If you want to know how to buy a house, you've come to the right place!
When you start thinking about buying your first house, it’s easy to let your emotions run the show. Before you know it, you’re stalking homes for sale on your home-browsing app, rearranging your schedule so you can do drive-by viewings, and researching creative financing options that would allow you to buy a house with next to nothing down.It’s all too easy to land a house you can’t afford, and that mistake can affect your ability to build wealth in the long run. But understanding the steps of the home-buying process empowers you to make smart decisions about your home purchase.
Buying a house takes time. And no house—not even that perfectly cute bungalow on the corner with the fenced-in backyard—is worth jumping into before you’re ready.
You know what’s more important than the house you buy? How you buy that house.
Use this step-by-step guide to buy a house the smart way.
The decisions you make in the home-buying process can make a difference between a home that's a blessing to your family for years to come and a home that becomes such a financial burden you feel like you can’t breathe.Find expert agents to help you buy your home.Buying a house doesn’t have to be a stressful, draining experience. It can actually be a lot of fun—especially if you’re making smart decisions that focus on the long term.
First, how do you know it’s the right time to buy a house? Before you even think about starting the steps of the home-buying process, there are a few things you should do:
Evaluate your finances. Make sure you have a consistent income and a good chunk of cash for a substantial down payment. (We’ll talk more about this later.) Buying a house before you’re ready can lead to financial disaster.
Consider the housing market. If you want to make a smart investment on your home purchase, you need to buy a house that'll go up in value. Talk to your real estate agent about home values in your area and their potential.
Think about your life stage. It doesn’t make sense to buy a house if you may move next year. The process of buying and selling a house is expensive, so make sure you feel confident you’ll be in that area for the next five to seven years. This is one of the reasons we recommend waiting at least a year after getting married to buy a house.
If you think it’s the right time to step into home ownership, here’s how to get started!
It’s tempting to skip the money question and jump straight into looking at homes in your area. After all, home shopping is way more fun than thinking through your finances! But a weak financial foundation is a recipe for regret when it comes to your home purchase
Don’t shortchange your future by having a short-term perspective. You'll build years of memories in your home. You’ll share countless meals in the kitchen and spend hours enjoying warm summer days in the backyard. Do you want those moments overshadowed by financial stress?
Buying a home is probably the biggest purchase you’ll ever make. Are you sure you’re ready?
Answering these two questions will help you know!
Before you begin the home-buying process, we recommend paying off debt and saving up three to six months of expenses in an emergency fund. Being financially ready to buy a house is important. Why?
When you no longer have a landlord, the responsibility of paying for repairs falls on you. So what happens if your water heater bursts after just three months in your new home?
When you don’t have room in your budget and no savings to fall back on, you may be eating Ramen noodles for the rest of the month to get that fixed. But if you have a full emergency fund and no debt taking up real estate in your monthly budget, an unexpected repair won't rock your whole life
Just like any goal, buying a home the smart way takes planning and preparation. The most time-consuming task is saving cash for the down payment, closing costs and other moving expenses.
Down payment: We recommend putting down at least 10% on your new home, but 20% is even better because you avoid private mortgage insurance (PMI). That's an extra cost added to your monthly mortgage payment, and it doesn’t go toward paying off your mortgage balance.
Closing costs and prepaids: Closing costs are the fees charged by title companies and lenders involved in your real estate transaction. Prepaids cover any prorated property taxes and insurance items.
Moving and other expenses: Moving expenses can vary from hundreds to thousands of dollars depending on how much you’re moving and how far away your new home is from your current place. To help with budgeting, you can call moving companies in your area for quotes ahead of time. If you plan to make updates to your home—like repainting, installing blinds, or buying new furniture—you’ll need cash for that too!
Ready to get your savings rolling? You’ve got this! Saving for a down payment isn’t rocket science. Set a plan and focus on your milestones and you’ll have that down payment before you know it. You’ve got what it takes!
The best way to buy a home is with cash. It may sound crazy, but people like you do it every day! If that’s not feasible for you, you’ll need a home mortgage loan.
How do you get preapproved?
In a quick conversation with you about your income, assets and down payment, a lender can prequalify you to buy a house. Getting preapproved takes a little more work. A lender will need to verify your financial information and submit your loan for preliminary underwriting. But it pays off when you begin your home search because a preapproval letter shows that you’re a serious buyer.
How do you know which mortgage option is right for you?
Bad financing turns your biggest asset into a liability. That’s why getting the right mortgage is so important! Setting your boundaries on the front end makes it easier to find a home you love that’s in your budget.
Here are the guidelines we recommend:
A fixed-rate conventional loan: With this option, your interest rate is secure for the life of the loan, leaving you protected from rising rates. Any other mortgage option is a terrible idea.
A 15-year term: Your mortgage payment will be higher with a 15-year term, but you’ll knock out your mortgage in half the time of a 30-year term and save thousands in interest.
A monthly payment no more than 25% of your monthly take-home pay: This leaves plenty of room in your budget to achieve other goals like saving for retirement or putting money aside for your kid’s college fund.
Once you know how much you can afford to spend on your new home, stick to it. And if you’re buying a home with your spouse, make sure you’re both on the same page about your budget.
If you need more help crunching the numbers, check out our mortgage calculator. You can play around with the numbers to see how different home prices affect your overall mortgage payment.
Though your search for homes may start online, it shouldn’t end there. You can do a lot of research on your own, but you need the help of an expert when it comes to actually finding and securing your perfect home.
You can do a lot of research on your own, but you need the help of an expert when it comes to actually finding and securing your perfect home.
A buyer’s agent can help you navigate through the home-buying process. In some cases, they may even be able to help you find a house before it hits the market, giving you a competitive edge. And when it comes to making an offer, your agent will negotiate on your behalf so you don’t pay a penny more than you have to.
How does a buyer’s agent get paid?
A real estate agent will advocate for your best interest and is a crucial part of your home-buying team. But they don’t work for free. So how much should you be prepared to pay? How does nothing sound?That’s right! In most cases, the seller pays your real estate agent’s fees, so using a buyer’s agent is free to you. Why would you not want to have a true pro in your corner as you make your biggest investment?
What should you look for in a buyer’s agent?
You may know a lot of real estate agents in your area. But keep in mind that not all agents bring the same knowledge and experience to the table. Don’t work with an amateur just because they know your cousin’s sister-in-law’s best friend from 10 years ago.
If you’re trying to spend time with a friend or family member, catch up over coffee. Don’t work with them to make your biggest purchase. You want an expert who can show you how to buy a home!
When you’re interviewing a real estate agent, don’t settle. A true rock star will have:
Specific experience assisting home buyers like you
Full-time real estate experience for at least two years
Great communication skills
A super-serving attitude that makes you feel like you’re their only client
An impressively long list of sold homes every year
Exceptional experience in your local market
A true pro won’t shy away from tough questions. They’ll be a mover and a shaker, ready to fight for your best interests as you’re searching for the right house and negotiating the terms of the contract. As a home buyer, working with a rock star agent is one of the biggest advantages you can give yourself!
Learn More About How to Buy a House
This is a lot of information. And guess what? There’s even more to learn! If you’re feeling overwhelmed, don’t worry. You don’t have to do all this on your own. With our iRealty Agents you can be confident you're working with a real estate agent who's an expert in your local market.
Don’t make your biggest investment without the guidance of a professional. Buying a house can be stressful, but a high-octane iRealty real estate agent will walk you through the home-buying process to help you make a smart investment that fits your needs and your budget.