Buying your first home is a big step! But it’s not just the last step there are several steps you need to take before taking the final step of buying a house. What are the steps to buying your first house? Here they are laid out in an easy to use order so that you can comfortably climb to the ranks of new homeowner. Here are the 10 steps to buying a house for the first time, if you prefer a visual you can check out our home buying timeline.
Start Saving A Down Payment
Before you go house shopping you are going to need to save up money for a down payment (find out what you will need with this down payment calculator). The amount that you save up will vary depending on what type of mortgage you will be getting.
Use this down payment calculator to see how much of a down payment you will need for the price range of house you are looking for.
If you are ready to accelerate your savings on your down payment, you should check out the Down Payment Accelerator. It can get you started on your down payment quickly and show you ways to save up faster.
Check Your Credit Score
You may have done this when you used a rent affordability calculator for your first place, but if not. This is a step that many people over look. When you first start to save your down payment you will want to check your credit score for any issues. Having a perfect credit score isn’t necessary for buying your first home. But a negative credit score can have a very damaging effect on your finances and the mortgage rate you will get.
Luckily by checking this right away you can begin to repair any credit issues and start to reshape your credit. Time is on your side while you are saving for your first home so make sure you are taking advantage of it.
Find Out How Much Home You Can Afford
This is another step that many people over look. You are going to need to know how much house you can safely afford. Our mortgage affordability calculator will help you figure this out and give you a better idea of how much money you will be able to borrow. More importantly this calculator uses a different method than the bank and lets you evaluate the numbers so you know how much you feel you can safely afford.
After you figure out how much you can afford it will be a good idea to see if there are any places you can save money. The bank will need to know your financial situation (they don’t just hand out money, we tried…) and it’s a good idea for you to know it as well. We suggest going over your finances to see if there are any places you can cut or if there are any debts you may want to pay off or consolidate before you apply for a mortgage.
Please make sure you know what you can safely afford. No house is worth becoming house poor for.
Check for First Time Home Buyer Benefits
This is another step that many people over look. Many places offer first time home buyer benefits or home buyer plans. You can use these to your advantage as long as you meet the criteria. It’s important that you do some checking to see what is available in your area. For example, Canada has a First Time Home Buyer Incentive. Do some checking for other first time home buyer incentives.
Pick a Neighborhood or Three
This is really where the fun starts. Start to look around your area for places that you are interested in. You will want to know which neighborhoods are right for you. Take a drive, look at open houses (a favorite pastime when you are saving your down payment) and see which ones are in your price range and what is a likely house type that will work for you.
Don’t be discouraged if the first neighborhood is out of your price range, there could be smaller homes more closer to your budget or nicer homes just outside of the area you want to live. Exploring neighborhoods is fun and a great way to learn about different parts of a city before you buy something. At this point you can start looking for houses online (let’s face it, you’ve probably started doing this already)
Build Your Home Buying Team
You are going to need some help buying your first house. Yes, you could do it on your own, but like most things you do the first time having help can go a long way. Here is what you should be looking for when building your first home buying team.
Pick a Real Estate Agent
Select A Mortgage Broker
There are debates about whether you should go with a bank or mortgage broker. Mortgage brokers are able to bring you to other lenders where the bank is limited to it’s rules and criteria. Several people have found that they were rejected by one bank, only to be approved by another through a mortgage broker. In Canada mortgage brokers are used more, in the U.S. there is a shift to using online mortgage brokers.
Related: 5 Reasons to Use a Mortgage Broker
Find a Lawyer
This is another part of your home buying team. This will be who you sign over the documents with and if you need tips on finding a lawyer you can see our article on what to look for in a real estate lawyer and what to ask.
Get Pre-Approved for a Mortgage
It’s important to know the difference between prequalified for a mortgage and pre-approved. One is a must, the other one is for piece of mind but not worth the paper it’s written on. Essentially before you can buy a house you will likely go through both.
By doing this you will get a better idea of what you can afford and what the bank will actually give you. This is a key item before you start shopping for a house in the next step. Without doing this you could find yourself getting an offer accepted only to find out that the price is more than any bank will lend you.
You can check out Lending Tree to see more about getting pre-approved for a mortgage.
Find a Houses
I would say that this is the funnest part of the steps to buying a house for the first time. House shopping!!!! You get to check out a bunch of places and see what you can find. Two pieces of advice is to make sure you see at least 10 houses before you make an offer. The other is to not get swept up in the emotion of buying a house. This is a hard thing to avoid but if you can keep yourself on a steady emotional level while you look at houses then you can come out on top.
There are a lot of things to look for when buying a house so make sure you are paying attention to everything that is out there. Often it’s what you aren’t seeing in a place that is the cause of concern. So get yourself ready. Make sure you avoid these issues when looking at houses.
The last part of this step is to narrow it down to a house you want.
Look at the Monthly Bills of the House You Want
This is another step that many people over look. We cover it in our products about buying a house because you want to make sure you aren’t making yourself house poor. Before you make your offer, ask to see the bills or the average usage for the utilities of the house. A house might be in your price range mortgage wise. But you could find that the monthly bills shoot your budget down.
Ask the ages of the current residents and see how their usage would be compared to yours(two seniors are very different than a family of 6). Ask things like: Is the house super hot or cold when you walk in? Are the water bills high or what you budgeted for? Getting these numbers before you make an offer can make a huge deal.
Make an Offer
When everything else checks out it’s time to put in an offer and see what happens. This will be a high energy moment. You will be checking your phone every 30 seconds and waiting for things to happen. Deep breath, let the process happen and think with your head not your heart.
Book the Home Inspection
When your offer gets accepted it’s time to book the home inspection (your purchase of the home should be subject to a home inspection). This will involve you reaching out to a home inspector (or your real estate agent may have one they use). Go with them to the house and take notes of everything they mention. You should get a report but it’s much better if you are there to witness everything.
If there are things in the home inspection checklist that you don’t like you will have the ability to counter your offer. You may want to make the items be taken care of by the current owner before you take possession, or you can negotiate a lower price if they don’t do them. Either way you have bargaining chips to work with.
Get a Home Appraisal
The bank will not lend you money on a home without an appraisal. You may be required to set this up, or the bank will do this as part of their due diligence. When the report comes back you will find out what the appraisal of the house is worth and you will either have a value close to what you are paying, or the appraisal could be lower, at which point you would need to go back to the offer and make adjustments.
Close on the house
This is the last of the boring steps to buying a house for the first time, you head to the real estate attorney and get the keys and everything else. Sign a bunch of documents to transfer the property over to you and you are done!
Move in and Enjoy Being a Millennial Homeowner (the last of the steps to buying a house for the first time)
This is the last step of your home buying journey and the first step of home ownership. Congratulations!!! This is an amazing accomplishment and you should be proud. Enjoy your house and make sure you have this new home checklist before you move in! Of course you will want to invite friends to move and make sure you have these moving essentials as well.