10 steps to buying a home

Buying a house requires a lot of time and effort, but these 10 steps can help make the home buying process more manageable and help you make the best decisions for your personal and financial situation.

Understanding how to find and finance the perfect home

Step 1: Start your research early

As soon as you can, start reading websites, newspapers, and magazines that have real estate listings. Make a note of homes you are interested in and see how long they stay on the market. Note any changes in asking prices. This will give you a sense of the housing trends in certain areas.

Step 2: Determine how much house you can afford

Lenders generally recommend that people look for homes that cost no more than three to five times their annual household income if the home buyers plan to make a 20% down payment and have a moderate amount of other debt.

But you should make this decision based on your own financial situation. Use the affordability calculator from Discover® Home Loans to see how much you might be able to afford.

Step 3: Get prequalified and preapproved for your mortgage

Before you start looking for a home, you will need to know how much you can actually spend. The best way to do that is to get prequalified for a mortgage.

To get prequalified, you just need to provide some financial information to your mortgage banker, such as your income and the amount of savings and investments you have. Your lender will review this information and tell you how much money you are eligible to borrow.

This will tell you the price range of the homes you should be looking at. Later, you can get preapproved for credit, which involves providing your financial documents (W-2 statements, paycheck stubs, bank account statements, etc.) so your lender can verify your financial status and creditworthiness.

Step 4: Find the right real estate agent

Real estate agents are important partners when you’re buying or selling a home. Real estate agents can provide you with helpful information on homes and neighborhoods that isn’t easily accessible to the public.

Their knowledge of the home buying process, negotiating skills, and familiarity with the area you want to live in can be extremely valuable. And best of all, it typically doesn’t cost you anything to work with an agent – they’re usually compensated from the commission paid by the seller of the house.

Step 5: Shop for your home and make an offer

Start touring homes in your price range. It might be helpful to take notes (using this helpful checklist) on all the homes you visit. It can be hard to remember everything about them, so you might want to take pictures or videos to help you remember each home.

Make sure to check out small details in each house. For example:

• Test the plumbing by running the shower to see how strong the water pressure is and how long it takes to get hot water
• Try the electrical system by turning switches on and off
• Open and close the windows and doors to see if they work properly

It’s also important to evaluate the neighborhood and make a note of things like:

• Are the other homes on the block well maintained?
• How much traffic does the street get?
• Is there enough street parking for your family and visitors?
• Is it conveniently located near places of interest to you: schools, shopping centers, restaurants, parks, and public transportation?

Take as much time as you need to find the right home. Then work with your real estate agent to negotiate a fair offer based on the value of comparable homes in the same neighborhood.

Once you and the seller have reached agreement on a price, the house will go into escrow, which is the period of time it takes to complete all of the remaining steps in the home buying process.

Step 6: Get a home inspection

Typically, purchase offers are contingent on a home inspection of the property to check for signs of structural damage or things that may need fixing. Your real estate agent might be able to help you arrange having this inspection conducted within a few days of your offer being accepted by the seller. This contingency protects you by giving you a chance to renegotiate your offer or withdraw it without penalty if the inspection reveals significant material damage.

Both you and the seller will receive a report on the home inspector’s findings. You can then decide if you want to ask the seller to fix anything on the property before closing the sale. Before the sale closes, you will have a walk-through of the house and the chance to confirm that any agreed-upon repairs have been made.

Step 7: Work with a mortgage banker to select your loan

Lenders have a wide range of competitively priced loan programs and a reputation for exceptional customer service. You will have many questions when you are purchasing a home, so make sure that you have a responsive mortgage banker assist you can make the process much easier.

Every home buyer has their own priorities when choosing a mortgage. Some are interested in keeping their monthly payments as low as possible. Others are interested in making sure that their monthly payments never increase. And still others pick a loan based on the knowledge they will be moving again in just a few years.

Step 8: Have the home appraised