Buying A Home: The Home Buying Process in 10 Steps

Buying a home can seem like a daunting process, but it’s really simple when you have all the steps.

If you’re anything like millions of Americans who dream of one day owning a home, then you’ve probably sat down a time or two and thought to yourself, where do I even begin?

Well, let me tell you, right here, right now, this is where you begin! You’re in the right place.

And, If you’re ready to jump into buying a home, but don’t have time to read the full article download this comprehensive step-by-step checklist.

1. Make A Plan For Buying A Home

The first step to buying a home is to sit down and make a plan.

“Is there anyone here who, planning to build a new house, doesn’t first sit down and figure the cost so you’ll know if you can complete it? If you only get the foundation laid and then run out of money, you’re going to look pretty foolish.”

Luke 14:28-30

In order to accomplish any goals, you must first envision it and make a plan.

Visualize Your Ideal Home

I want you to close your eyes. Take a deep breath. Imagine that you are sitting in your dream home. Look around. What do you see?

Are you sitting in your comfy living room, warming by a freshly made fire in your very own fireplace?

Or perhaps you’re cooking your family’s favorite meal in your spacious kitchen, while your children set the table in your dining room.

For me, it was my patio. My favorite thing to do every morning is sit with my fresh, hot, steaming cup of decaf coffee and read my bible out on my patio. I love it because the air is still crisp and slightly chilly, and the world is still silent. It is just me and Jesus.

Even if this isn’t on your dream list, it’s important to know what you desire in a home, what is important, and what will fill your cup when the time comes for you to move in.

Set Realistic Financial Goals

The next step in the home buying process is to set realistic financial goals for buying a home.

To set a realistic goal for buying a home, use the SMART goal-setting method.

Goals are more likely to be obtained using the SMART method because it follows a clear roadmap. When setting your financial goal, you want to make sure it is:

• S – Specific
• M – Measurable
• A – Attainable
• R – Realistic
• T – Timebound

After setting your SMART financial goal, you then can put it into practice.

Check the market near you and consider what your dream home is going for in today’s market and then see if that will work within your financial goals and budget.

2. Boosting Your Credit Power

Check & Improve Your Credit Score

Knowing where your credit score stands is so important when buying a home.

Your credit report and score affect multiple aspects of the home buying process including: your home buying power, interest rates, availability of homebuyers assistance programs, and more!

Also, keep in mind, most lenders require a minimum credit score in order to fund your loan. But, the higher your credit score, the more options open up to you. For example, you may be able to qualify for an FHA loan with a 620 FICO credit score, but with a 660 FICO credit score you can also qualify for a home buyers assistance program that will cover 75% of your down payment.

Boosting Your Credit Power

How do you improve your credit score you ask? Great question!

1. Know where you stand – Download your credit report from one of the three credit reporting agencies (TransUnion, Experian, or Equifax), or get it free from Free Annual Credit Report.*
2. Review your credit report – Validate what is accurate and what is not. Dispute any inaccurate or questionable information with each of the credit reporting agencies and follow-up to ensure it is removed.
3. Don’t apply for any NEW credit – In the 6 months leading up to buying your house, applying for new credit can negatively impact your credit score and may result in a denial.
4. Make your payments on time – According to Experian, payment history accounts for about 35% of your FICO Score. Not to mention, any late payments within the last 2 years will require a letter of explanation to the underwriters.
5. Don’t default on any bills – Make sure your financial house is in order. Stay up to date on all bills and avoid having any accounts go to collections.
6. Don’t close any longstanding credit cards or accounts – Lenders take into account the length of your credit accounts, and the longer you have positive accounts open, the better!

*Side note: you have legal right to obtain one free copy of your full credit report each year. Get it here at Free Annual Credit Report.

Manage Debts & Credit Utilization

After completing the steps above, ensure that any existing debts or credits are in good standing.

This includes any credit cards, loans, or lines of credit you have open. Make all payments on time.

Keep your credit card utilization low, between 5-30%. This is KEY to raising your credit score. By making this one little change, I was able to boost my credit score by over 150 points in 3 months.

Now, I know this is very specific, but trust me. Lenders want to see that you are using the credit that’s available to you, but they want to also want to see that it is used wisely and responsibly. And this seems to be the sweet spot. Although, closer to 5-10% is even better!

Establish a Strong Credit History

Lenders love to see that you have a strong credit history. The longer you have had an active credit account in good standing, the better! Unfortunately, there isn’t a specific length of time that you need to have these accounts open, but they like to see longevity, especially without blemishes or defaults.

3. Start or Increase Saving

The next step in process of homebuying, is to have an active and effective savings strategy. This is imperative to ensuring you reach your SMART goal for buying a home.

So, what are some useful saving stratgies you can employ?

Calculate Your Budget & Savings

Knowing your budget and how much you can afford to save is essential. If you don’t currently have a written budget, I encourage you to sit down with your spouse (if you have one), get a pen and paper (nothing fancy needed here) and write out all of your income, expenses, bills, and subscriptions.

I’m talking about everything that is taking money out of your pocket and put it on paper. Then consider how much money you have left over to save for your dream home.

Create a Dedicated Savings Plan

With your budget in hand, determine how much you can save each month, how you are going to do it, and how long it will take you.

Be realistic (remember our SMART goals).

Here’s an example: I am going to save $1,000 each month by setting up an automatic transfer from my checking account into my savings account on the 3rd of every month. By doing this I will be able to save $6,000 towards my down payment in 6 months.

This goal is specific, measurable, attainable, realistic, and time bound. By creating a dedicated savings plan, you can monitor your goals and adjust accordingly to ensure you are staying on track.

Trim Expenses & Automate Savings

Now, what if you come to the end of your budget and realize you don’t have much left over or you find that you are spending a little excessively.

This is where you would want to consider what can be removed from your budget. When reviewing your budget categories, ask yourself Is this a need or a want? If it is a want, cut it out (remember, this is only temporary until you reach your goals), but if it is a need, consider if there is a way to reduce the expense. Perhaps it’s your energy bill, can you reduce your energy costs? Maybe unplug unnecessary items, or turn off the extra lights during the day. Whatever it is, there is a way.

4. Get A Mortgage

I cannot emphasize enough, how important it is for you to have a knowledgeable, honest, encouraging, and trustworthy Mortgage Officer.

As I was beginning the process of buying a home in 2019, I sat down with a particular loan officer in my town and my goodness…. I left there feeling defeated and hopeless. She literally laughed at me in her office when I told her what my ideal price point was. The discouragement was real. So, I gave up for about a year.

And then in 2020 I decided to try again with another lender and by golly, she was the key to my success!! She looked at me and said “You’ve got some work to do, but I believe we can get you into a home within 90 days.” My jaw hit the floor. But…I received my keys on the 89th day after our first meeting and now she’s the only person I refer anyone to.

Shop Around for Mortgage Lenders

If my experience is any lesson to you, shop around. Don’t accept the first person that you meet with, consider all of your options. Talk through your situation with each lender that you meet with and see how their advice (or maybe lack thereof) resonates with you. And overall, trust your gut.

Get Pre-Approved

Once you’ve selected a lender, get pre-approved! This is the easy part 😉

A good loan officer will walk you through the steps you need to follow to get pre-approved. But you’ll want to make sure you have copies of the following items on hand:

• 3 months of bank & credit card statements
• 2 years’ worth of paystubs
• Any explanation letters for late payments or accounts in collections

There may be additional documentation that your lender will need, but just be available and responsive to make sure you don’t have any delay in getting your pre-approval.

Understand Different Loan Options

Understanding your different home loan options is extremely important, especially because it can affect your loan terms, occupancy requirements, and payment options.

For instance, if you are getting a USDA loan in a rural area, you may not be required to put any money down (or possibly very little). Whereas an FHA loan requires you to put down a minimum of 3% (with PMI) or 20% (without PMI). This can easily affect your ability to purchase a home, so do your research and find out what is available to you in your area and talk with your loan officer about what’s best for you.

5. Establish A Strong Team

Buying a home is not a one-person process, it requires the help of many talented professionals including a real estate agent, home inspector, mortgage broker, attorney, and sometimes even a financial planner or advisor.

Engage a Reliable Real Estate Agent

Having a real estate agent is not a requirement for purchasing a home, but it helps A LOT! Unless you are purchasing through a private listing, most homes on the market have a representing agent who is willing to show you a potential listing. However, having a real estate agent that works with YOU specifically as the buyer can make negotiating with the seller easier, communicating with your loan officer, understanding inspection requirements, etc.

But, as with the loan officer, you must do your due diligence to ensure the person you employ is reputable, reliable, and trustworthy. Make sure that they have satisfied clients. Check them out online, ask around, and find out how they work.

Connect with a Trustworthy Home Inspector

If you have found yourself a reliable and trustworthy loan officer and realtor, they should have a network of people, including a trustworthy home inspector. They will know the ins and outs of their work ethic, if they cut corners, and how quickly they will get any inspections and inspection reports completed.

Most importantly, you want to ensure that the home inspector is independent and has no conflicts of interests with local contractors who may be looking to swindle you out of repair costs (definitely not speaking from experience here 🙄).

Seek Guidance from an Attorney

As with any major life decision or life changing purchase, it is helpful to seek the guidance from a professional to ensure all legal documents you sign are valid and are in your best interest.

6. Make Your Wish & Priority List

Now to the fun part!

Make a List of Must-Haves & Nice-to-Haves

Remember when we were talking about visualizing your dream home? Well, now you get to prioritize what is important.

Consider what is a must-have and a nice-to-have.

An example of this would be: It’s nice to have a home with a fireplace, but I must have a large yard for my kids and animals to play in.

Get it?

So consider, what you must-have in your home (non-negotiable, I’m not buying this house, items) and what you can live without.

Consider Location, Size, Amenities, & Features

Location, location, location! And the other stuff of course!

When choosing your future home, make sure you know what you need to be close to. Are you religious and you need a place to worship but don’t want to have to drive 45 minutes each weekend to attend church?

Perhaps there is a nice neighborhood within your price range, in close proximity to the church of your denomination.

Do you have kids? Consider the school systems that you are buying into. Are their values in alignment with yours? Do they have metal detectors and public searches before you or your children have to enter the school? Should they?!

And what about community resources. I personally love that we have a community pool just 10 minutes away from my home where my kids and I can enjoy a relaxing day in the cool water when its a blistering 90 degrees outside.

7. Research The Market

When considering a buying a home, it is important to know what the housing market is like in your area or desired area.

Dive Into Online Listings & Attend Open Houses

Don’t be shy. Find potential homes and go to open houses without expectations. You may find the house of your dreams at one of these, but you are also conducting research to see how your desires and needs fair in these homes. It could help you to narrow down your ideas and priorities and clarify what is important to you.

Explore Neighborhoods & Gather Information

I cannot stress how important it is to know the neighborhood you are moving into. You could buy a home in a seemingly beautiful neighborhood but not realize that just 3 blocks away there is a large racetrack that hosts car races ever weekend from May – October (again, not speaking from experience 😅), meaning every summer night is polluted with the sounds of squealing tires and overpowering exhausts).

8. Make Budget-Friendly Decisions

Determine Affordability

Once you have spoken to a lending officer, real estate agent, and researched the housing market of your choice, you’ll be able to determine what affordability looks like for you. As a general rule, it is recommended that you do not spend more than 35% of your take home pay on your mortgage. This can put you in a financial bind that can make you “house poor” and can turn what should have been a blessing into a curse.

So, with that budget that we talked about earlier, consider how much you can comfortably afford and reverse engineer it with your loan officer (or an online mortgage calculator) to find a price range that is affordable for you.

Factor in Other Costs

Now, buying a home is not just the closing costs and mortgage. There can be many other expenses including inspection reports, home warranty costs, moving trucks/movers, new furniture, etc.

These are not all inclusive but are also not all applicable, they are simply to give you an idea of additional expenses that may incur during the homebuying process.

Consider Potential Renovations

Unless you’re buying a fixer-upper with the intention of flipping your home or you’re a DIYer, I don’t think you want a home with too many required renovations. So when you are considering a home, keep in your mind any expenses that may be required to make your home “move-in ready”.

9. Make An Offer

Knowing how to make the right offer when looking at buying a home is crucial. If you overbid, you’re selling yourself short, while underbidding can cause you to lose your dream house.

Understand the Art of Negotiation

We’re not talking about “Let’s Make a Deal” here, we’re talking about negotiating your offer (or the seller’s so that you both get what you want out of the sale). If you have a good real estate agent on your side, they will have great negotiating power and will be able to make recommendations to you.

But it is still important for you to understand what you want in a home and how to negotiate for it. Consider what the seller may be willing to relax a little bit on or how you can make the deal work for both of you.

Make Competitive & Well-Informed Offers

When I found my home and decided to submit an offer, I spoke with my real estate agent and loan officer. My real estate agent informed me that there had been other offers on the house that had been turned down because the buyers were underbidding and not willing to meet the asking price.

For me, I knew that my buying power was a little higher and I could afford to meet the asking price, however, I also knew that would mean I needed a little more for my down payment. So what I did instead was offered OVER the asking price, but asked for the sellers to cover part of my closing costs, thereby reducing my down payment.

In the end it was a win-win because they ended up getting more than they had asked for and I had less come out of my pocket initially.

While the term buyers/sellers’ market exists, I think what makes your offer competitive and more likely to be selected is for it to work for both you, as the buyer, and the seller.

Work Closely With your Real Estate Agent & Lending Officer

Once you have an accepted offer, you’re in the home stretch! But this is the most crucial part of the home buying process…. underwriting!

My advice to you is to stay in communication with both your loan officer and real estate agent. Provide any additional documentation or information that they ask for and BE RESPONSIVE! Any significant delay in communication while you are in underwriting can result in your loan being denied…and trust me…. you don’t want that!

But overall, as you are going through this process, remember to trust God. If He brought you here it is for a reason and He has a plan for your life!

10. Don’t Skip Your Inspections

Double Check Inspections

In the homestretch of buying a home there are going to be many moving parts. So, stay awake!

Be aware of any inspection reports, appraisals, or other requirements that may affect your dream home. Read any of these reports that come back from inspectors and appraisers to ensure you understand what you are walking into, because once you buy a home you cannot return it.

Double check that there are no serious health hazards/concerns, major electrical or plumbing issues, or anything that is going to become a bigger problem later on.

Sign Your Paperwork

Once underwriting is complete, double check the terms of your loan, loan payments, warranties, insurance requirements, or anything else your loan officer or real estate agent is having you sign.

If you do not understand what you are signing up for, ask for clarification or don’t sign until you understand.

11. Celebrate!!

Ok, I fibbed! There’s an 11th step – but it’s an easy one!

Get your keys & Celebrate!! Woo-hoo!! You did it!

Now it’s time to collect your keys and celebrate!

I know this process can seem rather overwhelming and daunting, but I promise you, once you collect the keys to your dream home it will have all been worth it.

You can do this. Just remember to follow the steps, stay the course, and above all else trust in God and His timing for your life. He will always make a way for you!

Blessings to you & your new home!

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