10 steps to becoming a homeowner

All the most important things to know about the process

How to become a homeowner: key tips to remember

  • Do your research and learn about mortgages
  • Decide on a budget and calculate a down payment
  • Find a lender and a real estate agent you can trust
  • Find a home, make an offer and get an inspection
  • Prep for closing and take notes

Becoming a homeowner has always been closely associated with the American dream, financial independence and a feeling of security. That dream is real, but it’s not as simple or easy as it sometimes appears. If you’re interested in learning how to become a house owner and curious about how to get started, you’re reading the right article. We’ve narrowed down 10 of the most important steps to becoming a homeowner, but there could be many more depending on how detail-oriented you are. These are the big ones. While you’re at it, you might also be interested in our new homeowner checklist.

1.     Begin with research

If you’re wondering how to be a homeowner, the most important thing you can do first is to educate yourself. Research the market you’re considering to see what homes are selling for, look into all the dark nooks and crannies of your credit and financial outlook, examine your assets versus your liabilities, and start thinking about what you can afford. Go out and see some open houses and take a few tours. Make sure to learn about the community you want to join.

2.     Learn about mortgages

Unless you’re lucky enough to have a pile of cash you need to get rid of, you’ll probably need a mortgage (home loan). Even if you are flush with cash, you might want to keep some available so you’re better prepared for emergencies, repairs and maintenance. There are many kinds of mortgages, so selecting one that makes the best sense for your financial situation is important. Thirty-, 15- and even 10-year mortgages are available. Depending on your credit score, you may qualify for different types of mortgages, including traditional loans, Federal Housing Administration (FHA) loans, Veterans Administration (VA) loans or even United States Department of Agriculture (USDA) loans. All have requirements and restrictions that only certain buyers will meet, so educate yourself upfront on what’s out there and available to you.

3.     Decide on a budget

Your bank probably has a mortgage calculator on its website. While you shouldn’t take these numbers as exact, they can help give you the ballpark of how much you might have to pay every month for various mortgages based on the prices of homes you aspire to own. While you’re at it, review your credit with a free report. Start thinking seriously about what you can and can’t afford. Don’t forget other certain and potential expenses that can come with purchasing a home, like closing costs, new furniture, repairs and maintenance, yardwork, legal fees and homeowners association fees. Not all will apply to you, but some could, and you must be prepared for every possibility and plan your finances accordingly.

4.     Calculate a down payment

Traditional and FHA loans typically require an upfront down payment of 20% of the home’s agreed-upon purchase price. Some loans, like VA loans, don’t require a down payment, so it’s important to look into all your possible loan options. Lenders often require private mortgage insurance (PMI) for buyers who put down less than 20% at the time of purchase. PMI typically consists of between 0.5% and 2% of your loan payments. Once you reach 20% equity in your home, your PMI requirement should disappear from your loan. Many people assemble a down payment with some combination of inheritances, savings, investment withdrawals, and gifts from family or friends.

5.     Find a lender and get qualified and preapproved

Finding a lender is important because you’ll want to build a relationship with someone you can trust. Look for experience and a solid reputation. You won’t want someone who makes you feel pressured or uncomfortable at any stage in a complex process. You’ll share information about your finances, including debts, income, credit and investments, which will give you a general idea of what loan size you will qualify for. Take your qualification one step further by securing preapproval, which includes a letter indicating how much your lender is willing to loan you. Being qualified and preapproved makes your offer more attractive to sellers. Review our guide to home finances for more helpful tips. 

6.     Find a real estate agent

A real estate agent is another arguably essential professional you will want by your side as you embark upon what is the biggest investment of most people’s lives. Talk to friends and family you trust about their experience with agents in the area where you’re considering homes. As with the lender, you’ll want someone you feel comfortable with who has significant experience and a solid professional reputation.

7.     Find the right home

Now that you’ve established a budget and found a lender and real estate agent you trust, make a list that details what you’re looking for in a home. In three columns, list what you must have, what you’d like to have, and what would be a dream come true. These could be any features, from the number of bathrooms or hardwood floors, to a flat, fenced-in backyard or a saltwater pool. Add a few “absolutely nots” that you’d consider deal breakers. This will help your agent zero in on what you want.

8.     Make an offer and order an inspection

Once you’ve found a home you love, consult with your real estate agent about making an offer. Your agent should help guide the process and get you the best price possible while balancing your needs with knowledge about the value of homes in the area. When you’ve arrived at a price the seller agrees to, you’re ready for a home inspection, which can uncover any necessary repairs or serious problems. If the inspection discovers issues, it’s time to negotiate further with the seller about whether they’d prefer to pay for repairs or lower the purchase price. Other options include waiving the home inspection contingency, discussed in a previous post.

9.     Apply for the loan

When you and the seller reach a price agreement, it’s time for a formal loan application with your lender. At this stage, as long as the loan amount is within the limits your lender has already established during qualification and preapproval, you shouldn’t expect any surprises. This part should be the last bit of paperwork and info sharing required before the actual closing.

10.  Prepare for closing

During your final walk-through of the home, be prepared to take notes on anything you notice. Make sure the seller completed all the required repairs. Get used to signing your signature many times, as you will be required to do so on your closing day. Hopefully, at this point, you’re not still asking yourself, “What do I need to become a homeowner?” Because congratulations, you are one! Once you move in, you might also want to check out our guide to home appliances.


The information in this article is intended to provide guidance on the proper maintenance and care of systems and appliances in the home. Not all of the topics mentioned are covered by our home warranty or maintenance plans. Please review your home warranty contract carefully to understand your coverage.
 

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