Here's what to expect when buying your first home

Buying a home is exciting—but with all the steps involved, it might also feel overwhelming. As you jump in, you may feel more comfortable by learning what to expect along the way.

Before you start the homebuying process, it’s a good idea to prepare your finances and consider whether you’re ready for homeownership responsibilities. If you haven’t given these factors much thought, you can always hit the pause button and ask yourself these questions.

Ready to move forward? Here’s a basic roadmap to buying a home.

1. Call a lender to get preapproved for a mortgage

A preapproval is a letter from a lender that tells you how much you can expect to borrow. It’s not a final number, but rather a good estimate based on your income, credit, debts (from student and car loans to credit card balances), and the amount you’ve saved for a down payment. This helps you set a budget so you can tour homes within that price range.

You don’t have to borrow up to your preapproved limit. If you take an estimated purchase price and your down payment, you can use an online mortgage calculator to figure out a monthly payment that includes:

• Principal and interest
• Homeowners insurance
• Property taxes
• Private mortgage insurance, if applicable
• Homeowners association fees, if applicable

Setting a realistic budget is important. "Once you buy a house and settle into it, and you decide you can’t afford it, the next day you can’t take it back to the seller,” says Ron Haynie, senior vice president of mortgage finance policy for the Independent Community Bankers of America.

2. Set up your team

There are many steps on the path to homeownership, and forming the best team can help you move quickly through each milestone. Start asking around for recommendations on the following professionals:

• Your real estate agent will guide you through the entire process, from touring homes to negotiating the selling price and closing on the mortgage. They’re “the person that you can rely on to help you make decisions beyond your current scope of knowledge,” says Nicole Rueth, producing branch manager with the Rueth Team of Fairway Independent Mortgage Corporation in Denver.

• A home inspector will check your home for any flaws after you sign the purchase and sale agreement. Based on the report they provide, you can decide whether to move forward with the purchase.

• A home insurance agent can help you estimate the cost of homeowners insurance on the house you’re buying. You can shop around for the best deal before closing on the home.

• A title company or title attorney researches the title on the home you’re buying to make sure the seller has the legal right to make the sale. This is another service you can shop for.

• A mortgage lender will first help you figure out which mortgage program—such as a VA loan, FHA loan, USDA loan, or conventional loan—works for you. Then, they’ll fund your loan. By getting rate quotes from multiple lenders, you can make sure you’re getting the cheapest loan terms and best service.

3. Shop for homes and submit an offer

Once you’ve chosen a real estate agent, they’ll set you up with a multiple listing service (MLS) account. The MLS is a database of available homes that’s customized to your area and price range. After touring homes and finding the perfect fit, you’ll make an offer on the home.

This step usually involves some negotiating between you and the seller. Your real estate agent can help determine a good price and any contingencies you may want to include.

After wrapping up the negotiations, you’ll sign a purchase and sale agreement, and hire a professional to inspect the home.

4. Apply for a mortgage

You can apply for your mortgage after signing the purchase and sale agreement. But you don’t necessarily have to go with the bank that preapproved your loan. Gather multiple mortgage rate quotes to compare offers and make sure you’re getting the best deal. Each application will result in a hard inquiry. But credit-scoring companies realize consumers shop around, so they’ll usually treat all mortgage inquiries within a 45-day span as just one inquiry.

According to a Freddie Mac survey, borrowers could save around $3,000 over the course of their mortgage loan by getting at least five rate quotes. You might save even more if you negotiate with those lenders. Here’s how:

Once you have a few loan estimates in hand, compare the closing costs, interest rate, and annual percentage rate (APR). Generally, the lowest interest rate and closing costs will help you save money in the long term. Take the best offer and ask the other lenders to beat the interest rate or lower the closing costs.

Having a good credit score can help here, as lenders may compete for your business.

5. Close on the home

After choosing a mortgage lender, they’ll get to work underwriting the home loan. The underwriter is “like the private detective of your mortgage,” Haynie says. “They’ll verify all the information you’ve given them about your financial situation.”

To start, the underwriter will comb through your bank statements to make sure you have money to cover the closing costs, down payment, and a few months’ worth of cash reserves. The underwriter also verifies your income, checks your employment status, and pulls your credit reports.

This process might take longer than you expect, especially when the housing market is busy. According to a February 2021 report from ICE Mortgage Technology, the closing process takes 53 days on average.

Your job during this process is to “be prompt with additional documentation the underwriter inevitably asks for, no matter how trivial,” says Nobu Hata, chief executive officer at Denver Metro Association of Realtors. “Good communication is key here.”

For example, you might need to show proof of where you received large bank deposits, additional proof of income or employment, or information about recent loans you took out. Responding to these requests quickly can help you get to the closing table ASAP.