my step-by-step guide for first time buyers

You’ve been daydreaming about homeownership. Maybe Redfin has become one of your most frequently visited sites, or you’ve dropped into some open houses, ran financial scenarios on a mortgage calculator, and find joy in browsing flooring samples. Now you’re ready to turn a hypothetical into a reality - which means taking out a mortgage, buying a home, and having those wide-plank distressed hardwoods installed.

Breaking the process down into steps, though, makes it much more manageable, so here’s your cheat sheet for buying a home!

1. Get your finances in order

At this early stage, position yourself to be a strong, qualified buyer by saving for a down payment and getting your credit in tip-top shape. Every buyer’s financial picture is unique. Yes, a credit score of 740 or above rewards you with the best interest rates, and putting a down payment of 20% or more into the home will save you from paying Private Mortgage Insurance, or PMI. But you can still purchase a home with a lower credit score and far less of a down payment. Just as one example—because there are loads of loan options out there—your credit score can be as low as 500 for an FHA loan (a government-backed mortgage insured by the Federal Housing Administration) so long as you put down 10 percent, or it can be 580 if you put down 3.5 percent. With conventional loans, you’ll be aiming for a credit score of at least 620.

The idea here? Don’t be discouraged. Market growth could outpace you if you’re waiting years to save 20%. Talk to your real estate agent openly and honestly about your financial standing and request solutions that can work for you.

2. Get a pre-qualification letter

Before you start looking at homes, you’ll want to get a pre-qualification letter, which states that the lender is tentatively willing to lend to you up to a certain point. This signals to real estate agents that you’re serious about buying, not just looking at homes for fun. A pre-qualification letter will also help you set your budget and narrow down which homes will be in your price range.

Something to keep in mind: Pre-qualified is a baby step towards a loan. You self-report information about your credit score and your income, and, in turn, the lender will give you an idea of how much you can afford. Being pre-approved, though, is a much more thorough process and will get you closer to the closing table: It’s when that information about your income and your credit scores is verified. More on that, below.

3. Hire a real estate agent

Think of your real estate agent as the captain of your home-buying team. Because of this, you’ll want to hire an agent who can make strong referrals for mortgage brokers, real estate attorneys, and home inspection professionals, etc. Most importantly, you need a real estate agent who will listen to you and understand your needs. See our complete set of qualifiers for finding the right real estate agent here!

It’s okay to interview a few until you find a great fit. Some questions to consider asking:

• How many other clients are you currently working with?

• What do you enjoy about working in this area? What parts of the neighborhood are most appealing to you?

• What’s your niche? (Some agents may pride themselves on working with first-time homebuyers, for example)

• Can you share some references?

4. Get pre-approved for a mortgage

You’ll position yourself as a strong buyer if you’re pre-approved for a mortgage before you start house hunting and putting in offers. You also don’t want to be scrambling to get pre-approved while other buyers are submitting offers. Many sellers won’t accept offers from prospective buyers who don’t yet have their financing lined up.

During this step, which is more formal and thorough than pre-qualification, you’ll be handing over lots of documents, like W2s, pay stubs, bank statements, and tax returns to your lender. Have your paperwork organized and ready to go.

5. Let the house-hunting begin

At this stage, you’ve got a budget in mind and communicated to your real estate agent what’s important to you in the home search—whether that’s a big play space for your kids, a short commute to work, or ample closet space.

As you’re touring homes or going to open houses, bring a notebook to keep track of the pros and cons of each property. It’s tough, but don’t get distracted by flaws that can easily be fixed. Your agent can help you brainstorm ways to fix cosmetic esthetic. Instead, pay attention to things that will be harder to address, like water pressure and the amount of natural light.

It could be love at first home tour or you could need to see a few dozen homes before you find the right one.

6. Make an offer

You’re pre-approved for a mortgage and your real estate agent found a property you love. It’s time to put in an offer!

Your real estate agent will have “comps” that show what other homes in the area have sold for and will help inform your offer. Oftentimes, first-time homebuyers will be unnecessarily worried about paying too much for a home, and a common mistake first-time buyers make is coming in too low. Even if you’ve heard your market favors buyers, you want to put together a desirable offer that well-positions you against other buyers and presents you in a great light to the seller.

If you really fall head over heels in love with a home, and you’re in a competitive market, you can sweeten your offer with a buyer’s letter, which helps you express why you’re interested in the home in a personal way. The best offer letters focus on the aspects of the home that you love, compliment the sellers on their tastes or the way they have maintained the home, and show them that you are committed to a smooth closing.

Once you’ve made an offer, the seller will accept, make a counteroffer, or outright reject it.

7. Get an inspection

Once the seller accepts your offer, it’s time to get a home inspection. Almost all offers include a “home inspection contingency” that allows the buyer to back out of the deal if there are significant problems in the inspection findings.

The inspector will look for all kinds of problems the home could potentially have, from the foundation all the way up to the roof, including things like faulty wiring or signs of mold growth.

A standard home inspection, according to the American Society of Home Inspectors, includes a comprehensive look at the following:

• Heating system

• Central air conditioning system

• Interior plumbing

• Electrical systems

• Roof and attic

• Walls, ceilings, and floors

• Windows and doors

• Foundation

• Basement

Home inspectors are looking for problems that could pose safety concerns, but they aren’t concerned with cosmetic issues. They’ll report something like a crack in the settlement but won’t make note of a sloppy paint job.

Buyers pay for home inspections most of the time, so make sure you are using a reputable company you trust. You can ask your agent for recommendations or choose your own. Depending on your contract, you—the buyer—can request that the seller make repairs based on the inspection or provide you with a credit so you can have the repairs completed. You will have a chance to do a final walk-through to make sure everything that was to be fixed has been addressed. If possible, schedule this after the sellers move out—just in case the movers cause any damage.

Sometimes, though, the deal falls through—maybe too many red flags popped up during the home inspection and the seller is willing or able to do the work. While it might sting a little, trust the process. Your home is out there!

8. Get an appraisal

Next up is an appraisal, which is required if you’re taking out a mortgage, but can be waived in an all-cash deal. During this, a licensed appraiser comes to the home and does a thorough walk-through of the home to determine how much it’s worth. Your appraiser is looking at what similar homes in the neighborhood recently sold for, as well as any renovations or upgrades that may have added value to the home, and taking note of the condition of the property. Essentially, the appraiser is trying to make sure that the contract price is fair for not just the buyer and seller, but also the lender. If the appraisal comes in lower than the contract price, the lender won’t approve the loan.

9. Get ready for closing

Make sure you’re ready to celebrate - after 30-60 days. On average, it takes 45 days to close on a home loan. Setbacks that can push out your closing date or require you to reschedule could include issues from the inspection or the appraisal, or a credit fluctuation that changes the terms of your loan. You can avoid this by not doing anything that would affect your credit or debt-to-income ratio, like maxing out a credit card or taking out a car loan.

Closing costs typically run about 2 percent to 5 percent of the loan, so if you’re buying a home for $250,000, expect closing costs to range from $5,000 to $12,500. You can pay this out of pocket, or you may be able to roll it into your loan, but keep in mind if you do the latter, you’ll be paying interest on it. Some of the common closing costs include fees for the appraisal, loan origination, title search, plus prepaid expenses such as property taxes, homeowners insurance, and interest until your first payment is due.

At closing, you’ll sign all the required documents for your mortgage, hand over a cashier’s check for your down payment and other fees, and receive the keys to your new place. Some states require an attorney to be involved in real estate transactions or be present at closing. Buyers will often choose to work with an attorney as an added protection if a sale has complications, like buying a home in a flood zone or purchasing a foreclosed home.

Depending on your loan terms, you may also be required to set up an escrow account. The bank collects an upfront escrow payment from you, and then you pay into the account monthly for the life of your loan.

Once you've closed, it’s time to pop the champagne and roll out the welcome mat.

You’re officially a homeowner now!