Step by Step Home Buying Process: From Start to Finish

a sign that states "for sale", indicating the starting steps of the home buying process for first-time homebuyers.

Purchasing a home is a big step for any consumer, but one we strongly recommend. Homeownership is the single biggest way Americans build wealth and prepare for a stable retirement. And unlike other investments, you can live in your house, so it’s not just a way to store and build wealth over time.

The process of buying a house can be long and involved, but thankfully no one has to go through it alone. Every homebuyer has access to professional help, from housing counselors to real estate agents, mortgage brokers, inspectors, etc. Anyone who is planning to buy a home should take advantage of all of the assistance available to ensure their success.

The Homebuying Process

1. Pre-Purchase Education

Too many people skip this crucial first step. There is first-time homebuyer education available to help new home buyers understand the entire journey that lies before them. The earlier one takes this kind of course, the better.

A lot of people get around to taking the class too late and for the wrong reasons. That’s because there are avenues of assistance open to people who complete first-time home buyer education, like down payment assistance or closing cost assistance. To get the assistance, one must show a certificate of completion indicating they’ve taken the pre-purchase education course. Where too many people go wrong is taking the class at the last possible minute, just to get a certificate. Taking the course early will save any homebuyer money and stress as they understand how to avoid mistakes and navigate the homebuying process efficiently.

2. Check Your Credit

Before you let a lender check your credit, look at your own reports. You can do this for free using, and doing so before your mortgage application is essential.

If you see any mistakes, whether they be errors or outdated information, you can get these items corrected before your lender requests your credit report and score. You might also see items on your report that are legitimate, but you have forgotten about it. The more you know in advance, the better off you’ll be when you fill out your mortgage application.

The goal is to make sure your credit reports are accurate, up to date, and reflect positively on you. We offer a free Consumer Guide to Good Credit to help understand the process of reading and updating your credit reports, and there are credit report review services if you’re struggling to interpret what you find in your credit reports.

3. Get Pre-Qualified For a Mortgage

This is another area where many homebuyers make a mistake. If you start shopping for a home too soon, you’re likely to waste time looking at properties you might not be able to afford. In the worst-case scenario, you fall in love with a particular property and are eager to make an offer, only to find you can’t be approved for a mortgage in that amount.

Pre-qualifying means the lender gives a rough idea of whether you’ll be approved and approximately how much you can afford to borrow. This pre-qualification isn’t a guarantee that you’ll be approved, and it doesn’t mean you have to borrow from that particular lender. It’s just a way of getting a lender to tell you realistically what your price range should be.

Once you have this pre-qualification, then you can start looking for a home without being in danger of overspending; you can avoid looking at homes that might be outside your true price range.

We always caution people not to borrow the maximum amount they qualify for. It’s wiser to stay well within your means, and only borrow what you can comfortably afford.

4. Work With a Real Estate Agent

A professional real estate agent will look out for you, making sure you find the best home for your situation, and that you are protected in the negotiating process. A good local agent will also know more about the areas you’re shopping in, so you can avoid areas with poor-performing schools and public services, crime problems, etc.

You will also need other professional help along the way, like home inspectors, insurance companies, contractors, etc. A real estate agent will be able to make informed recommendations that you can trust more than an online review. It’s very rare for a homebuyer to navigate the homebuying process without a real estate agent. And the agent is paid out of the proceeds of the sale, so you don’t have to worry about their fees.

5. Shop For a Mortgage

At this point, it’s okay to start shopping around for a mortgage. There are different types of home loans available, so get help if you need it to figure out what your best option is. Pre-purchase counseling is a good option if you want to be sure you’re making the best possible decisions.

This is the step in the process where you officially fill out a mortgage application, so hopefully, you have already reviewed your credit and made any necessary corrections. The lender will give you a pre-approval for a particular amount and interest rate, so you’ll be able to hone in on the right property to buy. In a hot market, it may be necessary to make an offer fast and sellers prefer buyers who are pre-approved. Pre-approval tells them that when it’s time to close, you will have the money.

Also, do some comparison shopping for mortgage products, and compare the costs from one lender to the other.

6. Shop For a Home

This can be a stressful time. In a good market, houses won’t stay available for long, so you might feel pressure to make offers quickly rather than lose a property. Try to strike the right balance; don’t move too quickly and pay more than you have to; don’t go so slowly that every good property is snatched up before you make your offer.

If you’re working with competent professionals, they’ll be able to help you weigh all of the considerations and make a good choice. Bear in mind that first-time homebuyers will move eventually, so the house you buy now probably won’t be the one you’ll spend the rest of your life in. If you’re moving into your 2nd or 3rd home, then you probably have formed some strong ideas about the kind of place you’d like to live in.

7. Get Inspections

After you make a formal offer on a property, your lender and real estate agent will work with you to hire inspectors. You will want to know if there are any concerns about the property before you go forward, and your lender will not want to give you money for the purchase unless they know the property is sound.

Besides the home inspector who checks out the electrical, heating & cooling, and plumbing systems, you’ll want secondary inspectors to check for insects, radon gas, mold, etc. The area you’re buying in will determine which specialists are needed to make sure you don’t have any other problems. An older home might need more inspections that a newer home doesn’t. Don’t skip any recommended inspections!

Ten Important Questions to Ask Your Home Inspector:

For Your Protection: Get a Home Inspection:

Once you have the inspection report, you might want to amend your offer. If there are major repairs needed, you could ask the seller to complete them, or take some money off the sale price for you to do the repairs yourself. Don’t turn this part of the process into a way to negotiate a lower price—the point of the inspections is to make sure the house is safe and in good repair.

8. Set Up Home Insurance and Utility Services

Your mortgage lender will require home insurance. If there is a fire or other disaster, they will want to know that the mortgage will be repaid. You should also make sure the insurance you get is truly enough to cover any potential losses you could suffer. Some things, like flood damage, aren’t covered by traditional homeowners insurance, so you’ll want to get supplemental coverage if you need it.

For utilities, the goal is to have services switched to your name on the same day as the loan closing or the next day. If these things don’t coincide, then the seller will want to shut off utilities altogether, and then you’ll have to arrange to have them turned back on in your name. This is a slow process that could leave your home without heating, cooling, running water, etc. The best way to handle utilities is to time things so that they’re never shut off, but transition smoothly from one owner to another.

9. The Loan and Home Closing

The final paperwork to close on the home and the mortgage loan will involve more professionals, like title companies and potential attorneys. You’ll get a disclosure in advance that tells you what fees will be due at closing.

All of this paperwork and fees are to be disclosed in advance and are a standard part of every mortgage transaction, but don’t let yourself be blindsided. If you started with first-time homebuyer education or pre-purchase coaching, then you’ll be fully prepared for this part of the process.

Don’t spend your last available cash on closing costs and fees. You’ve got one last big step to follow, and you’ll need some funds available to complete the process.

10. Move In

Now that you’ve closed the loan, it’s time to move in. Using professional movers will make things go quicker and come with some protection from damage and the like, but can get expensive. Moving in yourself will save you money, but involves extra time and stress.

It’s important to do some quick repair work while the house is vacant before you move all of the furniture in. Do you need to have your carpet cleaned? Patch drywall and paint?

As you settle in, take the last steps to make the house truly yours: re-key the locks and change the garage door opener codes.

Taking the steps toward homeownership in the right order will make sure you and your family are fully prepared, and that you have professionals on your side to make sure everything goes smoothly. We can’t say enough about the benefits of pre-purchase homeownership counseling.

Article written by
Melinda Opperman
Melinda Opperman is an exceptional educator who lives and breathes the creation and implementation of innovative ways to motivate and educate community members and students about financial literacy. Melinda joined in 2003 and has over two decades of experience in the industry.

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