than 20%.
Determine your monthly income and budget
It's essential to put a finger on how much money enters your bank account every month, especially if you have multiple revenue streams. This will help give you an idea of how much you could reasonably afford to pay towards your mortgage each month.
Gathering necessary documents that will be used throughout the homebuying process
2. Calculate your budget for a house using a home affordability calculator
Fully understanding your finances can help you budget correctly, which is essential when buying a home.
An affordability calculator can be a valuable tool in estimating your monthly mortgage payments and can give you a better understanding of how much you should expect to spend. It's a great way to get a benchmark of how much to save for your down payment, and start to narrow down where to kick off your home search.
3. Get pre-approved
Did you know getting pre-approved can make the buying process a lot smoother? A mortgage pre-approval is a letter that gives you an estimate of how much you can borrow for your future home; it does an assessment on your financial picture and in turn gives you a sense of how much you can truly spare. Getting your pre-approval with Better Mortgage won't affect your credit score and can be done in as little as 3 minutes. Most sellers or real estate agents require a pre-approval to see a home as an indication of buyer intent and affordability; as a result you should consider a pre-approval letter as one of the many things needed to buy a house.
With a free, no-commitment pre-approval letter, you'll have more confidence searching and a competitive edge when making an offer. Agents are more likely to take you seriously if you show up at an open house with a pre-approval letter, which can give you more leverage in your home search.
4. Search for homes within your budget
One of the essential steps to buying a home is finding one that fits within your budget but still meets your needs. Tips you might want to keep in the back of your mind are:
Find a real estate agent who can walk you through the process and save you money
Real estate agents can make your search easier because they are more familiar with properties in the area and can offer a lot of guidance when selecting the perfect home. Not only can Better Real Estate pair you with a local professional, but you can also save up to $2,000 on closing costs if you work with Better Real Estate and fund with Better Mortgage*.
Choose which neighborhood you want to live in
Pay attention to your home location and what amenities are readily available to the residents in the area. Think about factors like safety, price range, and if you’re a parent, school districts.
Identify what type of home you’re considering
The home in which you live is as important as the neighborhood. A list detailing the different types of houses and the pros and cons to each may come in handy here. You should consider asking yourself some big questions such as, would you be willing to participate in a homeowner’s association if you moved into a condo? If you buy something vintage, do you have a budget to carry out any necessary repairs that arise? Or would you rather opt for something more modern?
5. Make an offer on a home
A real estate agent’s job isn’t limited to showing you potential houses. While showing you different options that suit your taste and fall within your budget is an integral part of the job, they can also protect you from common pitfalls when you are ready to make an offer.
Making an offer is one of the necessary steps to buy a home. By submitting an offer you’re indicating your interest in buying a home, and your agent can be a great help here. As it’s the first step in kicking off the purchase, you don't want any mistakes because it's an important document that lays out your offer price and terms. Better Real Estate Agents are excellent guides that can help you through your home buying journey, and help make a plan for possible situations that might come up during the offer and negotiation stages. Once the seller accepts you’ll need to secure financing in the next step.
6. Submit your mortgage application
Once your offer is accepted, you can formally start the mortgage application process. At this stage you’ll need to determine which loan product would be best suited for your needs, the length, and rate that meets your budget. For example, depending on your needs, you might prefer a fixed- or adjustable-rate mortgage. After selecting your loan type, rate, and term, the next step is to lock in your interest rate to move forward in the application process.
Better Mortgage allows you to view all the rates you qualify for and you’re able to lock 24/7 when it makes sense for you. Once you’re locked you’re ready to move into loan processing and can start uploading any required documentation so we can get you to closing (PS — we help borrowers close up to 10 days faster than the industry average).
7. Enter the loan processing phase
Once the completed loan application is submitted, it moves into loan processing. Typically, the lender will send you a list of required documents, personal tax returns, bank statements, and then conduct a hard credit check. Each of these are needed before your loan is reviewed by an underwriter who will determine whether your mortgage is approved.
At the loan processing, you’ll need to submit the proper documents to proceed into underwriting and closing. You usually have to pay certain fees, but Better Mortgage never charges origination or underwriting fees. Loan processing typically involves:
An appraisal and home inspection: The lender will order an appraisal to assess the value of the home and ensure the mortgage does not exceed the value of the home. The inspection is meant for you, as the buyer, to identify any issues with the home that would require repair or could be a costly issue in the future.
Title and home insurance: At this stage, your title company will look over the history of the property and resolve any title issues including unpaid bills and settling owner disputes. After that, you can purchase homeowners insurance to protect you from damages and losses. Transferring ownership and setting up insurance take about 1–2 weeks.
Underwriting: This step is the final process where the lender decides on approving your mortgage.
Congratulations! You made it through the previous steps. On closing day, you'll sign all of the documents in the closing package. A short time later, your lender will fund your loan after you've made any required down payments or closing costs (in the form of a cashier's check or bank wire). Once that is done, and your agent confirms your lender has made a deposit, your home purchase will officially be complete and you’ll get the keys!
You can speed up the arrival of the closing day at Better Mortgage. As a digital lender we make the entire process faster, with an average closing time of only 32 days — 10 days faster than the industry average.
Buying a home is a big accomplishment, and having the correct information can make it all the more exciting. Better Mortgage guides you and makes the process of buying a home simpler. Our support staff is dedicated to helping you at every stage of the buying process, whether it be sorting your finances, coordinating with Better Real Estate to get you matched with a real estate agent, or funding your mortgage. Get started on buying a house today.