11 Steps to Buying a House: 4 Benefits of Home Ownership

Homeownership can offer many benefits over renting, including:

1. 1. Personal control. When you buy a house, you’re free to make renovations inside and out to create an environment that you truly love—from landscaping to flooring to removing walls. In contrast, when you’re renting a property, the rental agreement typically limits the tenant’s ability to make cosmetic changes, like painting the walls a different color or changing the cabinets.
2. 2. Fixed payments. When looking for financing during the home-buying process, interested shoppers have the option of selecting fixed mortgage rates, which do not fluctuate with the housing market. If you’re renting a property, your landlord can increase your rent prices (within the bounds of local laws), which can throw off your finances.
3. 3. Stable housing. As long as you pay your mortgage promptly, you can generally maintain continuous residence in your dwellings: This is not always the case with renting. In some states, landlords can legally terminate a month-to-month tenancy with a 30- or 60-day notice, as long as the decision is not driven by discrimination or retaliation.
4. 4. Equity. Buying a home can improve your financial portfolio since you build equity as you make mortgage payments. As you pay your loan down, your property has the chance to increase in value as you make renovations, and your credit score may increase. In contrast, rent payments simply go to your landlord without building equity.

Whether you’re a first-time homebuyer or a seasoned investor, here are the most common steps in the process of buying a house:

1. 1. Assess your finances. To buy a house, you’ll likely need to take out a large loan called a mortgage unless you pay it in full with funds from your bank account. If you opt to finance, you’ll need to make monthly payments toward the mortgage loan. Before you start house hunting, look at your financial situation to figure out the size of your down payment (money you pay upfront on the home) and the maximum monthly mortgage payment you can afford.
2. 2. Find out your debt-to-income ratio and credit score. Two factors that lenders use to determine your loan qualification are your credit score and debt-to-income ratio (DTI). You can request access to your credit report online through the credit bureaus. A high credit score (in the high 600s or 700s) will make it easier for you to get a good loan because it signals to lenders that you can manage your debt responsibly. To calculate your DTI, add up your regular monthly debt (how much you pay in car payments, credit card payments, student loans, etc.) and divide that number by your monthly gross income (pre-tax income). Many reputable lenders use the “28/36” qualifying ratio to evaluate your DTI. In this ratio, your housing expenses should not exceed 28 percent of your gross income, while 36 percent is the maximum amount of your gross income that should go toward paying your total debt. For a more in-depth breakdown of your finances and your home-buying potential, use a mortgage calculator or affordability calculator for a detailed loan estimate.
3. 3. Find the right lender. After looking at your finances, schedule an appointment with a reputable lender to discuss the different home loan options available to you. Find a licensed lender (rather than a servicing company) with a good service record that offers the type of mortgage that’s best for your finances (a fixed-rate mortgage is the most conventional loan, though there are plenty of other mortgage types to consider before committing).
4. 4. Get pre-approved. With a lender, you can apply to be pre-qualified or pre-approved for a loan, meaning they evaluate your finances and draft up a document that shows home-sellers the amount they’d be willing to loan you. Pre-approval documents are usually good for 30–90 days. While getting a pre-qualification or pre-approval letter isn’t necessary, it can help speed up the loan process and put you in the best position to buy your dream house before other interested parties.
5. 5. Choose a real estate agent. A good real estate agent will serve as a helpful guide through the home-buying process, answering questions, fielding conversations with the seller, and doing paperwork. Search online or ask friends and family for recommendations. Select a realtor who listens to your needs, understands your financial situation, and has a track record of good judgment when evaluating homes.
6. 6. Begin shopping for your house. Everyone wants to find the perfect home, but combing through housing listings and visiting open houses can quickly become overwhelming. Before you start looking in earnest, compile a list of “must-haves” to help you narrow down your search for the right home. There are many factors to consider when looking for your dream home—proximity to work, shopping, schools, parks, or public amenities; property tax rates; neighborhood amenities like snow removal or trash and recycling pickup; long-term livability (will your family outgrow the house within the next five years?).
7. 7. Make an offer. Once you find an ideal house in your price range, work with your real estate agent to make an offer on the house. This offer will include a total purchase price offer and a down payment offer, and an overview of your financial information. You may not be the only person making an offer on the house, so another party may outbid you. Often, the seller’s realtor will reach back out to you with a counteroffer—this is a good sign that the seller is interested in your offer.
8. 8. Begin the paperwork. Once the seller accepts your offer, you can start the contract of sale. Your real estate agent will be vital during the finalization process—they’ll help you through the paperwork. You’ll need to ensure you have enough money in your checking account to put down an earnest money deposit (a sum that shows you’re committed to buying), which will go toward your down payment. You may be required to place your earned money deposit into an escrow account until you and the buyer close the deal. Escrow protects the buyer’s deposit and ensures the seller receives it once the deal is officially closed. This account is usually managed by the mortgage servicer or another viable third party.
9. 9. Conduct a home inspection. After entering into a contract, homebuyers typically hire a certified independent inspector to conduct a full inspection of the house. The home inspector will do a full walkthrough of the property and identify any defaults or concerns you and your realtor may have missed. It’s normal for inspectors to find small things—like peeling paint—but keep an eye out for more expensive structural defects like roof damage, bad siding, or foundation shifting, which can significantly affect renovation costs or devalue the property.
10. 10. Finalize with your lender. Once you’re sure you want to buy the house, you can submit the mortgage application to your lender, who will review the documents and appraise the house. It’s during this time that you can lock in your interest rate, ensuring that your quoted mortgage rate won’t change as you finish closing on your house. After the details are finalized, your mortgage lender should give you a “good faith estimate” or a written overview of every detail of the mortgage, including when and how you’re expected to pay.
11. 11. Close on the house. After your loan is approved, your realtor will walk you through the last final details, including signing final documents, organizing homeowner’s insurance, paying closing costs and escrow fees, and doing a final walkthrough. Finally, on your designated closing date, you’ll be given the deed and the keys to your new home.

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