Home Buying Checklist: 12 Steps to Buying a Home

Step 1: Decide If You Are Ready to Buy

Buying a home is a major life decision. Start by evaluating your financial readiness. Can you save enough for a down payment, cover closing costs, and manage ongoing homeownership expenses? Owning a home comes with costs beyond a mortgage, such as property taxes, insurance, maintenance, and utilities. Compare these costs to renting to determine if buying is right for you.

Step 2: Calculate How Much You Can Afford

Lenders use your Debt-to-Income (DTI) ratio to determine how much you can borrow.

Example:
Monthly debt = $2,500
Monthly income = $5,000
DTI = 2,500 ÷ 5,000 = 50%

The 29/41 Rule:

• Housing Expense Ratio: Your mortgage payment divided by gross monthly income. Aim for under 29%.

• Total DTI: Includes all monthly debts (mortgage, car, student loans, credit cards). Aim for under 41%.

Example:
Mortgage = $1,500
Other debts = $500
Income = $6,000
Total DTI = 2,000 ÷ 6,000 = 33%

Speak with a mortgage lender to understand your options and what you can afford.

Step 3: Save for Down Payment and Closing Costs

Most loans require a down payment, which reduces lender risk. The amount depends on your loan type. Increasing your down payment may lower your interest rate or help you qualify for a larger loan.

Closing costs typically range from 2–5% of the home’s purchase price. For a $300,000 home, expect $6,000–$15,000. These costs cover items such as appraisals, inspections, title insurance, and escrow fees.

Step 4: Decide on the Right Type of Mortgage

Work with a lender to determine the best mortgage for your situation. Loan options vary by down payment, interest rates, and repayment terms. A mortgage broker can help you find the right fit.

Step 5: Get Prequalified or Preapproved

Before house hunting, get preapproved for a mortgage. This provides a preapproval letter stating how much you can borrow, which strengthens your offers.

Step 6: Find the Right Real Estate Agent

A good agent will represent your interests, help you find homes, schedule showings, write offers, and negotiate. Buyer’s agents are typically paid by the seller, so you don’t pay out of pocket. Your agent guides you through contracts, inspections, and negotiations.

Step 7: Begin Looking at Houses

Work with your agent to identify homes that meet your priorities, such as bedrooms, square footage, yard size, neighborhood, or school district. Agents can create custom searches for new listings that match your criteria.

Step 8: Make an Offer

Your offer is a contract to purchase. It often includes an Earnest Money Deposit (1–2% of the purchase price) applied toward your down payment and closing costs. If issues arise during inspections covered by contingencies, you may be able to cancel and retain your deposit.

Step 9: Get Home Inspections

Inspections protect you by identifying potential issues. Even new homes benefit from inspections. Review reports carefully and negotiate repairs or concessions with the seller. If you cannot reach an agreement and have an inspection contingency, you can terminate the contract without losing your deposit.

Step 10: Get the Home Appraisal

Lenders require appraisals to ensure the property value supports the loan. If the appraisal is below your offer, you may renegotiate the price, pay the difference, or request an appraisal reconsideration. An appraisal contingency can protect your earnest money.

Step 11: Do a Final Walkthrough

Before closing, inspect the property to ensure repairs are complete and everything is in order. Confirm the seller has removed belongings and that all systems work properly.

Step 12: Close on Your New Home

A few days before closing, review your Closing Disclosure for accuracy. At closing, bring your ID and proof of funds. You’ll sign documents for the down payment, closing costs, mortgage note, and deed of trust. Once complete, you are officially a homeowner.