Ready to buy a house but not sure where to start? We've all been there!

This step-by-step guide covers that question we've heard a million times: "How do you buy a house?" Below we'll cover everything you'll need: assessing your readiness, financial preparation, preapproval, finding an agent, and closing the deal.

My Home Pathway's proven system helps first-time buyers like you take control of the process. Ready to learn the exact steps to make your homeownership dreams happen? Let's get started. Take your first step toward homeownership today.

Key Takeaways

Check both your money and mindset before jumping in - we're talking savings, monthly budget, job stability, and your readiness to handle a mortgage and home maintenance. Know your numbers and your gut feeling. Our rent vs. buy guide helps you weigh these factors honestly.
That pre-approval letter isn't just paper - it's your power move. It shows sellers you're serious and gives you a clear budget before house hunting. Plus, you'll know exactly what loans work for your situation. Understanding the pre-approval process gives you a clear picture of what you can afford and shows sellers you mean business.
Skip the DIY house hunting and partner with a pro agent. They'll spot problems you might miss, know the hot neighborhoods, and help you win in multiple offer situations. Their expertise pays for itself.
Assess Your Readiness

Let's get real about buying a house - it's more than picking out paint colors and planning your furniture layout.

Here's what you need to know about being truly ready to buy:

Your Money Situation

Take a hard look at your paycheck - is your job solid? Could you handle the mortgage if your income dipped?
Count your savings - you'll need more than just the down payment
Check your monthly spending - mortgage payments are just the start (think property taxes, insurance, repairs)

Your Life Plans

Planning to stick around? Moving costs eat into any equity you build
Big life changes coming up? Factor in potential career moves or family plans
Ready for the responsibility? No landlord to call when things break

Your Market Smarts

Know what's happening in your target neighborhoods
Understand if home values are trending up or down
Check if it makes more sense to rent or buy right now

My Home Pathway helps you nail down these decisions with confidence. We've guided countless buyers through this exact process.

Get a personalized readiness assessment.

Remember, buying a house means being ready with both your wallet and your mindset. Let's make sure you're set up for success from the start.

Financial Preparation

Let's talk money moves before house hunting because getting your finances in order makes everything smoother down the road.

Key steps include checking your credit score, saving for a down payment, and organizing financial documents. Each is vital for securing a mortgage on favorable terms.

Check Your Credit Score

Generally, you’ll need a minimum score of 580 to qualify for most mortgages, but aiming for a score in the upper 700s can significantly improve your chances of getting favorable terms [source].

The numbers break down pretty simple:

580: Gets you in the door for most FHA loans
620: Minimum for conventional loans
700+: Now we're talking better rates
740+: This is where you'll see the best terms

But Remember: My Home Pathway can help if your credit score isn't where it needs to be, or if you're getting bad terms on the deal. This is what we do! So don't worry if you aren't exactly where you need to be, you just need someone to help you show the lender that you're solid!

So what's next? Let's tackle your credit report the smart way - here's exactly what you need to do.

Pull your credit report and check for errors
Watch your credit usage - keep those card balances low
Stay current on all bills - late payments hurt your score big time
Hold off on opening new credit accounts
Sign up for My Home Pathway

Financial readiness goes beyond having a good credit score; it includes being prepared for the financial responsibilities of homeownership.

Save for a Down Payment

Getting that down payment together might feel like climbing a mountain. Let's break it down.

Know Your Numbers. Different loans need different down payments:

Conventional loans: 5-20% of purchase price
FHA loans: As low as 3.5% down
Some special programs: Only 3% down
VA loans: Zero down (if you qualify)

Understanding your loan options helps you set the right savings goal [source].

Putting 20% down usually gets you:

No PMI (saves you hundreds monthly)
Better interest rates
Lower monthly payments
Instant equity in your home
Stronger offers in bidding wars

Don't have 20%? No problem:

First-time buyer programs
State assistance programs
Employer help programs
Gift funds from family
Special profession programs (teachers, healthcare workers)

Your down payment isn't your only expense:

Closing costs (2-5% of loan)
Moving expenses
Initial repairs
Basic furniture needs
Emergency house fund

Smart buyers plan for all these costs upfront.

Remember: your down payment size shapes your entire homebuying journey. Let's make sure you're saving the right amount.

Get Your Financial Paperwork Ready for Your Mortgage

Let's go over exactly what papers and recent bank statements you need before talking to lenders.

Your basic must-haves:

Last 2 months of bank statements (every page!)
Past 2 years of tax returns
List of all your assets
Recent statements from retirement accounts
List of debts (student loans, car loans, credit cards)

Got a regular job? You'll need:

Last 30 days of pay stubs
W-2s from the past 2 years
Proof of any bonus or overtime
Employment history for 2 years
Contact info for the HR department

Run your own show? Grab these:

Past 2 years of business tax returns
Profit and loss statements
Business bank statements
1099 forms
List of business debts

Learn how these docs affect your approval

Don't forget about any alimony or child support documents as well!

Getting these docs together now saves major headaches later. Let's make your mortgage application smooth sailing.

Ready to get your paperwork organized the right way? Start your document checklist now.

Create a Budget that Works in the Real World

Forget what the bank says you can borrow. Set your own budget based on:

Your actual monthly spending
Future goals (kids, travel, retirement)
Job stability factors
Comfort with financial risk

Keep your housing costs in check (The 28% Rule): To understand what an affordable monthly mortgage payment would be for you, review your budget and consider average mortgage rates. Generally, your mortgage should not be more than 28% of your gross monthly earnings.

Your mortgage payment (including taxes and insurance) should stay under 28% of your pre-tax income
For someone making $5,000 monthly, that's $1,400 max
Adjust down if you have other significant debts
Factor in your savings goals too

Budget for these monthly expenses:

Property taxes (varies widely by location)
Homeowners insurance ($100-200/month - rates can be higher in areas that experience natural disasters)
HOA dues if applicable
Utilities (often higher than in rentals)
Maintenance fund (about 1% of home value yearly)

A realistic budget is key to managing finances during the home buying process. Set a hard budget limit and stick to it, even if lenders approve a larger loan than you prefer.

This will help prevent financial strain, especially in a competitive market. Learn from other buyers' experiences.

Get Pre-Approved for a Mortgage

We've seen this play out hundreds of times - the buyers who get preapproved first win the homes they want. Here's why it matters and how to do it right.

Why Preapproval Gives You Power

Think of preapproval as your VIP pass:

Shows sellers you're serious about buying
Tells you exactly what you can afford
Speeds up your closing when you find "the one"
Gives you confidence in competitive situations

The Preapproval Process

What actually happens:

Lenders pull your credit report (this is a hard inquiry)
They verify your income and employment
They check your savings and assets
They calculate your debt-to-income ratio
They give you a maximum loan amount

Most lenders want to see you using no more than 43% of your monthly income for debt payments, but they'll really smile if you're at 36% or lower. [source]

And remember, there are specific categories that banks look at for calculating debt-to-income ratio and credit card payments is only one of those categories.

Front-end DTI: Compares your income to your housing costs, like mortgage payments, property taxes, and homeowners insurance
Back-end DTI: Compares your income to all your monthly debt payments, including credit cards, auto loans, student loans, and more

Shop Around for the Best Deal

Lenders want to make sure the house is worth what you're paying for it - after all, it's their investment too.

If the home's value comes in low during the appraisal or there are serious problems with the structure, you might hit a wall with your mortgage approval.

Low Appraisal Value

When a home's appraised value comes in lower than what you've agreed to pay, it can stop your mortgage in its tracks. Simply put: if you're trying to buy a house for $300,000 but it only appraises for $275,000, your lender sees that gap as a big risk.

You've got a few options if this happens.

You could try to get the seller to lower the price to match the appraisal, or you might need to come up with a bigger down payment to make up the difference.

Structural Problems

Major problems with a house - like foundation cracks, bad plumbing, or a roof that's falling apart - can kill your mortgage approval fast.

These aren't just cosmetic issues that you can fix with a fresh coat of paint; they're serious problems that make lenders worry about the house's safety and value.

#5 Incomplete or Incorrect Application

Making mistakes on your mortgage application - even small ones - can bring the whole process to a screeching halt.

The underwriters who review your application are looking at every detail and they won't hesitate to reject it if things don't add up.

Before you submit your loan application, go through it with a fine-tooth comb. Let's look at what paperwork you might be missing and the kind of mistakes that typically trip people up.

Forgetting to sign all required forms and disclosures - every missing signature means a delay in processing.
Leaving employment gaps unexplained on your application - lenders need to know what you were doing during any work breaks.
Not reporting all sources of income, including side jobs or rental income - more income usually helps your case.
Sending outdated pay stubs and bank statements - lenders need your most recent documents, usually within the last 60 days.
Missing tax returns or sending incomplete ones - make sure you include all schedules and pages.
Not explaining large deposits in your bank account - lenders need to verify where this money came from.
Forgetting to include all debts and monthly obligations - being upfront helps avoid surprises during underwriting.
Providing inconsistent information across different forms - double-check that your numbers match everywhere.
Not including divorce decrees or child support documentation if applicable - these affect your monthly obligations.
Failing to respond quickly to requests for additional information - delays can cause your rate lock to expire.

Pro Tip: If you need help applying for a mortgage, My Home Pathway is a free tool that could help you! Learn how it works.

Bonus: A Few More Reasons (That Don’t Happen As Often)

Financial Changes: Last-minute changes to your finances can make mortgage lenders uneasy, especially when they spot unusual deposits or withdrawals in your accounts.

Large Bank Transactions: Big deposits in your bank account - especially ones over 25% of your monthly income - will need to be explained to your lender. Keep documentation for any major deposits, whether they're work bonuses, tax refunds, or family gifts, to avoid delays in your mortgage approval. [source]

Increased Debt: Taking on new debt during your mortgage application process can put your approval at risk, so focus on paying down existing loans and avoid taking on any new ones until you've closed on your home.

Not Meeting Mortgage Loan Program Requirements: Each type of mortgage comes with its own set of rules - what works for a conventional mortgage loan might not cut it for an FHA loan. Let's look at what you'll need to qualify for these different types of mortgages so you can figure out which one might work best for you.

Conventional Loan Requirements: For a conventional mortgage loan, you'll need decent credit - typically between 670 and 739 - and your monthly debts shouldn't eat up more than 43% of your income (though staying under 36% will get you better rates). While you only need to put 3% down, keep in mind that a larger down payment can help you snag better terms and lower monthly payments. [source]

FHA Loan Criteria: If your credit score isn't perfect, an FHA loan might be your ticket to homeownership - they'll work with scores as low as 580, though better credit always means better rates. Just keep in mind that FHA loans come with an extra step: they need to make sure the house you're buying is in good shape, so it'll need to pass a special inspection for safety and condition.

Steps to Improve Your Chances of Approval

Never go with just one lender:

Try at least 3 different types (big bank, credit union, online lender)
Compare interest rates closely
Check the loan fees
Ask about down payment requirements
Review the closing cost estimates (compared to your down payment)

Make Preapproval Work For You

Smart strategies:

Get preapproved before viewing homes
Know preapprovals typically last 90 days
Understand preapproval ≠ final approval
Ask for a preapproval letter you can customize for each offer

Sellers and real estate agents usually prefer offers from preapproved buyers, reducing the risk of financing issues.

Remember, getting preapproved doesn’t obligate you to borrow from that lender, but it helps you understand your loan terms upfront.

Find a Real Estate Agent

Don't skip this step - a great agent becomes your secret weapon in the home buying game.

They'll spot hidden gems before they hit the market, tell you which neighborhoods are heating up, and help you avoid overpaying.

When choosing your real estate agent, experience matters but personality fit matters just as much. You'll spend a lot of time with this person, so interview at least three before deciding.

Ask how many buyers they've helped recently, what areas they know best, and how they handle bidding wars. Pay attention to how quickly they respond and whether they actually listen to what you want.

The best part? You typically don't pay your buyer's agent directly - their commission comes from the seller's side of the deal.

So you get professional guidance without an out-of-pocket cost. That's why working with an experienced real estate agent is a no-brainer, especially for first-time buyers.

Start House Hunting

This is where things get real - you're about to walk through potential homes and imagine your life there.

Your agent becomes your best friend during this phase. Be crystal clear about what you absolutely need versus what would be nice to have. Can't live without a garage? Say so. Want a big backyard but could compromise? Let them know.

Before hitting open houses, make your must-have list:

Minimum bedroom/bathroom count
Neighborhood preferences
Commute limits
School district requirements

Home searches can get overwhelming, so keep your priorities straight.

When you visit homes, don't just look at the property - check out the whole area. Drive around at different times of day. Where's the nearest grocery store? How's the traffic? These details matter when you actually live there.

Make an Offer

Found your dream home?

Time to make a winning offer without breaking the bank. Start by asking your agent for a comparative market analysis so you know exactly what similar homes actually sold for. Your offer needs a strong earnest money deposit - typically 1-3% of the purchase price - to show sellers you're serious.

Be ready for negotiation since most sellers will counter your first offer. Know your absolute maximum price and which contingencies you won't compromise on before discussions heat up.

Home Inspection and Appraisal

Once your offer is accepted, schedule a home inspection to uncover potential issues. A professional inspector will evaluate major systems like plumbing, electrical, and HVAC to identify any problems.

The inspection typically occurs post-offer acceptance but before finalizing the purchase. If significant issues are found, request repairs from the seller or consider walking away from the deal.

Finalize Your Mortgage

You're in the home stretch!

Now comes the critical part where many deals fall apart. Once your offer's accepted, the mortgage company takes center stage to finish your loan approval.

They'll order an appraisal to verify the home's worth matches the loan amount, and you'll address any inspection issues that came up.

Here's the golden rule during this phase: do absolutely nothing with your finances. Seriously.

Don't buy furniture for the new place.

Don't finance a car.

Don't switch jobs.

Don't max out credit cards.

Your lender will re-check your credit and employment right before closing, and changes can torpedo your loan at the last minute. These are the main reasons mortgages are denied.

Even small changes to your financial picture can cause big headaches. I've seen buyers lose their dream homes days before closing because they made seemingly innocent financial moves.

The mortgage company wants to see the exact same financial profile they approved initially.

Close the Deal

The big day is almost here! Closing is where all the paperwork comes together and you officially become a homeowner.

This is no time to skim documents - read everything carefully.

Three days before closing, your lender will send your Closing Disclosure. This document shows every single penny you'll pay, including your loan terms, monthly payments, and closing costs. Compare it to your Loan Estimate to catch any surprise fees.

Don't skip the final walk-through - typically done 24 hours before closing. This is your last chance to verify the home is in the condition promised.

Check that all agreed-upon repairs were completed and nothing has been damaged since your last visit.

That's It! Time to Move In!

On behalf of everyone from My Home Pathway, we would like to say congratulations, you’re now a homeowner. Take a moment to enjoy your new home and the journey that brought you here. Welcome to your dream home!

Frequently Asked Questions

How long does it typically take to receive a pre-qualification letter?

You can typically expect your pre-qualification letter within one to three days. It's a pretty quick process!

What is the main purpose of getting pre-qualified or pre-approved when buying a home?

Getting pre-qualified or pre-approved shows sellers you're serious and have the financial backing to make the purchase. It puts you in a better position to negotiate and helps speed up the buying process.

What should a borrower expect during the pre-approval process?

During the pre-approval process, expect to fill out a mortgage application, get your credit checked, and maybe pay a small application fee. Just be ready to share an idea of your down payment too!

How can buyers make their offers more appealing in a seller's market?

To stand out in a seller's market, buyers should keep their offers simple and limit contingencies. This makes your offer more appealing and helps you compete better!

What service does My Home Pathway provide for potential homeowners?

My Home Pathway helps you boost your financial health and guides you through the mortgage loan process, making it easier to get approved for your dream home.

If you are still not pre-approved sign up at My Home Pathway to start your home buying journey.

Disclaimer: My Home Pathway is a technology-driven risk improvement platform. We are not a mortgage broker or lender and are not representatives of any home loan programs. We are not a credit repair company, HUD-certified counseling agency, or one-on-one home counselor. While we offer mortgage-related services, we are not a bank, non-profit organization, foundation, or real estate agency. We may partner with those organizations to provide content and access related to our services.

The information provided is for educational purposes only and should not be considered credit repair advice or housing counseling services. For credit repair assistance or housing counseling, please consult with appropriate certified professionals or HUD-approved agencies.

How Do You Buy a House: The Ultimate Step-by-Step Guide