Buying a house is an exciting adventure but it can sometimes feel a little overwhelming too. Especially when you are buying your first house, there can be a lot of things to learn and a lot of decisions to make.
That’s why we provide this step-by-step guide to how to buy a house. You’ll find the important steps you’ll want to understand plus links to many helpful articles that will explain these steps in more detail.
Step 1. Decide you are ready to buy a house
People often buy homes when they feel settled in their lives and are ready to commit to a community. You need good credit and finances to get your mortgage application approved. You usually need money for a down payment and closing costs. And you want to make sure you can afford the monthly payments, maintenance, and other expenses that come with owning a home. Learn more about how you can save money for a home.
Step 2. Decide buying a house makes financial sense
It’s not a bad idea to check if buying a home makes more financial sense for you than renting a home. Both choices have upsides and downsides you’ll want to consider. To learn more, see our article and calculator on renting vs buying.
Step 3. Estimate how much you can afford
Before you begin looking for a home, it’s a good idea to estimate home prices you can afford so you can focus on houses you can realistically expect to buy. How much you can afford is affected by many things. Current mortgage interest rates have a big impact. When interest rates go up, more of your monthly payment goes toward interest which means you will likely have to shop for less expensive homes. When interest rates go down, you can often afford more expensive homes.
When you are looking at interest rates, look at the annual percentage rate (or "APR") too. APR tells you more about the total cost of a home loan. Learn about mortgage rates vs APR.
How much money you have for a down payment impacts the price of houses you can afford. The cost of property taxes and homeowners’ insurance impacts affordability, because you typically pay for these as part of your monthly mortgage bills. Finally, the cost of mortgage insurance when your loan requires it also affects how much home you can afford.
To get an estimate, check out our home affordability calculator. You can also consider getting preapproved for a mortgage with us to understand how much home you might qualify to buy.
Step 4. Get pre-approved for a mortgage
Getting prequalified or preapproved for a mortgage can both help you understand the prices of homes you can afford. When you get prequalified, lenders like Freedom Mortgage will give you an estimate based on financial information you provide. When you get preapproved, we’ll ask you to submit financial documents we can use to verify your financial information.
Both these options can help make your bid on a home more attractive to the seller. Learn more about getting prequalified vs preapproved for a mortgage. Keep in mind you will still need to apply for a mortgage even if you are pre-approved.
Step 5. Choose a loan
We think it’s a good idea to review your mortgage options as you begin shopping for a home. That’s because you may have several loan choices and it can take time to understand which loan is right for you.
At Freedom Mortgage, we can help you buy a home with a conventional, FHA, VA, or USDA loan. FHA and conventional loans are available to all homebuyers who qualify. FHA loans can have lower credit score and down payment requirements compared to conventional loans but can have higher mortgage insurance costs. Conventional loans often have higher credit score and down payment requirements but give you the option to avoid paying for mortgage insurance when you make a down payment of at least 20%. Learn more about conventional loans vs FHA loans.
VA loans are only available to veterans, active duty military personnel, and some surviving spouses. If you qualify, VA loans are often an excellent choice for buying a home. USDA loans can make buying a home more affordable. However, the home you want to buy must be located in an eligible rural or suburban community to qualify for a USDA loan.
Step 6. Shop for homes
Now you are ready to begin looking for homes! Think about what is important to you in a home. The size of the house and number of rooms, its location, its distance from your workplace, and the quality of the local schools are factors homebuyers often consider. Consider finding a real estate professional to work for you as a buyer’s agent. Buyers agents represent your interest in the purchase of a home and can provide useful advice and reassurance. You can also think about buying a condo or townhouse.
Step 7. Make an offer to the seller
Once you find a house you want to buy, decide how much you would like to pay for the home and submit a bid to the seller. You typically need to include "earnest money" with your bid (this is also called a "good faith deposit") to show you are serious about buying the house. Learn more about how to make an offer on a house .
If the seller does not accept your bid, you get your earnest money back. If the seller accepts your bid, and the sale of the house closes, your earnest money is usually applied to your down payment or closing costs.
Step 8. Apply for a mortgage
When your bid on a home is accepted, the next step is to get formally approved for a mortgage to buy that house. You’ll need to complete a mortgage application and provide credit, income, and financial documents to your lender. Learn more about how to apply for a mortgage.
Step 9. Understand mortgage underwriting
Once you have completed your application, your lender will review your application and documents (this is often called “mortgage underwriting”) and hopefully approve your application. You will typically have to read and sign a set of documents called “Initial Disclosures” that give your lender permission to begin the underwriting process. Learn more what to expect after your mortgage application.
Step 10. Get a home appraisal
Most lenders will require you to get an appraisal of the home you want to buy when you apply for a mortgage. An appraisal estimates the fair market value of the house and may be higher or lower than the price you and the seller agreed on.
This is important to understand because when the appraised value of a house you want to buy is lower than the sale price, it can affect your ability to get your mortgage application approved. Learn more about home appraisals.
Step 11. Understand title searches
Most lenders will require a property title search before they approve your mortgage application. A title search confirms the seller is the legal owner of the home and looks for liens or claims against the property. Learn more about property title searches.
Step 12. Get a home inspection
Home inspections are not always required by your lender, but they are a good idea when you are buying a house. Many homebuyers also make passing a home inspection a condition of their offer.
A home inspector will look for problems that you’ll want to address before you buy the home such as a leaking roof, plumbing or electrical problems, heating and cooling system repairs, termite damage, structural issues, and more. Depending on the results, you may want to ask the seller to make repairs or reduce the sale price of the home. Learn more about home inspections.
Step 13. Shop for homeowners’ insurance
Lenders will want you to have purchased homeowners’ insurance before you close on the home. Shop for policies to help you understand the kinds of coverage you need and how much you might pay. Learn more about homeowners insurance.
Step 14. Get your mortgage application approved
Your lender will approve your mortgage application if you meet their credit, income, and financial requirements. When you are approved for a mortgage, your lender will send you a set of documents called “Closing Disclosures” for you to read and sign. You need to sign these documents before you can close on your mortgage.
Closing Disclosures include your final loan amount and interest rate, how much you will need to pay in closing costs, and an estimate of your monthly mortgage payment. Your monthly mortgage bill usually includes payments for principal, interest, property taxes, and homeowner’s insurance. Your bill may also include payments for mortgage insurance if this is required by your loan.
Step 15. Close on your mortgage
When your loan is approved and all the details of the sale have been finalized, you are ready to close on your mortgage. (Closing can also be called “settlement.”) Right before you attend closing, conduct a final walk-through of the house to confirm that any repairs have been made and the house is in the same condition it was when you submitted your offer.
You often have to attend closing in person to sign the deed, your final loan documents and other paperwork. To help make sure your closing goes smoothly, check out our practical tips for closing on a mortgage.
Step 16. Pay closing costs
Paying closing costs is frequently a part of closing. These costs can include lender fees, discount points, mortgage insurance, property insurance, and government fees. Sometimes you can add closing costs to your mortgage amount. For example, you might be able to get a $260,000 mortgage in which $250,000 goes to buying the house and $10,000 goes to paying your closing costs. Other times, you may be required to pay the costs in cash at closing. Check out our closing costs calculator to estimate how much you might pay.
Step 17. Get your keys and move in
Once you close, you are the owner of your new home. Congratulations! You are ready to move into your house and begin the next step of your life.
Step 18. Start paying your monthly mortgage bills
Your new house comes with a new monthly mortgage payment. Note that you will make your monthly payments to your mortgage servicing company, which may or may not be the same company that gave you your loan. Mortgage servicing companies handle tasks like processing your payments, sending your monthly statements, managing your escrow account, and providing customer service. Your lender will make sure you know how and when you need to pay your monthly bill. At Freedom Mortgage, we typically service the loans we give our customers.
Your monthly mortgage bill will come with a minimum payment – that is a set amount of money you are required to pay each month. Most mortgages allow you to make extra payments above this minimum if you like. Making extra payments can help you pay down your mortgage faster and save in interest payments over the life of the loan. Learn more about paying off your mortgage early.
When you are a Freedom Mortgage customer, we look for ways you might save money by lowering your interest rate or get cash by tapping your home’s equity. When you sign up for our Eagle Eye program, we’ll send you alerts about these opportunities.
Talk to Freedom Mortgage about how to buy a house
Freedom Mortgage can help you buy homes with conventional, VA, FHA, and USDA loans. Would you like to learn more about your mortgage options? Call 877-220-5533 to speak to a Freedom Mortgage Loan Advisor or visit our Get Started page.