Home Buying Process Checklist: 13 Steps You NEED to Know

By Lindsay Stefan

Posted on September 9th, 2022

An illustration of a bearded man checking a giant home buying process checklist with a giant pencil.

Buying a home is exciting and gratifying — but it can also be time-consuming and stressful.

Understanding the entire home buying process, step by step, can help you:

  • Manage your expectations
  • Adapt to the unexpected
  • Stay grounded throughout the long process
  • Avoid the dreaded buyer’s remorse

This is especially true for first-time home buyers, who have never experienced the overwhelming whirlwind before.

Since 2017, our team of licensed real estate experts has fielded thousands of common questions from home buyers. We put together a checklist that covers every major milestone, from preparing financially to accepting the keys for your new home.

If you need additional support during your home buying journey, our friends at Clever Real Estate can provide advice and connect you with the best real estate agents near you. Clever offers a free service that matches you with top-rated realtors from Keller Williams, RE/MAX, and other leading brokers. You'll get support and guidance from an experienced buyer's agent who has helped past clients land their dream homes!

Best of all, buyers in most states can receive up to 0.5% cash back after closing. That's $2,000 cash back on a $400,000 home, just for finding a great agent through Clever.

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Home Buying Process Checklist

1. Check Your Finances

Before you think about the kind of house you want, consider the kind of house you can afford. To do that, you’ll need to take a look at your finances.

Look at Your Income

Do you have enough to cover your future monthly mortgage payment, plus closing costs and ongoing costs, like utilities and maintenance? According to a recent study from Clever Real Estate, homeowners shell out over $15,400 on average per year, on top of their mortgage.

Check Your Credit Score and Debt-to-Income Ratio

Borrowers will generally need a minimum credit score of 620 to qualify for a conventional mortgage, though some government-backed mortgages have more lenient standards. To get the best rates, you’ll need a score in the 700s, especially now that rates have increased, and lender standards are tightening.

Lenders will also look at your debt-to-income ratio, which measures how much of your income is allocated each month to your debts. In general, lenders want a DTI of less than 43%with no more than 28% going toward your mortgage.

» Read More: Am I Ready to Buy a House? 9 Questions to Help you Find the Answer

2. Save for a Down Payment

Save up as much as you can for your down payment – the more money you can put down at the beginning, the lower your monthly mortgage payment will be.

Not all mortgages require a down payment, and some require only a very small down payment — certain government-backed loans, like VA loans or FHA loans.

The down payment amount varies depending on your financial circumstances, and the requirements of your loan, but the average down payment is 12% of the listing price, according to the National Association of Realtors. Keep in mind that if you put down less than 20%, you’ll have to pay private mortgage insurance until you reach 20% equity.

» Read More: How Much Money Should I Save Before Buying a House?

3. Find a Local Real Estate Agent You Trust

Because of their intimate knowledge of the local market, a good real estate agent is an invaluable partner, especially if you’re buying for the first time.

They can help you gather and prepare the documents you need, put in competitive offers, negotiate the sale, and guide you through the complicated closing process. A good agent will get you to the latest listings before they’re snapped up and will argue for contingencies in the purchase agreement that could save you from a disaster.

Finding a dependable agent can be tricky, even if you have a good local recommendation. Our friends at Clever Real Estate offer a free service that matches you with the perfect agent for you — and unlike a casual recommendation from an acquaintance, all Clever partner agents are pre-vetted with a proven track record of success in your local market.

Meet the Best Agents Near You

Submit your information to get started today!

4. Prepare Your Documents

Here are the documents you’ll need to to buy a home:

  • Proof of Income: Collect a month’s worth of paycheck stubs, unemployment payment records, or other documents that prove you have regular income.
  • Tax Documents: Your lender will want to look at the past two years of tax returns (at least), plus your W-2 forms.
  • Bank Statements: Gather bank statements from the last 60 days to give your lender an idea of how much money is going in and out of your bank accounts.
  • Rental Payment History and References: Lenders will want to know where you’ve resided for the last two years (at least), how much and when you paid rent, and the names of your landlords to use as potential references.
  • Loan Papers: To establish your debt-to-income ratio, include papers pertaining to any debt you have, including car loans, student loans, credit cards, etc.
  • Documents for Other Assets: Include any forms related to savings, stocks, bonds, or other securities you may own.

5. Get Preapproved for a Mortgage

Do your research based on your income to find a reliable lender and mortgage type with help from your real estate agent. Then, get a preapproval letter.

This isn’t a guarantee you’ll get a mortgage, but it’s a statement of confidence from your lender that you’ll likely qualify and can indicate to sellers that you’re a committed, qualified buyer. With that letter, they’ll take your offers more seriously.

6. Find Your Ideal Home

Now comes the exciting part! With your preapproval letter in hand and your buyer’s agent at your side, it’s time to start looking at homes.

On one hand, you should take your time and look at as many homes as you want. Buying a home is a huge decision, and you want to make a confident, informed decision so you don’t run into buyer’s remorse down the line.

At the same time, in a hot market you’ll have to move fast, since you’re competing against a ton of other motivated buyers. You can lean on your agent here to set up showings and advise you on the local market.

But don’t get too caught up in finding the perfect “dream home” — just something that’s good enough for you right now, at the right price.

» Read More: 15 Questions to Ask When Buying a House

7. Make an Offer

Once you settle on a home, it’s time to put in your offer.

Your agent will help you decide on an amount that’s within your financial means but is also competitive for your market. An offer that’s too low will be dismissed; an offer that’s too high could lead to overpaying.

It can be tempting to exceed your budget to secure a home you love, but you’ll probably regret it when you feel the financial stress from a high monthly mortgage payment later.

Don’t forget to include some contingencies in your offer! These are clauses that will allow you to back out of the sale without financial penalty if certain problems arise down the line. Once again, talk to your agent to figure out which contingencies you need to protect you.

8. Pay Earnest Money

If your offer is accepted, you’ll have to pay your earnest money. This will be defined in the offer, but is usually around 1%-3% of the sale price.

This money is put into escrow and is a token of good faith on your part, to show the seller you’re serious about buying their house and that they’re protected if you back out of the sale unreasonably.

» Read More: Navigate the Escrow Timeline With These Helpful Tips and Resources

9. Order an Inspection

Next, order a general home inspection — a close inspection of the home, conducted by a licensed professional, to make sure the home is in habitable condition and that there aren’t any hidden, serious problems with the property.

» Read More: Read This BEFORE Your General Home Inspection

9. Negotiate Repairs

Once the home inspection is complete, go over the report with your agent. If the inspector discovers major problems, your agent can help you negotiate with the seller to have them addressed.

You can either ask the seller to have the repairs done before the sale, or you can negotiate repair concessions — essentially lowering the sale price in the amount of the estimated cost of the repairs. It’s also possible to negotiate a cash credit at closing, in which the seller refunds part of the sale price because of the repairs — but this requires the approval from your lender.

If you’re in a strong seller’s market and the seller has received multiple offers, you won’t have much leverage to ask for a long list of repairs.

10. Secure Your Mortgage and Insurance

Your lender will want to dive into your finances to make sure you can handle the financial obligation of the mortgage in question. Once they’ve done that, you and your agent can move onto insurance.

Get homeowners’ insurance if you don’t currently have it. If you’re putting down less than 20% as a down payment, you will also need private mortgage insurance.

Bring proof of insurance to closing, a closing disclosure form, your share of closing costs, and your ID.

11. Get a Home Appraisal

Your lender will order a home appraisal to make sure the home is actually worth the amount of your mortgage.

If the appraisal amount comes in low, you’ll have to cover the gap with cash or the deal may fall through. (You might be able to back out of the sale with your earnest money intact, if the appraisal comes in substantially low — but only if you have an appraisal contingency.)

If the appraisal comes in at the sale price or higher, you’re getting a good deal and your lender will back you.

» Read More: What Do Appraisers Look For? Here Are 11 Things They'll Check

12. Close and Move in

On closing day, you finalize the home sale, and the seller officially and irreversibly transfers to you, the buyer.

On closing day, you and your agent will meet with the seller and their agent, often at the office of the escrow or title company. You’ll transfer funds from escrow to the seller. Then the buyer and seller pay closing costs and sign and file the financial paperwork to update the deed to reflect the change in ownership.

At the end of closing, you’ll get your keys, and you’re officially a homeowner! You’re now free to move in and start settling into your new house. Congratulations!

Recommended Reading

Frequently Asked Questions About Home Buying

What is the process of buying a house?

The process of buying a house involves saving up, finding a good real estate agent, getting all your documents ready, finding the right house, and making an offer. If your offer is accepted, put down earnest money and order a house inspection. If there are issues, negotiate for repairs. Then get a mortgage and insurance, get the home appraised, and then close and move in. Learn more about buying a house.

How does home buying work?

To buy a home, you need to save up for a down payment. Get a trustworthy real estate agent from the beginning. They’ll help you through the rest of the process: getting all the documents ready, finding houses for you, making offers on houses you like, ordering inspections to find any issues, negotiating repairs to fix those issues, finding a good mortgage lender and insurance provider, getting the home appraised, and officially closing on the house. Learn more about buying a house.

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Posted in Buying a House, Closing on a House, Escrow, Real Estate Agent Commission