How to buy a home

1. Are you ready to buy?

Buying a home is the largest financial transaction most people ever make. Before you start browsing listings, consider a few fundamentals:

• How long will you stay? Buying and selling a home costs roughly 8–10% of the purchase price in transaction costs (agent commissions, closing costs, moving). You typically need to stay 3–5 years just to break even versus renting, longer in slow-appreciation markets.
• Is your income stable? Lenders want a two-year history of employment. Recent job changes, gaps or self-employment complicate underwriting — not impossibly, but it takes more documentation.
• Do you have an emergency fund? Homeownership comes with unexpected costs. Plan for 1–3% of the home's value per year in maintenance and repairs, and keep 3–6 months of expenses in cash reserves.

2. Get your finances in order

Three numbers matter most when you apply for a mortgage: your credit score, your debt-to-income ratio and your down payment.

Credit score: Pull your reports from all three bureaus (annualcreditreport.com) and resolve any errors before applying. Scores of 740+ get the best conventional rates. FHA loans accept scores as low as 580.

DTI ratio: Your total monthly debt payments (including the proposed mortgage) divided by gross income. Most conventional loans want this below 43–45%.

Down payment: The more you put down, the lower your rate and monthly payment. Putting down less than 20% on a conventional loan requires PMI. FHA requires just 3.5% down but adds mortgage insurance for the life of the loan if you put down less than 10%.

3. Get pre-approved

A pre-approval is a lender's written commitment to lend you up to a specified amount, based on a hard credit inquiry and documentation review. It's essential before making offers in most markets — sellers often won't consider offers without one.

Apply with at least three lenders and compare the Loan Estimates you receive. Even a 0.25% difference in rate saves thousands over the life of a 30-year mortgage. Multiple mortgage inquiries within a 45-day window count as a single hard pull on your credit.

4. Find the right home

With pre-approval in hand, you know your ceiling. Work with a buyer's agent — in most transactions their commission is paid by the seller, so your representation costs nothing out of pocket.

Beyond the listing price, account for:

• Property taxes — These vary dramatically by location and are included in your monthly escrow payment. Check the county assessor's site for historical tax bills on any home you're seriously considering.
• HOA fees — Count toward your DTI and can range from $50/month for a townhouse community to $1,000+/month for a high-rise condo.
• Insurance costs — In high-risk areas (flood zones, hurricane-prone coastlines, wildfire zones), homeowner's insurance can add several hundred dollars a month to your payment.

5. Making an offer

When you find the right home, your agent will prepare a purchase offer based on comparable sales, market conditions and your budget. A standard offer includes the purchase price, earnest money deposit (typically 1–3% of the price, applied to closing costs), proposed closing date and any contingencies.

Common contingencies include financing (your right to back out if you can't get a loan), inspection (right to negotiate repairs or cancel after inspection) and appraisal (protection if the home appraises below the purchase price). In competitive markets, buyers sometimes waive contingencies — understand the risk before doing so.

6. Inspections and due diligence

After your offer is accepted, schedule a home inspection immediately — you typically have 7–14 days depending on your contract. A general inspection ($300–$600) checks the structure, roof, systems (HVAC, plumbing, electrical) and visible defects. Depending on the property, you may also want:

• Sewer scope (older homes)
• Radon test (varies by region)
• Pest/termite inspection (often required by lenders in certain states)
• Specialist inspection if the general inspector flags concerns

If the inspection reveals significant issues, you can ask the seller to repair them, reduce the price or provide a credit at closing — or you can walk away if the issues are serious enough and you have an inspection contingency.

7. Underwriting and appraisal

While you're doing due diligence, your lender is doing theirs. Underwriting typically takes 2–4 weeks. The underwriter verifies your income, employment, assets and credit, and orders an appraisal of the property.

The appraisal (paid for by you, typically $500–$800) confirms the home is worth at least the purchase price. If it appraises low, you'll need to renegotiate with the seller, cover the gap in cash or walk away if you have an appraisal contingency.

The underwriter may issue "conditions" — requests for additional documentation. Respond promptly; delays at this stage push out your closing date.

8. Closing

Three business days before closing, you'll receive the Closing Disclosure — the final version of your loan terms and costs. Compare it carefully to the Loan Estimate you received at application. Your rate and loan amount should match; some fees can change, others cannot increase at all.

On closing day, you'll sign the promissory note (the loan), the deed of trust (the lender's lien), and a stack of disclosures. You'll need to bring valid photo ID and certified funds (cashier's check or wire) for the closing cost amount shown on the Closing Disclosure.

After signing, the lender funds the loan, the title company records the deed and the keys are yours.