Down payment: Unless you’re getting a loan backed by the U.S. Department of Veterans Affairs or U.S. Department of Agriculture, you’ll probably need to put some money down. While there are benefits to putting down at least the old standard of 20% of the home’s purchase price — one of them often being a lower interest rate — some lenders now offer conventional loans for as little as 3% down, and Federal Housing Administration (or FHA) loans allow as little as 3.5% down.
Although it may not always be feasible if you live in an expensive real estate market, try to keep your total housing payment under 30 percent of your gross monthly income. When you spend much more than that on your mortgage, you risk becoming “house poor” — you might live in a beautiful home but find it difficult to save or even cover other monthly expenses.
Now that a the home buyer has determined the type of home that he or she is most interested in, the location, and has obtained the services of a real estate agent, it is time to view available homes in the area. Of the steps to buy a house, this is often one of the most enjoyable. The real estate agent will locate and screen homes for the buyer and present him or her with the options that best match the established criteria. The agent can set up a date and time to visit potential homes. During this time the buyer should not feel pressured or make hasty decisions.
Keep your options open. Some homes might be listed as a two-bedroom, but if the square footage is in the same range as three-bedrooms you’ve been looking at. This could be a sign that it’s a hidden gem with a “secret” third bedroom. Secret bedrooms are often sunrooms that can be easily converted into a bedroom or an extra-large master that could be divided with some drywall.
The home buying process can take anywhere from one month to a few years, depending on the unique experience and expectations of the home buyer. On average, a home buyer can spend one to two months searching listings, several weeks to negotiate and close a deal, and then make the first mortgage payment several weeks after that. With these variations in mind, a home buyer can realistically expect for the home buying process to take roughly three months.

Closing costs and prepaids: Alex Clark, a real estate Endorsed Local Provider whose team closes an average of 100 homes a year in Portland, Oregon, advises his clients to save around 3% of a home’s purchase price for closing costs and prepaids. But that percentage can vary depending on how expensive fees and taxes are in your area. Closing costs are the fees charged by title companies and lenders involved in your real estate transaction. Prepaids cover any prorated property taxes and insurance items.

The largest metro area to make the Best Affordable Places to Live list, Houston residents spend 26.47 percent of the median blended household income on housing. The Texas metro area also sees a relatively low cost of living despite the significant number of people moving there. Houston's population grew by 6.84 percent between 2011 and 2015 due to net migration alone, according to the U.S. Census Bureau.

The last step in securing a home mortgage, and ultimately buying a home, is getting an official loan commitment for a specific home and for a specific sales price. Once again, you'll undergo a credit check, so make sure you don't take out any loans or new credit cards right up to home closing date - that could impact your mortgage loan in a negative way. At this point, you don't want to raise any "red flags" to lenders, so keep your personal balance sheet clean during the mortgage loan approval process. Once you've cleared this hurdle, you'll get a loan approval letter for the specific home you want to buy.


Closing is a formal process where all parties sign the necessary paperwork to complete the transaction and transfer the property’s title from the seller to you. The seller receives payment for the home, and you receive the house keys! From the amount credited to the seller, the title representative subtracts the funds to pay off the existing mortgage and other transaction costs. Deeds, loan papers and other documents are prepared, signed, and ultimately filed with local property record office.
Property tax is the amount of money that you are required to pay based on the property’s assessed value. Property tax can be very costly, depending on where you live. This is something you’ll want to consider when calculating how much you plan on spending on your overall homeownership expenses. Property tax payments are usually due annually, but more often than not, they are divided into and included in your monthly escrow payment.
And so, on a 30-year mortgage, our homebuyer, given an excellent credit profile, would take on approximately $1,762 in monthly payments (at a 5% interest rate, including 78 mortgage insurance payments of about $113 at 0.5%, and blending property tax into the payments at 1.25%). That's based on an initial savings of $30,000, used as a down payment on a $300,000 house.
How To Buy A House, In 7 Steps The journey to buying a house can lead you down some perilous roads, past pushy real estate agents, self-interested bankers and not-so-meticulous home inspectors. We lay out a step-by-step approach to help you avoid those pitfalls, from what to look for in a house that will truly make you happy to assembling a team to help close the deal.
As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the "over-55" rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit—subject to limitation—free from taxation.
That is, you need to be thinking about how much it'll set you back when you buy a lawn mower or pay a service to cut your grass. You'll want to keep in mind that when you buy a home, you'll soon be making the owner of a local furniture store very happy. If you plan on having kids, someday you'll be begging them to turn off the lights and asking, "Do you think I'm made of money?"
In addition to saving for a down payment, you’ll need to budget for the money required to close your mortgage, which can be significant. Closing costs generally run between 2% and 5% of your loan amount. You can shop around and compare prices for certain closing expenses, such as homeowners insurance, home inspections and title searches. You can also defray costs by asking the seller to pay for a portion of your closing costs or negotiating your real estate agent's commission. Calculate your expected closing costs to help you set your budget.
What's clear is that home buyers have options, and while the savings required to get a first home can climb to the neighborhood of $50,000, they can also come in around the mid-twenties. There are also assistance plans available from Fannie Mae and Freddie Mac, featuring 3%-5% down payments, and each comes with it own pros and cons. First-time home-buyers should also look into state and local plans. The research you invest in your process ahead of time can greatly affect what you have to save up before turning the key to your new front door.

Closing is a formal process where all parties sign the necessary paperwork to complete the transaction and transfer the property’s title from the seller to you. The seller receives payment for the home, and you receive the house keys! From the amount credited to the seller, the title representative subtracts the funds to pay off the existing mortgage and other transaction costs. Deeds, loan papers and other documents are prepared, signed, and ultimately filed with local property record office.
Before you even look at a single property, you need to know exactly how much you can afford. There are several online calculator tools you can use, but these tools are only estimates. Use these tools as a guide, but then adjust the amount based on your individual situation. How much is your current rent payment? Did you meet that payment each month with ease, or was it a bit of a struggle each month? The payment you can afford right now is a good indicator of what you'll be able to afford in your new home.
Almost 95 percent of all home searches today begin on the Internet. With just a few clicks of the mouse, homebuyers can search through hundreds of online listings, view virtual tours, and sort through dozens of photographs and aerial shots of neighborhoods and homes. Spend some time defining your goals and have a pretty good idea of the type of home and neighborhood you want. By the time you reach your real estate agent's office, you are halfway to home ownership.

Many home shoppers use a lender who was recommended by a friend, family member or real estate agent, and they don’t bother shopping around. But that doesn’t guarantee you’ll get the best rate, or even get a lender who is experienced with loans for your particular situation. The CFPB recommends talking to at least three lenders to get the best loan for you.
"Building equity in a home can be a good way to grow your wealth, but it's important that you do so in a way that doesn't stretch your finances too thin," he cautions. "Things can get really ugly when the housing market declines, so it may be a good idea to take out a 30-year mortgage but accelerate your monthly payments as if you had a 15-year mortgage. If you ever need to lower your payment in the future, you'll still have that option."

One of the ways your lender makes sure you and your house are a good bet is with a home appraisal. This is when someone does a professional evaluation of how much your home is worth. If the appraisal ends up higher than your offer, go celebrate. If it’s not, you may either have to make a larger down payment, get a second opinion, or renegotiate the price. Or you may decide to walk away from the deal.​
Even when your purchase offer has already been accepted, if inspections reveal any problems, you may want to renegotiate the home's purchase price to reflect the cost of any repairs you will need to make. You could also keep the purchase price the same but try to get the seller to pay for repairs. Though you may not have much scope to demand for repairs or a price reduction in case you're purchasing the property "as is," there is no harm in asking. You can also still back out without penalty if a major problem is found that the seller can't or won't fix it.

Several years ago I remember a friend advising me to purchase a house before I was ready, and now I have been curious about the repercussions of purchasing a house outside your financial capabilities. I appreciate that you specifically pointed out that you should never stretch to buy your primary residence thinking that you can take cash out or flip it for a quick profit in a few years. Thank you for the advice regarding financial planning in purchasing real estate!
Further prepare by taking advantage of a first-time homebuyer education course, often offered by local Realtors’ offices, banks or even your county at a community center. Many courses stress the importance of financial preparedness and getting ready to go through the rest of the home purchase process, and a class will help you get ready for what’s ahead.
Down payment: Unless you’re getting a loan backed by the U.S. Department of Veterans Affairs or U.S. Department of Agriculture, you’ll probably need to put some money down. While there are benefits to putting down at least the old standard of 20% of the home’s purchase price — one of them often being a lower interest rate — some lenders now offer conventional loans for as little as 3% down, and Federal Housing Administration (or FHA) loans allow as little as 3.5% down.
Following a decline in homeownership after the Great Recession, homeownership rates nationwide are above 64 percent as of the first quarter of 2018, according to the U.S. Census Bureau. While homeownership has not returned to its historical peak of 69.2 percent in 2004, it is edging upward again after hitting a 50-year low in mid-2016 at 62.9 percent.
Down payment: Unless you’re getting a loan backed by the U.S. Department of Veterans Affairs or U.S. Department of Agriculture, you’ll probably need to put some money down. While there are benefits to putting down at least the old standard of 20% of the home’s purchase price — one of them often being a lower interest rate — some lenders now offer conventional loans for as little as 3% down, and Federal Housing Administration (or FHA) loans allow as little as 3.5% down.
To begin, check your credit report to make sure there are no errors on it. Credit reports from each of the three major credit reporting agencies: Equifax, Experian and TransUnion, are available for free once every 12 months. If there are errors, then contact each agency and report the mistake. You can also check your credit score for free with Bankrate. The goal is to raise your credit score before you shop for mortgages.
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