Buying a house is one of the biggest decisions a person can make. It’s exciting, but also a little scary, especially if it’s your first time. The good news is that you’re not alone. By following a clear path and getting help from experts, you can make the home buying process easier and less stressful.
In this guide, we’ll explain the steps of buying a house—from checking your credit to moving into your new home. Whether you’re just getting started or already working with a real estate agent, this guide will help you stay organized and confident.
Let’s break it all down.
Before you do anything else, it’s smart to take a homebuyer education course. These classes are usually offered by HUD-approved housing counseling agencies. They teach you how the home buying process works, how to compare mortgage loans, and what to expect when working with a real estate agent or mortgage lender.
If you’re a first-time buyer, this course could help you qualify for special first-time homebuyer programs like down payment assistance or reduced interest rates. Some cities and states even require this course before you can access certain payment assistance programs.
A good education course will cover:
You’ll leave the course with more confidence—and sometimes a certificate that proves you’ve taken it.
After taking a course, the next step is checking your credit. Lenders will look at your credit report and credit score to decide whether to give you a loan. They’ll also use your score to determine your interest rate, loan term, and monthly mortgage payment.
You can get a free credit report from all three major credit bureaus at AnnualCreditReport.com. Review it for mistakes, like old accounts that should be closed or payments marked as late that were actually on time. If you see errors, dispute them right away.
Also check your actual credit score. Some programs require a minimum score—for example, FHA loans usually require at least 580, while conventional loans may ask for higher scores.
If your score needs work, focus on:
Your debt-to-income ratio is also important. That’s the percentage of your monthly income that goes toward debt payments. Most lenders want this number to be below 43%, though lower is better.
If you need help, consider meeting with a housing counselor. Credit.org offers credit counseling and help with building a better financial profile before you apply for a loan. We also offer a credit report review service if you need help knowing where to start.
Once your credit is in shape, it’s time to talk to lenders. Start by getting pre-qualified. This is a simple step that tells you how much you might be able to borrow based on basic financial info like your income, assets, and debt.
Pre-qualification doesn’t require paperwork or a hard credit pull, and it only takes a few minutes. The lender will give you a rough estimate of how much home you can afford. This is not a promise to lend—it’s just an estimate to help you start house hunting with a price range in mind.
Even though this is only a first step, take it seriously. Don’t assume the biggest number the lender offers is the best choice. You still need room in your budget for things like:
Use a mortgage calculator to try out different home prices and down payment amounts. Look for a monthly payment you can comfortably afford—not just what a lender says you qualify for.
Many first-time buyers confuse pre-qualification with pre-approval, but they are not the same thing.
Pre-qualification is an informal estimate based on what you tell the lender. Pre-approval is a more serious process. You’ll need to fill out a full mortgage application and provide documents like:
The lender will run your credit report and calculate your actual debt-to-income ratio. Then, if all looks good, they’ll issue a pre-approval letter.
This letter is important because it shows sellers you’re a serious buyer. In a competitive market, offers with a pre-approval letter are more likely to be accepted.
Your pre-approval will also tell you:
Getting pre-approved doesn’t mean you’re locked into that lender. You can still shop around for better rates or terms. Just make sure not to make any big financial changes—like taking out a new credit card or changing jobs—while you’re in the middle of the home loan approval process.
Once you’re pre-approved, it’s time to start shopping for your future home. This part of the home buying process is exciting—but it can also be stressful. It helps to stay focused on your needs and your budget.
Start with your must-have list. Ask yourself:
Think about the local market, too. If it’s a buyer’s market, there may be more homes available and sellers may be willing to negotiate. But in a seller’s market, homes can sell fast and for more than the asking price.
Work closely with your real estate agent during this phase. They can help you stay realistic, set up showings, and avoid common home search mistakes—like falling in love with a home you can’t afford or skipping an important inspection.
A good real estate agent is your guide throughout the entire buying process. They know the neighborhoods, the housing market, and how to write offers that get accepted. Your agent will schedule showings, answer your questions, and communicate with the seller’s agent for you.
Look for an agent who:
Ask for referrals or check online reviews. A “right real estate agent” is someone you trust to give you honest advice—not someone who pushes you to buy too quickly or over your budget.
-min.webp)
Not all mortgages are the same. Your lender or housing counselor will help you understand the loan types available to you. Here are a few of the most common:
These are offered by banks and lenders without government backing. They typically require higher credit scores and down payments, but they may offer lower interest rates for qualified buyers.
Backed by the Federal Housing Administration, these loans allow for smaller down payments (as low as 3.5%) and are more flexible with credit scores. They’re a popular choice for first-time homebuyers.
These are for eligible military service members and veterans. VA loans usually require no down payment and no private mortgage insurance (PMI), making them a powerful option for those who qualify.
For homes in rural areas, USDA loans offer 100% financing to qualified buyers who meet income and location requirements.
These start with a low interest rate that adjusts after a few years. They might make sense if you only plan to stay in the home short-term—but they come with risk if rates go up.
Discuss your options with your lender. The best loan type for you depends on your income, credit, savings, and long-term plans.
The CFPB explains more about fixed vs. adjustable rate mortgages here.
Your down payment is the amount of money you pay upfront when buying a home. This amount is subtracted from the home’s purchase price and the rest is covered by your home loan.
Typical down payments are:
Many buyers believe they need 20% down, but that’s a myth. Today, most first-time homebuyers put down less than 10%.
There are also down payment assistance programs that can help you cover this cost. These programs may be offered by:
You might also receive gift money from a family member. If so, your lender will ask for a signed gift letter that confirms the funds don’t need to be repaid.
Talk to your lender about whether you’ll need to pay private mortgage insurance (PMI). If your down payment is under 20%, you may have to add PMI to your monthly mortgage payment.
In addition to your down payment, there are other costs you’ll need to cover when buying a house. These are often called “closing costs.”
They include:
Closing costs typically range from 2% to 5% of the purchase price. So if you’re buying a $300,000 home, expect to pay $6,000–$15,000 in closing costs.
Your lender will give you a Loan Estimate and later a Closing Disclosure that outlines these fees. Review both carefully. If anything is confusing, ask questions. Your mortgage approval depends on understanding what you’re signing.
In some cases, the seller may agree to cover part of your closing costs—this is called a seller concession. Your real estate agent can help you negotiate for this during your offer.
Your mortgage payment includes more than just the loan amount. Most monthly payments include:
If your lender sets up an escrow account, they will collect your taxes and insurance with your monthly payment and pay them for you when due. This makes it easier to manage big expenses.
Use a home loan calculator to understand how changes in the purchase price, down payment, loan term, or interest rate affect your monthly payment.
Once your offer is accepted, you’ll move into the inspection phase of the home buying process. A home inspection is a detailed look at the home’s structure and systems. Even if the house looks perfect on the surface, hidden problems can cost thousands of dollars later.
Your home inspector will check:
Some homes may need additional inspections, like:
After the inspection, you’ll receive a report listing any problems. This is your chance to request repairs or ask for a price reduction. Your real estate agent will help you negotiate with the seller or their agent.
In rare cases, a major issue may lead you to walk away from the deal. If your contract includes an inspection contingency, you can cancel without penalty.
Don’t skip the inspection—even on new homes. It’s one of the best ways to protect your investment.
See HUD's "10 Important Questions to Ask Your Home Inspector" to learn more.
At the same time you’re doing your inspection, your lender will schedule a home appraisal. The appraisal tells the lender whether the house is worth the price you’ve agreed to pay.
An independent appraiser looks at:
If the appraised value is the same as or higher than the purchase price, you’re good to go. If it’s lower, the lender may reduce your loan amount.
When that happens, you have three options:
Appraisals protect both you and your lender from overpaying in a changing housing market.
As you get closer to the closing date, your lender will give you a final Closing Disclosure. This form outlines the exact amounts you’ll pay at closing. Review it carefully and compare it to your earlier Loan Estimate.
Typical closing costs include:
You’ll need to bring a certified check or arrange a wire transfer to pay the total upfront costs. These will include your down payment and all closing costs, minus any earnest money you’ve already paid.
Some down payment assistance programs also help with closing costs. If you’re receiving gift money from a family member, you’ll need to provide a gift letter to your lender.
Ask your lender about your options. Some buyers negotiate a lender credit to offset closing costs in exchange for a slightly higher interest rate.
Most lenders require that you purchase homeowners insurance before closing. The policy protects you from major risks like fire, storms, and theft. Make sure your coverage is enough to replace your home—not just pay off your loan.
You may also be required to buy private mortgage insurance (PMI) if your down payment is less than 20%. PMI protects the lender, not you—but it allows you to buy a home sooner without saving a full 20%.
If your lender sets up an escrow account, it will collect money from you monthly to cover:
This means your monthly mortgage payment will include these extra amounts. Your lender then pays the bills when they come due.
Escrow accounts make budgeting easier by spreading big expenses throughout the year.
A day or two before your closing date, you’ll do a final walk through of the home. This is your chance to check that:
Bring a checklist and your real estate agent. Test lights, toilets, windows, and appliances. Turn on faucets and check for leaks.
If there’s an issue—like a missing appliance or damage during move-out—report it to your agent immediately. In some cases, closing may be delayed until it’s resolved.
The final walk through gives you peace of mind before you commit to the purchase.
On closing day, everything becomes official. You’ll meet at the escrow office, title company, or attorney’s office (depending on your state). Be sure to bring:
You’ll sign dozens of pages, including:
After signing, the lender sends your funds to the seller and records the transaction with the county. Once that happens, you receive the keys to your new home.
Congratulations—you’re now a homeowner! After closing, it’s time to move into your new home. But before unpacking boxes and hanging pictures, there are a few important tasks to take care of.
Start by changing the locks. You never know how many copies of the old keys are floating around. Reprogram any keypads and reset garage door openers if necessary.
Next, inspect the home once more. Double-check that utilities like electricity, water, and gas are working. If you arranged for utility transfers on your closing date, services should already be in your name. Avoid gaps that could damage your property—especially during cold weather.
Some buyers opt to clean the house before moving in. It’s easier to steam-clean carpets, paint walls, or replace flooring while the space is empty.
As you unpack, keep track of what’s missing. New homeowners often discover they need essentials like:
Budgeting for these “hidden” move-in expenses is wise.
Owning a home comes with new responsibilities. Unlike renting, you’ll now be in charge of everything—from small repairs to major systems.
Set aside money each month in a home maintenance fund. Experts recommend saving 1% to 3% of your home’s value annually for upkeep. So if your home costs $300,000, aim to save $3,000–$9,000 per year.
Common maintenance tasks include:
If you bought a home with a homeowners association (HOA), check their rules and fees. HOA dues may be monthly, quarterly, or annual. They cover things like shared spaces, amenities, and exterior upkeep in some neighborhoods.
A good maintenance schedule helps protect your property value—and prevents small problems from becoming big ones.
Take a closer look at your homeowners insurance policy. Make sure it includes:
If you live in a high-risk area, consider adding extra coverage like flood or earthquake insurance. These are not included in a standard homeowners policy.
If your insurance was paid through your escrow account, you won’t have to worry about bills coming directly to you. But it’s still important to review your policy yearly and adjust your coverage as needed.
You might also receive offers to extend your home warranty. This covers things like appliances and major systems for a limited time. Read the fine print before renewing. Learn more about home warranties from Realtor.com.
Your mortgage payment is due monthly. Most mortgage lenders offer online payments, automatic transfers, and mobile apps to make paying easier.
Check your mortgage term. If you chose a 30-year loan, you’ll make 360 payments unless you refinance or pay off early. A 15-year loan will have higher monthly payments but less total interest.
Be aware of your loan type. If you have an adjustable rate mortgage (ARM), your interest rate may change after a fixed period. Know when your rate adjusts and what your new payment might be.
You’ll receive an annual escrow statement showing how much was collected and paid for taxes and insurance. If your costs go up, your monthly mortgage payment may increase too.
Buying a house is a big step—but keeping your home and finances healthy is just as important.
Here are a few smart habits for new homeowners:
Homeownership builds equity, which is the difference between what your home is worth and what you owe. As you pay down your mortgage and your home’s value rises, your equity grows.
That equity can become a powerful financial tool. You can use it later for home improvements, education, or emergency expenses through refinancing or a home equity loan.
After a few years, you may want to refinance your home loan. This means replacing your current mortgage with a new one—usually to get a lower interest rate, reduce your term, or change loan types.
You might refinance to:
Keep an eye on mortgage rates. If they drop by 1% or more from your current rate, refinancing might save you money—even after closing costs.
The home buying process takes time and effort—but it’s worth it. By following each step carefully, working with trusted professionals, and asking questions when you need to, you can become a confident and successful homeowner.
Here’s a quick recap of the key stages:
Whether you’re just starting or getting ready to move, remember: you don’t have to go it alone. Housing counselors at Credit.org can help with budgeting, credit improvement, pre-purchase education, and more.
