Whether you’re buying your first home or your 10th, the process can be a little daunting — or maybe even totally terrifying. Markets change, interest rates fluctuate, sellers use new tools and the buying process itself never seems to stay the same — so how can you know what to expect?

The good news is that, even though the journey to a brand-new home looks a little different for everyone, there are a few steps you can always count on. Let’s go through the process, from the very first daydream to the moment when you finally take the keys to your perfect property.

Do you think you’re ready to buy a house?

It’s one thing to think about buying a house — imagining what color you’d paint the walls, where you’d put the doggie door, which flowers you’d plant along the front walkway — but it’s another thing to actually do it. That’s why the first step in buying a house is to make sure you’re ready for everything the process entails.

Before you buy

Don’t reach for that home search app until you’ve asked yourself these questions:

• Could my financial habits support any long-term mortgage option?
• Am I ready to settle down in one area?
• Do I want to be responsible for repairs, maintenance and other household expenses?
• Are my career and salary reliable enough for a large expense?
• Does the economy make this the right time to buy a home?

If you can answer a resounding yes to all of these questions, congratulations — you’re ready to become a home buyer.

If, however, you hesitate in one of these areas or more, it’s time to sharpen your favorite pencil and do a little more homework. This doesn’t mean you have to give up on your dreams of homeownership — just do research on finances, the real estate market and the economy until you know what’s causing you to hesitate and how you can overcome it.

Understand the finances

Once you’ve decided that you’re ready to jump in with both feet, your next step is to make sure your budget is on board. Here are a few things to know about the costs of buying a house and how to prepare yourself financially.

Income

How much money should you be making to buy your first home? That depends on a number of factors, including:

• The local real estate market
• Mortgage rate
• Manageable mortgage payment
• The square footage you’re looking for
• The property size you want
• How long you plan to stay in your new home

If you’re looking for a “forever home,” you’ll have plenty of time to make changes and renovations until every detail feels like you. That means you can buy a fixer-upper or a house in need of a few updates — you’ll get the property cheaper and you won’t have to worry as much about resale value. This is a good way to get a comfortable house even with a lower income.

If, however, you’re looking for a starter house or just don’t want the work and worry of renovations, a Bungalo home is the perfect fit. Bungalo homes get all the necessary face-lifts before ever hitting the market — which means you can start living your dream life the minute you walk in the front door.

Savings

According to Forbes, you should have enough savings to comfortably make a 20% down payment. That means being able to handle your mortgage payment every month without having to stress about unexpected expenses — for example, a hospital bill or a mechanical fix for your car.

Also consider things that could dip into your savings over time, including student loans, credit cards or that awesome little takeout place you just can’t get enough of. Ideally, owning a house shouldn’t put other parts of your financial life in peril — so take all of your money habits into consideration when deciding how much house to buy. 

Real estate agents

Although you don’t have to work with a real estate agent during the homebuying process — in fact, with Bungalo, you get 1.5% cash back when buying direct — they can be a helpful resource throughout the home purchase. This is especially true if you’re uncertain about the details or feel you need an ally to protect you legally and financially. (More on that later.)

At this stage of the buying process, don’t worry about deciding on an agent — what you need to know is how much an agent’s commission adds to closing costs.

Generally, agents make between 5 and 6% of the sale price on a home. For reference, a house that sells for $300,000 would come with an $18,000 payday for your agent. This isn’t a budgeting tragedy, though — the commission comes from the total you pay as a buyer, which means it won’t be tacked on as an extra fee. Also keep in mind that the seller takes this money and pays it to their listing agent, who splits it with your agent.

However, if you have a home to sell before you can close on a new one, you’ll have to think more like a seller when it comes to commissions — meaning that about 6% of what the buyer paid will be split between both agents. No matter how a real estate agent factors into the deal, make sure you take them into account when considering costs.

The home inspection

A home inspection is a big part of the real estate game, especially if you end up seriously considering multiple houses. They can make or break a deal — but they can do the same thing to your budget.

According to the Department of Housing and Urban Development, home inspections can range from $300 to $500, but may go higher depending on the square footage of the home and any special circumstances. That may not be a big deal if you only have one house inspected — but if someone swoops in with a higher offer and you end up going to your second choice, you’ll have to pay for another inspection.

Also keep in mind that home inspections are considered confidential. When you pay for one, it belongs to you — so even if someone else made an offer on your dream house, had an inspection and then backed out of the deal for separate reasons, you can’t benefit from that report. You have to pay to have another one completed.

Mortgage and loan considerations

As you consider whether you’re ready for home buying, you don’t yet need to worry about specifics like mortgage rates or what type of home loan is best for you. It’s more important to do the math and find out how a mortgage would impact your overall financial health.

Take, for example, your credit score. According to Experian, applying for a mortgage loan temporarily hurts your credit. This happens in two stages: first, lenders are checking your credit, which can make the score drop by around five points; second, once the mortgage is opened, your score drops again until you prove you’re able to make payments on time.

After the mortgage has been open and your payment habits are established, one of two things will happen. If you make every payment on time, your score will start to improve — and the longer your mortgage lasts, the more you’ll round out your credit history. Miss payments or pay late, however, and your score will drop.

While this may not seem like a big deal — after all, you’ll have already closed on your house — it can hurt you in the future. You’ll have trouble making big purchases or refinancing existing loans — so manage that mortgage carefully.

Know your options

If you’ve gotten this far, it means you understand the costs of buying a house and are still ready to start the process. That’s good news — because now the fun part begins.

The home buying process looks different for everyone. Deciding how it’s going to look for you is where you get control over how you spend your money, what approaches you use, which deals are best and what your house-hunting story will look like. The good news is that you have plenty of options — so no matter what you want in a home, there’s a way to get there.

Real estate agents: Should you get one?

Remember that childhood game “the floor is lava”? Well, that’s what it’s like trying to navigate the housing market right now — and sometimes, a real estate agent is just the ally you need to navigate through that kind of heat. Other times, it may be better to go in alone.

Here’s what you need to know.

Real estate agent vs. real estate attorney

Real estate agents help you with every step of the house-hunting process, from finding the right property to signing the paperwork. They’re experts at reading the market, and sometimes they can even help you decide which house fits your income.

A real estate attorney, on the other hand, is all about the law. They won’t help you find your dream home, but they will help you read and sign all the forms that come with it. They know how to protect you from legal loopholes and financial fiascos, and they’re good allies in a seller’s market (which is the case just about everywhere right now).

Do you need representation?

You don’t have to have an agent or attorney when buying a home. In fact, skipping this step might save you money in the long run. However, if you’re worried about all that legalese — or if you don’t want to face an experienced seller on your own — you may want to consider finding a partner in property-buying.

Here are some things to ask yourself:

• Am I confident in finding my own home, or do I need help searching?
• Can I organize my own home tours?
• Do I have experience reading and understanding legal paperwork?
• How familiar am I with the real estate market?
• Am I a good negotiator?
• Do I know what the best price is and how to get it?
• Can I make my terms stand out to sellers who may be fielding multiple offers?

Choosing an agent

Choosing the right real estate agent comes down to your unique needs as a buyer. As you begin your search, keep these things in mind:

• Experience isn’t everything.

Finding a reliable, experienced agent is important, but it’s not the only thing you should consider. Someone who’s been in the business for 20 years may be stuck in their ways, while someone newer to the real estate world might see new approaches and be able to navigate the modern market with more flexibility.

• Keep your options open.

According to Forbes, it’s best to interview at least three real estate agents before making a final decision. This helps you broaden your horizons and have something to compare against as you talk to each candidate.

• Make personal connections.

Agents can do a whole lot more than show homes. They’re also your guide through local neighborhoods, school districts and more — as long as you take the time to connect with them on a personal level, that is. This is especially helpful if you’re moving from out of town or you’re a little nervous about relocation.

• Be sure they’re good communicators.

A good real estate agent needs to be in frequent contact with you. In the beginning of the home search, they need to update you about new listings — but as the journey continues, communication becomes even more important. For example, say you’ve just made an offer on a house and are eagerly waiting to hear back. If your agent doesn’t bother answering your texts or emails, you could be left in the dark for a whole day or longer — and that’s plenty of time for sellers to receive other offers.

Obtaining a mortgage

Choosing a new home is the fun part. Paying for it — not so much. Luckily, there are ways to simplify the process of understanding and obtaining a mortgage, and it all begins with one little step called preapproval.

Step 1: Preapproval

Mortgage preapproval is like the fast line for anyone buying a house. It shows sellers that you’re close to securing the necessary financing to buy their home — and it might just make your offer stand out from the crowd.

To get preapproval, you’ll need a few things:

• An acceptable credit score
• Proof of identity
• Employment history
• Pay stubs or income statements
• Lists of accounts and liabilities

Once this information is in hand, you’ll fill out a 1003 form for one or more lenders you’re interested in working with. If they preapprove you, there’s no guarantee that you’ll actually get the loan — but the lender is saying they’re interested, and the process will be faster and easier later.

Step 2: Understand your mortgage options

When it comes to choosing a mortgage, you have a few options — and your biggest considerations are type and terms.

Type

According to Forbes Advisor, there are two loan types to choose from. The first is a conventional loan, where you borrow directly from a private lender and agree to their terms. The second is a federal loan, including the FHA loan and VA loan, that is insured by the government — which, in turn, makes the lender more comfortable taking a risk if your credit score is low.

Terms

You also need to consider the terms of each loan. For example, a long-term home loan may make your monthly payment manageable — but it’s also forcing you to pay interest for a longer period of time, meaning that the total cost will be far more in the long run. Short-term loans, on the other hand, have higher monthly payments, but will be cheaper overall if you can manage them.

Step 3: Research interest rates

According to the Consumer Financial Protection Bureau, lenders determine the interest rate on your mortgage by taking a few factors into consideration:

• Your credit score and history
• Your monthly income
• Your loan type and terms
• The total price of your new home
• The location of your new home
• The percentage of your down payment

Different lenders also offer different interest rates, which means you should shop around and make sure you’re getting the best deal before signing anything.

Step 4: Know your responsibilities

When choosing a mortgage, you’re also choosing some new responsibilities that will follow you for decades. That’s why it’s smart to know exactly what’s expected of you from day one.

Here are a few things that will be on your plate:

Homeowners insurance

Homeowners insurance financially defends your new home and the people who live or visit there. That’s why it’s required by lenders: They’re protecting their investment. Luckily, you have options for securing homeowners insurance, so you should be able to negotiate terms that benefit your budget.

This is much easier when you choose a Bungalo Certified home. Bungalo certifications mean that a house is solid, safe and free of costly issues — which means you won’t have to worry about using that homeowners insurance.

Mortgage insurance

Lenders typically require mortgage insurance if your down payment is less than 20% of a home’s total price. Private mortgage insurance protects the lender in case you can’t make your payments regularly or on time.

Payments

Speaking of payments, the good news is that all these responsibilities and insurances are usually calculated into your monthly bill. The rest of your monthly mortgage payment amount is determined by details like interest rate, loan terms, type of loan and more.

Step 5: Finalize

Once you’ve checked everything off the list, it’s time to get one step closer to buying a house by finalizing your mortgage. This is when you actually sign on the dotted line and a potential lender becomes your financial partner. Congratulations — you’re about to take the keys to your very own piece of real estate.

Closing costs and more

Closing costs are usually the final hurdle between you and your new home. Buyers and sellers have different responsibilities when it comes to closing costs, but both parties have something to pay for. Here are some things you’ll be responsible for as a buyer:

• Appraisal fees
• Property taxes
• Mortgage origination fees
• Title insurance

Luckily, you usually don’t need to worry about paying agent commissions when buying a home. That’s generally part of the seller’s closing costs — meaning they pay both their own agent and yours.

One more thing you’ll need to consider in your calculations is earnest money. This is a payment you make to show the seller you’re serious about their property and you’re able to secure the necessary funds, and it’s paid early in the process. If everything goes as planned, earnest money goes toward your down payment or closing costs once the deal is finalized. However, if anything falls through, you usually get that money back from the seller.

After that last dollar is paid, the closing process can take between 30 and 60 days — and then the keys are yours.

Make buying a breeze with Bungalo

If you haven’t even pulled out the moving boxes yet and you’re already feeling overwhelmed, don’t worry — stress just means there’s an easier way to do what’s worrying you.

When it comes to finding your dream home, that “easier way” is working with Bungalo. Certified houses listed exclusively on an all-in-one home-buying platform where all the tricky stuff is taken care of for you? It doesn’t get much better than that.

Start browsing with Bungalo today and see how easy it is to get home.

This article is meant for informational purposes only and is not intended to be construed as financial, tax, legal, real estate, insurance, or investment advice. Bungalo always encourages you to reach out to an advisor regarding your own situation.