How to Buy a House in 2024: Step-by-Step Guide

1. Determine if Buying a House Makes Sense for You

Whether you're a first-time homebuyer or you've done this before, you'll want to have your financial ducks in a row before you start house hunting. You might be ready if you can answer yes to the following questions:

• Do you have a strong emergency fund? The rule of thumb is to set aside three to six months' worth of expenses. This money could come to the rescue if you're hit with a financial emergency. That might be a stretch of unemployment or a surprise bill. It's wise to build up this safety net before buying a home.
• Have you saved money for your new home? Unless you're making a cash offer, you'll need a sufficient down payment and enough cash on hand to cover closing costs (more on this shortly). Moving expenses can also add up. If you aren't prepared, these costs could deplete your emergency fund.
• Do you have a healthy credit score? Minimum credit score requirements vary depending on the type of mortgage you're seeking. That said, lenders typically require a credit score of at least 620 to qualify for a conventional mortgage.
• Do you have room in your budget for a new home? Once you've settled into your new home, you'll be responsible for your mortgage, homeowners insurance and property taxes. Your budget will also have to cover regular maintenance costs and any repairs that pop up.

Learn more >> 5 Reasons to Buy a Home and 5 Reasons Not To

2. Calculate How Much Home You Can Afford

What's the maximum amount you can spend each month on your home? One rule is to keep your housing costs at or below 28% of your gross monthly income. If you earn $8,500 per month (before taxes), you'd want to make sure your monthly housing costs don't exceed $2,380. These costs include your:

• Mortgage payment
• Property taxes
• Homeowners insurance
• Mortgage insurance (this applies if you have certain government-backed mortgages or make a down payment that's less than 20% of the purchase price)
• Homeowners association fees, if applicable

On top of your loan principal and interest, your monthly mortgage payment will likely include property taxes and homeowners insurance (and possibly mortgage insurance). Mortgage lenders usually collect these costs in installments each month and hold them in an escrow account. When these bills come due, the lender will pay them on your behalf.

And don't forget about regular home upkeep. Some experts recommend saving 1% to 4% of your home's value each year for these costs. If your home is valued at $350,000, you could spend $3,500 to $14,000 annually on maintenance.

Learn more >> Homeowner Costs Beyond Your Mortgage

3. Save for a Down Payment

Making a 20% down payment has long been seen as the gold standard, but it's possible to get into a home with much less. That's good news for homebuyers—to make a 20% down payment on a $400,000 house, you'll need to come up with $80,000. Your minimum down payment will depend on your loan type and lender, but below are some general guidelines:

Tip: While a 20% down payment isn't required for every mortgage, it's still a good threshold to reach as it allows you to avoid private mortgage insurance.

Your loan amount and overall financial health also play an important role. For example, some lenders may require a larger down payment if you have a lower credit score or are seeking a jumbo loan. The following steps can help you save for a down payment:

• Set a savings target based on homes in your price range.
• Automate your savings and funnel a portion of every paycheck toward your down payment fund.
• Consider keeping your money in a high-yield savings account or certificate of deposit (CD) so that you'll earn interest along the way.
• Adjust your budget to reduce your spending.
• Leverage cash gifts, tax refunds, work bonuses and other windfalls.
• Look into down payment assistance programs.

Learn more >> What Type of Mortgage Loan Is Best?

4. Don't Forget About Closing Costs

As the homebuyer, there are certain expenses you can expect to cover when finalizing the sale. These are called closing costs, and they typically add up to 2% to 5% of the sale price. Closing costs often include:

• Lender fees: That can include loan origination fees and any money you're putting toward discount points, which are optional fees that reduce your interest rate.
• Fees from third-party service providers: You'll likely have to pay for a home inspection, appraisal, title search services and title insurance premiums. Real estate attorney fees may also be on the table.
• Prepayments: When you button up a home sale, the mortgage lender will likely require you to prepay a portion of your homeowners insurance premium and annual property tax bill. You might have to do the same for mortgage insurance. Again, these funds will be held in an escrow account.

Just like your down payment, you'll want to have your closing costs saved up and ready to go before you make an offer—but there might be some room for negotiation. See if you can talk down your:

• Loan application fee
• Origination and underwriting fee
• Rate lock fee
• Title insurance costs
• Homeowners insurance premium

Learn more >> Everything You Need to Know About Mortgage Fees

5. Prepare Your Credit

Credit requirements depend largely on the loan type and lender, but you'll likely need a minimum credit score of 500 to 700 to qualify. Here's a snapshot of what you can expect, keeping in mind that every lender is different:

Building your credit is an important step in getting a mortgage. Here's a simple checklist for strengthening your credit score:

• Check your credit report and score. Review your report and score to see where your credit stands and to identify any potential identity theft or fraud. You can check your credit report and score for free with Experian. You can also get your credit reports from all three consumer credit bureaus (Experian, TransUnion and Equifax) at AnnualCreditReport.com. If you spot any inaccurate information, you have the right to dispute your credit report for free.
• Pay your bills on time. Your payment history makes up 35% of your FICO^® Score^☉ . One of the best ways to improve your credit score is to consistently make on-time payments.
• Reduce debt balances. Amounts owed account for another 30% of your FICO^® Score. Paying down your debt can show lenders you have the financial means to cover your mortgage payments. Reducing or paying off credit card balances, in particular, can reduce your credit utilization rate and help your credit scores relatively quickly.
• Put off applying for new credit. Every time you apply for new credit, it triggers a hard credit inquiry on your credit report that can cause a small, temporary decrease in your score. It's also wise to avoid adding new debt during the mortgage application process. Most lenders require a debt-to-income ratio that's below 43% and don't like to see recent applications for credit right before applying for a mortgage.
• Don't close old credit card accounts. Closing old accounts could affect your credit utilization ratio. If you have other accounts with balances, those accounts will take up a larger percentage of your total available credit—and that can have a negative impact on your credit score.

6. Get Preapproved for a Mortgage

Getting preapproved for a mortgage lets you know how much you're authorized to borrow. The lender should issue you a preapproval letter that shows your expected loan amount, mortgage type and interest rate. You can then start house hunting with confidence—and make an offer if you find something you like. Most preapproval letters are good for 90 days.

You can expect the lender to perform a hard credit inquiry and review your:

• Credit reports and credit scores
• Proof of identity
• Income
• Assets, debts and expenses
• Down payment amount

It's important to note that preapproval is different from prequalification. The latter usually involves a more basic review of your creditworthiness to see how likely you are to get approved for a mortgage. Lenders typically do this through a soft credit pull, which does not affect your credit. Either way, you'll still need to complete an actual mortgage application when you get closer to finalizing the deal—and you'll need to get approved in order to receive funding.

7. Find an Experienced Real Estate Agent

The right real estate agent can make a big difference during your homebuying journey. They should understand your local market, what you're looking for in a home and your budget. From there, they can sort through listings and recommend available homes. They can also schedule home tours, put in an offer when you're ready and negotiate on your behalf.

A real estate agent can also be a great resource at the closing table—handling paperwork associated with the purchase, answering your questions and ensuring that everything is in order.

Real estate agent fees have historically been paid by the seller, but due to recent changes in the industry, buyers are now responsible for compensating their agent. That might mean paying:

• A percentage of the sale price
• A flat fee
• A la carte fees

Shopping around and comparing different real estate agents (and their fees) can help you find the right fit for your needs and budget.

8. Look for a Home

Once you've gotten preapproved and have a real estate agent, you're ready to start house hunting. Here are some important things to share with your agent:

• Your must-haves: You might be looking for a certain number of bedrooms or a home that's in a specific part of town or school district. Be as clear as you can about what you're looking for.
• Your deal-breakers: You may not want to live in a community that has HOA fees or high property taxes. Be sure to communicate these things to your real estate agent. It can help them weed out listings and prevent you from wasting time looking at homes that don't meet your criteria.
• Your budget: Just because you've been preapproved for a certain amount, that doesn't mean you have to borrow that much. Set your ideal price point with your agent—and let them know how high of an offer you're willing to make.

Review the listings your agent sends you, and schedule tours for homes that pique your interest. You can also attend open houses on your own if you come across available homes that stand out to you.

Learn more >> How Much House Can I Afford?

9. Make an Offer

If all goes well, you'll find a home you love. The next step on the road to homeownership is making an offer. Your real estate agent can be a great resource here. They should know what similar homes are going for in your market—and they can use that to help you craft an attractive offer. Whether your offer is accepted depends partly on whether it's a buyer's market versus a seller's market:

• Buyer's market: This is when home sales are down and there are more available homes than there are buyers. That lack of demand can give you a leg up when buying a home because competition isn't as fierce. Home prices also tend to be lower.
• Seller's market: This happens when inventory is low, homes are selling fast and prices are on the rise. You may have to make a more competitive offer to stand out from other buyers.

Either way, be prepared for some back-and-forth after putting in an offer. The seller may come back with a counteroffer. Decide beforehand how much you're willing and able to spend, and let your real estate agent negotiate on your behalf.

10. Arrange a Home Inspection

Once your offer is accepted and a contract is signed, you'll want to arrange a home inspection to ensure that the property is up to your standards. A licensed professional will walk through the home looking for material defects and safety risks, which could both affect the home's value. They'll likely inspect the home's:

• Major systems, like the heating and air conditioning, plumbing and electricity
• Foundation and structural components
• Roof
• Walls, doors and windows

If they find any serious issues, you may choose to reconsider your offer. That might mean negotiating a lower price—or backing out of the deal altogether, which you can do if you have a home inspection contingency in your contract.

11. Negotiate Repairs

A 2023 Clever Real Estate report found that one-third of buyers felt remorse about the upkeep their home needed. If your inspection comes back with red flags, like the need for costly repairs, you'll have to decide if it's worth the time and energy to fix them. One option is to negotiate a lower sale price, leaving you with more money left over to make repairs. Alternatively, you could request that the seller make the repairs before moving forward.

According to the National Association of Realtors, some of the most common home inspection issues include the following:

Source: National Association of Realtors

12. Get a Home Appraisal

A home appraisal, which determines the home's market value, is required by the mortgage lender. They do this because they want to know that their investment will be safe if you default on your home loan. In the event that happens, and they have to foreclose on the property, they'll turn around and resell it.

A low appraisal can create a real challenge for homebuyers. If the appraisal is less than your offer price, you won't be approved for the full mortgage amount—even if you qualify for it. You'll have a few options in this situation:

• Come up with the extra cash to cover the difference.
• Negotiate a lower price with the seller.
• Walk away from the deal, which you can do if you have an appraisal contingency in your contract.
• Hire your own appraiser to challenge the original findings. Some states allow this, but just be aware that if competition is high, the seller might simply go with another buyer who's ready to close the deal.

13. Do a Final Walk-Through

After completing the home inspection and appraisal, it's wise to do a final walk-through of the home before closing. You and your real estate agent can take one last look at each room, including any problem areas you've been concerned about along the way. For example, did the seller make the repairs they agreed to make? Do all the appliances work? Are there any new issues you're noticing now?

If so, there's still time to revisit negotiations—or possibly pull out of the deal. Keep in mind that walking away from the sale might result in losing your earnest money deposit. This is a good faith deposit sellers typically make early on to show the seller they're committed to the deal. It usually ranges from 1% to 3% of the offer price and goes toward your down payment if the sale goes through as planned. But you might not lose your earnest money if the home inspection reveals a defect that negatively affects the home's market value or integrity.

14. Close on Your Mortgage

After receiving final approval for your mortgage, it's time to complete the transaction. You'll need to bring the following to the closing table:

• Proof of identity
• The rest of your down payment, which is typically paid with a wire transfer or cashier's check
• Proof of insurance coverage

At this point you'll sign all the required documents. This usually involves your real estate agent, title insurance company, escrow company and attorney (if you're using one). In some states, all parties come together to sign the documents at the same time. In others, the closing could take longer as each signature is collected. When it's all done, you'll become responsible for your home loan—and will officially be a homeowner.

Learn more >> Mistakes to Avoid When Closing on a Mortgage

Frequently Asked Questions

• How Long Does It Take to Buy a House?

  It varies, but from start to finish, you can expect a timeline of 45 to 60 days to buy a house. Being prepared can help expedite the process. Not having things together, on the other hand, can cause unwanted delays.

• What Credit Score Do I Need to Buy a House?

  As noted above, you'll likely need a credit score of 500 to 700 to qualify for a mortgage. Minimum credit score requirements depend on the loan type and lender. Your personal financial situation and down payment amount will also come into play.

• Is Now the Right Time to Buy a House?

  The answer depends largely on your financial health. If you have an emergency fund, down payment, good credit, low to no debt, and steady employment and income, it might be the right time to buy a home. You'll also want to pay attention to mortgage rates. The lower your rate, the less you'll pay for a home loan. Even a slight difference in interest rates could save you thousands of dollars over the life of the loan.

The Bottom Line

Following these 14 steps to buying a home can help set the stage for a smooth experience. It comes down to being prepared, working with the right real estate agent, maintaining strong credit and meeting your lender's requirements. If all goes well, you'll receive the keys to a home you love.