How To Buy a House: 10 Steps for First-Time Homebuyers By Realtor.com

The steps to buying a house might seem complicated—especially if you've never done it before. Between down payments, credit scores, mortgage rates, property taxes, interest rates, and closing the deal, it's easy to feel overwhelmed. There's so much at stake with a first home!

Still, if you familiarize yourself with how to buy a house beforehand, it can help you navigate the real estate market with ease. So let's get started with what to know about buying a house and more first-time homebuyer tips.

How do I buy my first house?

In this step-by-step breakdown, you'll learn what it takes to buy a house for the first time, from beginning to end. Whether it's your first time in the real estate market or you're an experienced homeowner who wants to brush up on your skills, this is everything you need to know about how to buy a house.

Step 1: Explore first-time homebuyer programs

The average American homeowner will end up owning at least three homes throughout their lifetime, but buying your first house is often the hardest. First-time buyers don’t have equity from a previous sale to put toward their next purchase, which can make it tough to come up with a competitive down payment. It's a frustrating situation: Hopeful homebuyers want to buy to build equity, but they don't have equity to buy.

Luckily, there are programs designed to give first-timers an on-ramp to the American dream of owning a home. These initiatives can provide everything from down payment assistance to home loans with more affordable rates and flexible requirements.

Start by researching what your city or state offers. Many municipalities have grants, forgivable loans, or educational resources designed to help first-time buyers. On the national level, consider applying for an FHA loan. These government-backed loans are specifically designed for first-time buyers with lower down payment thresholds and more forgiving credit standards.

Step 2: Start saving your down payment

One of the most important steps to buying a house for the first time? Figure out your finances. Buying a new home (particularly for the first time) requires a mortgage, where a lender fronts you the money and you pay it back over time. However, to get a mortgage, you'll need some sort of down payment.

So how much do you need?

Ideally, a down payment on a mortgage should be 20% of the home's price to avoid added fees, but if you don't have that much of a down payment, don't worry. A mortgage down payment can be as low as 10%, 5%, or even 0% for certain types of mortgages (e.g., VA loans or a USDA loan).

If saving up a down payment is a real challenge, find out everything you can about government programs. A HUD home is a property owned by the U.S. Department of Housing and Urban Development. These properties require lower down payments for eligible participants and often sell at below-market prices.

Step 3: Check your credit score

Did you forget to pay off a couple of credit cards? Unfortunately, it'll affect your credit score.

In addition to having a down payment, a first-time homebuyer will need a decent credit score. This three-digit number is a numerical summary of your credit report, a detailed document outlining how well you've paid off past debts, such as credit cards and college student loans.

A lender will check your score and report to estimate the odds that you will deliver your monthly payment, too.

In turn, the lender will use this info to decide whether or not to loan you money, as well as how much and at what interest rate. If a lender sees some late payments on your credit cards or other blemishes in your credit report, this can lower your odds of getting a loan with a great interest rate, or perhaps even jeopardize your chances of getting any loan at all.

So, it's essential to know your credit score and take steps to bring it up to snuff with those overextended credit cards and high-interest debts. Here's more on how to check your credit score and what number is best for buying a first home.

Step 4: Get pre-approved for a mortgage

Another one of the most important first-time homebuyer steps? Seeking pre-approval from a lender for a home loan. This is where you meet with a loan officer, ideally a few at various mortgage companies.

Each mortgage lender will scrutinize your financial background—such as your debt-to-income ratio and assets—and use this info to determine whether to loan you money, and what size monthly payment you can realistically afford. This will help you target homes in your price range. And that's good because a purchase price that's beyond your financial reach will make you sweat your mortgage payment and put you at risk of defaulting on your loan.

As a buyer, just keep in mind that mortgage pre-approval differs from mortgage pre-qualification. Pre-qualify, and you're undergoing a much simpler process that can give you a ballpark figure of what you can afford to borrow, but with no promise from the lender. Getting pre-approved is more of a pain since you'll have to provide tons of paperwork, but it's worth the trouble since it guarantees you're creditworthy and can truly buy a home.

Before they even meet with a lender, homebuyers can learn what they can afford as a monthly mortgage payment by plugging their info into an online home affordability calculator. This will calculate the maximum amount you can afford as a monthly payment.

Step 5: Find a real estate agent

Want a trusty homebuying guide by your side? Most first-timers will want a great real estate agent—specifically a buyer's agent, who will help them find the right houses, negotiate a great real estate deal, and explain all of the nuances of homebuying along the way.

Here's how to find a real estate agent in your area. Note: There is a difference between a real estate agent and a Realtor®; the latter is a member of the National Association of Realtors® and adheres to a code of ethics.

Step 6: Go shop for a home!

This is the fun part! As a homebuyer, you can peruse thousands of real estate listings on sites such as Realtor.com, then ask your agent to set up appointments to see your favorites in person. These aggregators are some of the best real estate tools for homebuyers because they allow you to set strict search criteria and surface all the available units.

Since the sheer number of homes can become overwhelming, it's best to separate your must-haves from those features you'd like but don't really need. Do you really want a new home, or do you prefer a fixer-upper? Make a list of your wants and needs to get started, and whittle down your options.

Step 7: Make an offer

Have you found your dream home? Then it's time to make an offer to the seller. Be prepared to write a check to the seller—it's called "earnest money," and it's different from the deposit.

Here's more on how to make an offer on a house that a seller can't refuse.

Step 8: Get a home inspection

A home inspection is where you hire a home inspector to check out the house from top to bottom to determine if there are any problems with it that might make you think twice about moving forward. Think termites, faulty foundation, mold, asbestos, etc. Sure, a lot can go wrong, but rest assured that most problems are fixable.

Step 9: Get a home appraisal

Even if you got pre-approved for your home loan, your lender will want to conduct a home appraisal. This is where the lender checks out the house to make sure it's a good investment. It's similar to a home inspection, but for your lender.

Step 10: Head to closing

Closing, which in different parts of the country is also known as settlement or escrow, brings together a variety of parties who are part of the real estate transaction, including the buyer, seller, mortgage representative, and others.

Closing is the day you officially get the keys to your new home—and pay all the various parties involved. That will include your down payment for your loan, plus closing costs, the extra fees you pay to process your loan.

Closing costs can be sizable, averaging anywhere from 2% to 7% of the home price.

Move in!

Done with closing? Got your loan? Congratulations, you've officially graduated from a homebuyer to a homeowner! See, the long-term process of buying a first home wasn't so scary after all, right? Now, it's time to kick back and enjoy the many benefits of becoming a homeowner.

And when tax day comes around, don't forget about the tax advantages of being a homeowner. While the first-time homebuyer tax credit is no longer available, first-time buyers can often benefit from the mortgage interest tax deduction and property tax deduction.

"Call Eli Torres at (832) 430-2107, for your home buying and selling needs."

Source: www.realtor.com