5 Min Read | September 15, 2022

9 Steps to Consider When Buying a House

Got your eye on your dream home? Following these steps may help you successfully navigate the process of buying that house.

This article contains general information and is not intended to provide information that is specific to American Express products and services. Similar products and services offered by different companies will have different features and you should always read about product details before acquiring any financial product.

At-A-Glance

Understanding the steps involved in buying a house can help you navigate a sometimes lengthy and complex process.

Steps to prepare include researching areas to live and how much you can afford, checking your credit score, and getting preapproved for a mortgage.

A real estate agent may help with some of the most important and potentially stressful steps, including negotiating with sellers.


For many people, buying a house is one of life’s key milestones – and biggest financial decisions. But the process of buying a house can seem lengthy and complex, perhaps even overwhelming if it’s your first time. Understanding how to buy a house can help you plan for success and better prepare for navigating one of life’s most significant – and expensive – purchases.

 
Here are nine steps to consider when buying a house, from starting the hunt to move-in day:

1. Researching Where to Buy and How Much to Spend 

Start your house-buying quest with some basic research to help get an idea of where to buy and what you can afford:

  • Where should I buy? Browsing real estate listings and visiting potential neighborhoods can help you get a feel for what it would be like to live there and how much it would cost.
  • How much can I afford? There are several ways to research this, but following these general guidelines can help you start off on the right track. For example, one commonly cited rule of thumb is to spend no more than about 30% of your gross income on housing costs, including mortgage payments.1 Online calculators can estimate how much you may need to earn to live in specific major metro areas, or the maximum mortgage payment you may be able to afford.
  • Down payment & other costs: Making a big down payment – 20% or more – can appeal to mortgage lenders and reduce your monthly mortgage payments, but many first-time buyers are able to make much smaller down payments of 10%, 5% or even less. Most home purchases also involve paying various “closing costs” that may total 2% to 6% of the purchase price.

2. Checking Your Credit Score 

Your credit score and credit history generally affect your ability to get a mortgage, your choice of lenders, and the interest rate you’ll get – which can make a big difference to your monthly mortgage payment. It makes sense to check your credit score and credit report early in your homebuying process; besides providing useful information, this gives you more time to address any problems that you uncover. 

3. Getting Preapproved

Getting preapproved by a mortgage lender can help smooth some of the later steps in the homebuying process. Lenders examine your credit information and other financial information, then use that information to decide whether to lend to you and, if so, how much. If they preapprove you, they’ll generally provide a letter that you can show to sellers as evidence that you’ve taken this critical step to buying their house.

 
You may need to provide quite a few documents to get preapproved, such as:

  • Government-issued ID.
  • Pay stubs.
  • Tax returns.
  • Bank statements.
  • Proof of other assets and any other income.

4. Finding a Real Estate Agent 

Selecting a real estate agent can be important because many people use their real estate agent not just to help find a house, but also to provide advice and support throughout the homebuying process. For example, the real estate agent may help you figure out what you can realistically expect to get given your budget, write offers and negotiate with sellers, and find experts who will inspect the house before the sale. An agent who specializes in your targeted neighborhoods may be able to suggest where to hunt for the best deals.

 
When you’re buying a house, you generally don’t have to pay for the real estate agent’s services, because the agent’s commission is paid by the seller.

5. Shopping to Buy Your House

Now the serious house shopping starts. By now, you and your agent should have a good idea of what you want, what you can afford, and where to look. You can find homes for sale by searching online listings yourself, or your agent may recommend homes to view. It’s a good idea to take the time for an up-close-and-personal walkthrough.

 
If there are many houses for sale, the choices can get confusing. Focusing on your must-have features, as opposed to nice-to-haves, can be a good way to help narrow options down.

6. Making an Offer

Once you’ve found your ideal home, it’s time to make an offer. Again, your agent may be able to help, because they should have a good idea of how competitive the market is and how much to offer, as well as any other conditions you should ask for, such as a home inspection. This can be one of the more stressful steps in the homebuying process, especially if you are competing with offers from other buyers.

 
After you’ve made your offer, you generally have to wait for the seller’s response. The seller may accept your offer, say no, or make a counteroffer for you to consider. You may go through an offer-counteroffer cycle more than once before you reach an agreement or decide to walk away. Once your offer is accepted, you may have to pay a deposit, known as “earnest money,” which is often around 1% to 3% of the home’s purchase price – but it can be higher, depending on the market and location.

7. Getting a Home Inspection

Many home sales are conditional on the results of a home inspection. Buyers generally schedule the inspection as soon as possible after agreeing to terms with the seller. A home inspector examines the house to determine if there are problems that could need costly repairs and might make you think twice about buying it.

 
For example, the inspector might look for termite damage, hazards such as asbestos, a leaky roof, or a blocked sewer. Depending on what they find, you may be able to negotiate with the seller for discounts or repairs, or you may even choose to walk away.

8. Completing the Final Steps

If you’ve successfully passed the home inspection stage, congratulations! You’re entering the homestretch. A few important steps remain, including:

  • Home appraisal: The mortgage lender usually conducts an appraisal to reduce their risk by making sure the house is worth what you’re paying.
  • Getting home insurance and utilities: It’s a good idea to get these organized now, even if you don’t need them until move-in.
  • Closing: This is the big day. You’ll generally sign a pile of documents to complete the sale. At the same time, the lender finalizes the loan, you pay the down payment and closing costs, and the seller gets paid. Closing details can vary significantly from state to state.

9. Moving In 

You’re crossing the finish line! You’re now a homeowner. You get the keys and move in. For more move-in insights, read our “Moving out of State Checklist: 7 Tips for Cutting Costs.”


The Takeaway

For many people, buying a house is an important milestone – and one of life’s biggest financial decisions. Understanding the steps involved can help you successfully navigate the process of acquiring your dream home.


Mike Faden

Mike Faden has covered business and technology issues for more than 30 years as a writer, consultant, and analyst for media brands, market-research firms, startups, and established corporations.

 

All Credit Intel content is written by freelance authors and commissioned and paid for by American Express. 

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