The Process of Buying a House and Getting a Mortgage

Written By: Camile Carlson

Reviewed By: Jeremy Blaylock, and Blake Thomas

Buying a house can feel overwhelming, especially if it’s your first time. There are many steps, from figuring out how much money you can spend, picking the right mortgage, and finally closing the deal. This guide will help make the process easier to understand. Whether you’re buying your first home or your next one, knowing these important steps will help you make good choices and reach your goal of owning a home. 

The steps you go through to buy a home:  

• Determine the price you want to pay and the mortgage you want.  
• Get pre-approved for a mortgage.  
• Find a real estate agent to help you.  
• Start house hunting.  
• Make an offer on a home you love.  
• Get home inspections and appraisal.  
• Finalize your mortgage  
• Close on your home.  
• Move in!  

This seemingly basic process may seem quite complicated, but this guide will help navigate you through the process with a good understanding of your options. You will likely have many questions along the way. Check out each of the questions below as you prepare to navigate the roller coaster of buying a home!  

• What price of home can you afford? 
• What are my mortgage options? 
• What is a pre-approval and how do I get one?  
• How do I choose a good real estate agent?
• How do you begin house hunting? 
• How do you make an offer on a house? 
• What is a home inspection and appraisal?  
• What are the last steps to finalize my mortgage? 
• What happens on closing day? 
• What are the important things I should do after I move in? 

What price of home can you afford?  

First, start by assessing your financial situation. If you don’t do this at the beginning, you may find you end up getting into a mortgage that is too much in conjunction with all your other expenses.  

Add up your income and add up your expenses and do the math needed to see what monthly mortgage payment you can afford, and then calculate with the interest rate the price of the home you could afford.  

In addition to affording your monthly payment, you will need to ensure you have money up front for the down payment and closing costs.  Down payments can be as low as 3% of the home’s price, though there are advantages to downpayments at or above 20%, for those looking to avoid PMI, or Private Mortgage Insurance. 

Your credit score also plays a major role in the interest rate you will qualify for. Check what your credit score is and begin to make improvements if needed. You can boost and build your credit score by making your payments on time and practicing good money management. Learn more about what your credit score is and how it affects you by reading “Boosting and Building Your Credit Score” 

What are my mortgage options? 

There are many types of mortgage and loan terms to look at. It is important to do some research and get a general idea of the mortgage you want, the term you want, and discuss the current interest rate. You can also discuss these options with a trusted lender, or multiple lenders to see who can offer you the best rates. Here are a few of the mortgage options WeStreet offers, which are comparable to most financial institutions. These are not only mortgages that can be used for homes, but land and building.  

• First Home Buyer Mortgage  
• Fixed Rate Mortgage  
• Adjustable Rate Mortgage  
• FHA (Federal Housing Association) Loan  
• USDA (United States Department of Agriculture) Loan 
• VA (Veterans Association) Loan 
• Land Loan  
• Construction Loan 

Generally, loan terms are 15 years, 20 years, or 30 years. Obviously, whichever term you choose will change the amount you must pay on your monthly mortgage payment. 

Lastly, the interest rate is important. In the last several years, we have seen increasingly low interest rates, as well as rates that are very high. The interest rate can change daily and will determine the amount of interest you pay on your home. Discuss interest rates with your trusted lender. Most of the time, lenders will also have an option to “buy down” your interest rate, meaning you pay more up front for a lower interest rate throughout the life of your loan. Discuss each of these options and determine what is best for you. 

What is a pre-approval and how do I get one? 

Once you have researched your desired spending and mortgage, you can start to find a trusted lender. Local banks and credit unions are great options, as well we national banks. Whichever you are more comfortable with. If possible, compare the rates and terms offered by a few different lenders before choosing the one you want to go with. 

Many financial institutions have online applications for a pre-approval letter, which is a letter showing the lender’s willingness to provide you with the funds you would need to buy a home (pending further verification). Get online to a lender you trust and add in your information. It will normally ask for information like your employment history, income, assets, debt, name, address, and more.  

When you get a preapproval letter, the institution you do it through will most likely also check your credit. Then, you can use that letter to show potential sellers that you are serious about buying a home. 

How do I choose a good Real Estate Agent? 

Finding a real estate agent who is both knowledgeable and personable can make or break the home buying experience. You want to find an agent who you can trust and who knows the area you are buying in. Look at how many years of experience the person has, and if possible, look them up online to read other people’s reviews about their experience with them. Reddit, Google, and places like RateMyAgent are great places to start. 

Call a few agents and talk with them about your needs and see who you are most comfortable with. If you wonder what it is the real estate agent will do for you, it is a lot. You will most likely talk to them very frequently until you move into the home you buy; here is a list of some of their responsibilities:  

• Find and send you listings that are within your price range and specifications. 
• Handle negotiations between you and the seller when you find a home you like. 
• Find you options for home inspections like mold inspections, structural inspections, termite inspections, and more. 
• Schedule and attend each inspection. 
• Help to negotiate the price you will pay for the home.  
• Contact your lender when in the process of closing.  
• Coordinate all closing events, documents, and other parts of the process. 

How do you begin house hunting? 

Depending on where you are looking, and what you are looking for there could be thousands of options or just a few! Know that the housing market is always changing, not only are mortgage rates constantly changing, but also the homes available near you. If you don’t find a home you want on your first try, don’t worry, it can take a few weeks to several months to find the home that meets your needs and budget.  

When you start to house hunt, use sites like Zillow, Realtor.com, Redfin. These sites can help you see at a quick glance which homes are available in your area as well as their prices and specifications. You can also drive though the neighborhoods you want to live in and look for for-sale signs and open houses.  

Tour each of the homes you have that interest you. Normally, your real-estate agent can set you up to tour them and come with you to each home. Not only can you look for listings but have your agent also send you other listings they find that may be a good match for you. Take note as you go to each showing what you like and dislike about the homes you walk through.  

How do you make an offer on a house?  

Your real estate agent should help you navigate the many faucets of making an offer. Essentially, you choose the price you want to propose to the seller and communicate with our agent to write up an official offer letter. This letter can be personalized with aspects you like about the house and some personal background, or it can simply state the price you are offering and any other details you would like to include. Some real estate agents have templates of generic offer letters that you can fill out and have them send it. 

Decide what you want to offer for the home. For example, if the home is on the market for $250,000, you could offer anywhere from $200,000 to $300,000 depending on your budget and how badly you want the home. If you toured the home and noticed a few things that were not in working order, or in need or repair you could offer below the asking price and explain that you would use the extra money to repair the home. Here are a few other things you could consider when making an offer on a home:  

• How long has the house been on the market? – You may want to offer a lower price if the home has been on the market for a few months, as the seller may be more motivated to accept it. 
• Are comparable homes in the same price range? – Look online at other homes that offer the same things (same # of rooms and baths, garage, yard, etc) if comparable homes are lower you may want to submit a lower offer. 
• Is the home in need of repairs? – Add up how much each repair would cost and consider those costs when making an offer. You can request that money off the asking price or ask the seller to make the needed repairs.  
• How much competition is there? – At times, homes may be going fast, and a seller may have multiple offers in on their home at the same time. If you really want the home, you may want to ask for more than the listing price.  

Once you have considered all of this, submit your offer! Normally in about 1 to 3 days the seller will get back to you and let you know if your offer has been accepted or not. You will also need to consider how much money you want your earnest money to be. Earnest money is the money you offer at the time of the offer to show that you are offering in good faith, this is normally about 1% of the asking price. 

What is a home inspection and appraisal? 

Once your offer is accepted, and you have a signed contract, the clock starts ticking on your inspection period. Find out from the seller and your real estate agent how long you have to complete inspections. Decide which inspections you want performed, here are a list of some good ones to consider:  

• Standard Home Inspection  
• Structural Inspection  
• Mold Inspection  
• Termite or Pest Inspection  
• HVAC Inspection 

Keep in mind that you will need to budget for each inspection as you will have to buy the inspector. From them, you will get a report about any problems in the home. From these inspections, you will get the opportunity to propose any further improvements to the seller before you close on the home. 

After home inspections, an appraiser will come to your future home to evaluate the value of the property. “A qualified appraiser creates a report based on an in-person inspection, research into recent sales of similar properties, current market trends, and the details of the home, including its size, condition, floor plan, and amenities.” The appraiser works for your lender and ensures that the home is a worthy investment of you and your lender before allowing you to officially begin your mortgage. They also ensure that that house is worth the amount they are loaning you. 

What are the last steps to finalize my mortgage? 

After your inspections and appraisals come back, you get to start on the final steps of securing your home! With your lender, you will finalize your mortgage, sign the last papers and agree on an official closing date. You will also lock in your interest rate, meaning you choose the best interest rate you can get and commit to it to avoid any further fluctuations. 

If it hasn’t already, your mortgage will also now be submitted to underwriting, where a lender further reviews your application and checks out your information to assess risk. Throughout this process, you have most likely worked closely with a Mortgage Loan Officer who will continue to communicate with you about how the mortgage is progressing. They may have conditions you will need to satisfy in order to be approved, like paying a debt or providing more documentation, but when it is all finished, they will clear you to close.  

Lastly, you will watch for an email or message about the Closing Disclosure, which is all the documents you will need to sign and review in order to complete your purchase and begin your mortgage. This document will also outline how much you will need for closing costs, and the final terms and conditions of the loan.  

What happens on closing day? 

It’s closing day! On the day you close you will likely meet up with your real estate agent and your mortgage loan officer at the title company in order to sign the last papers and get the keys to your new home.  

Before heading to the title company, you will do one last walk through the house before it switches ownership. Make sure everything looks up to par from when you first went through the house.  

Also come with your down payment and money for closing costs so that you can finish the deal. You can normally set these up to happen electronically, or you can bring cash to the title company. An escrow account will be set up as well to pay for your homeowner’s insurance and property taxes. Both your insurance and taxes are wrapped up into your mortgage payment, making it so you do not have to worry about them being paid because they are placed into your escrow account and paid for you when they are due. 

Be prepared to sign the mounds of paperwork that they have you look through. Read through anything that is important. Sometimes you can begin reviewing these documents ahead of time to make sure you know what you are signing.  

Once signed and finished you are given the keys to your home, and you can start moving in! Know that normally you will not make your first mortgage payment until 30 or more days after you close.  

What are the important things I should do after I move in? 

While you may get carried away with unpacking, cleaning and settling in, don’t forget a few of these crucial things to do that will help you to have a safe, secure, and smooth transition into your new home:  

• Change out the locks on every door. You never know who had a key to the house before you moved in! 
• Install a new security system. You want your home to be a place you can feel safe in. 
• Test and update your smoke detectors, CO2 monitors, and HVAC filters so that you start out with clear air and warning systems set up. 
• The powerline from the pole to your house may need a warranty or insurance too! Get that checked out by an electric company. 
• Call the local utility companies and transfer each into your name so that you get the bills and notifications from them. There are lots to remember: water, sewer, electrical, trash, gas, and more!  
• Find out when your trash day is from your neighbors! Be sure you know what day to take out your bins! 
• Look into getting a home warranty. 
• Set up any other amenities you would like, like TV, internet, subscriptions, and more! 

Buying a home can be quite a feat! There is so much new information and things you need to know if it is your first time. Hopefully, as you go through the process you find answers to your questions and research any information you need to know. Getting a mortgage and buying a home is a great accomplishment.