How to Get Ready to Purchase a Home: A Step-by-Step Guide

Buying a home is one of the biggest financial decisions you’ll ever make, and preparing for it can feel overwhelming. But with the right steps, you can make the process smoother and more manageable. Whether you’re still deciding between renting and buying or you’re already considering mortgage options, this guide will walk you through the essential steps to get ready. From assessing your credit score to saving for down payments and even finding the right real estate agent, these tips will help set you up for success in your journey to homeownership.

Renting vs. Buying: Is It the Right Time?

Before jumping into the process of buying a home, it’s important to ask yourself whether the timing is right. This is a major decision, and it can depend on where you are financially and what your goals are in the near future.

Start by thinking about your current lifestyle. Renting offers more flexibility if you’re unsure about staying in one place, while buying locks you into a location for the long term. If you plan on staying in the area for several years, buying may make more sense, as it builds equity over time.

You should also evaluate your financial stability. Homeownership involves more upfront costs than renting. You must be prepared to cover a percentage of the purchase price as a down payment, in addition to closing costs and ongoing expenses like maintenance and property taxes. Make sure you’re financially prepared for this larger commitment.

Also, consider the real estate market. If prices are high or interest rates are unfavorable, it might be worth waiting a bit longer before making a move. However, if you’re in a stable financial position, this may not deter you if long-term ownership is a priority.

8 Steps to Take in Preparation

Step 1: Check & Improve Your Credit

Your credit score doesn’t just determine whether you qualify for a mortgage—it also impacts how much you’ll pay in interest over the life of your loan. Mortgage lenders view higher credit scores as less risky, so the higher your score is, the better the interest rates are. A lower interest rate allows you to afford a higher purchase price while keeping monthly payments manageable.

Credit Score Requirements for Home Loans

Different loan types have varying minimum credit score requirements:

• 620+ = Conventional loans (typically require at least this score)
• 580+ = FHA loans (may go as low as 500 with a larger down payment)
• 700+ = Ideal for securing the best interest rates

Some mortgage lenders have their own requirements that may be stricter than federal guidelines, so it’s always good to shop around!

Example of How Credit Scores Affect Interest Rates

Let’s say you’re applying for a $300,000 mortgage on a 30-year fixed loan:

A borrower with a 760+ credit score could save over $100,000 in interest compared to someone with a 620 score. Even a small credit score improvement before applying for a mortgage can lead to major savings.

How to Check Your Credit Score & Reports

Before applying for a mortgage, it’s crucial to review your reports for errors and understand your score.

Ways to Check Your Credit Score:

• Many banks and credit card providers offer free credit score monitoring.
• Credit monitoring services, such as Dovly, provide real-time updates on your score.

Where to Get Your Credit Reports:

• You can get one free credit report per year from the three major credit bureaus (Equifax, Experian, TransUnion) at AnnualCreditReport.com.
• Review all three reports carefully—not all lenders report to every bureau.

How to Improve Your Credit Score Before Buying a Home

If your score isn’t where you want it to be, start improving it as soon as possible. Even a small boost can help you secure better loan terms.

1. Dispute Credit Report Errors

Errors on your report can wrongly lower your score, so fixing them is a quick win.

• Look for incorrect late payments, duplicate accounts, or accounts that aren’t yours.
• Dispute inaccuracies directly with Equifax, Experian, and TransUnion—they have 30 days to investigate.
• Dovly can automate this process for you, making it easier to clean up your credit report.

2. Lower Your Credit Utilization

Credit utilization—the percentage of available credit you’re using—plays a huge role in your credit score.

• Ideal utilization: Keep balances below 30% of your credit limit.
• Best utilization for top scores: Aim for below 10%.
• Quick tip: If paying off a balance isn’t possible, ask for a credit limit increase (as long as it doesn’t trigger a hard inquiry).

3. Make Every Payment on Time

Payment history is the biggest factor in your credit score (35% of your total score).

• Even one missed payment can drop your score significantly.
• Set up automatic payments or reminders to avoid forgetting due dates.
• If you’ve had late payments in the past, keeping a consistent on-time payment streak can help rebuild your score over time.

4. Avoid Opening New Accounts Right Before Applying

Each new credit account results in a hard inquiry, which can lower your score temporarily.

• Avoid opening new credit cards, personal loans, or financing purchases in the months leading up to your mortgage application.
• Multiple inquiries can make lenders question your financial stability.

Exception: If you’re mortgage shopping, multiple inquiries within a 14-45 day window count as one inquiry, minimizing the impact on your score.

How Long Does It Take to Improve Your Credit for a Mortgage?

The time required to improve your credit depends on what’s hurting your score:

If you plan to buy a home within a year, start improving your credit as early as possible to maximize savings on your mortgage!

Final Credit Prep Checklist Before Applying for a Mortgage

• Check all three credit reports for errors and dispute inaccuracies.
• Keep credit card balances below 30% (ideally under 10%) of your limit.
• Avoid opening new credit lines in the months leading up to your mortgage application.
• Make 100% of payments on time—set up autopay if needed.

Before diving into the home buying process, it’s crucial to understand your current credit standing. Reviewing your credit report for any errors or areas that need improvement and then taking action. This is where Dovly can help—by offering tools to monitor and improve your credit score over time, ensuring you’re in a stronger position when applying for a mortgage.

Step 2: Save for a Down Payment & Closing Costs

Buying a home comes with upfront costs, so planning ahead is key. Your down payment and closing costs will be your biggest expenses before you even move in and begin making monthly mortgage payments.

How Much Do You Need for a Down Payment?

Down payment amounts are typically calculated as a percentage of the purchase price of the home. The amount you need depends on your loan type:

• Conventional Loans: Typically require a down payment of 3-20%.
  • Most homebuyers opt for a conventional loan because they usually offer competitive interest rates, flexible terms, and fewer restrictions compared to government-backed loans.
• Federal Housing Administration (FHA) Loans: Require a down payment of at least 3.5%.
• VA Loans: For eligible veterans and military members, often require 0% down.
• USDA Loans: For rural homebuyers, may allow 0% down.

If saving for a down payment feels overwhelming, you’re not alone. Many first-time buyers struggle to come up with a down payment, but down payment assistance programs (DPAs) can help bridge the gap. These programs provide financial aid through grants, low-interest loans, or deferred payment options to make homeownership more accessible.

Earnest Money Deposit (EMD)

In addition to your down payment, you may be required to submit an earnest money deposit. This deposit, usually between 1-3% of the home’s price, shows the seller you’re serious about your offer. It’s held in escrow and later applied toward your down payment or closing costs.

Understanding Closing Costs (2-5% of the Home Price)

Closing costs cover loan fees for processing your mortgage and finalizing the sale. These costs are based on and in addition to the purchase price of the home. These typically include:

• Loan Origination Fee – Lender’s charge for processing the loan
• Appraisal Fee – Determines the home’s value ($300-$600)
• Title Insurance – Protects against ownership disputes ($500-$1,500)
• Home Inspection – Assesses the property’s condition ($300-$500)
• Prepaid Expenses – Covers property taxes and homeowners insurance upfront

Some sellers may agree to cover part of the closing costs through “seller concessions,” so don’t be afraid to negotiate.

Don’t Forget the Hidden Costs of Homeownership

Oftentines, buyers focus only on their mortgage payment, but other expenses can add up:

• Property Taxes: These vary by location. For example, a $300,000 home in Texas may have a much higher tax bill than the same-priced home in Florida.
• Homeowners Insurance: Costs depend on your home’s location and size.
• HOA Fees: If buying in a community with a homeowners association, expect monthly or annual dues.
• Maintenance & Repairs: Budget 1-3% of your home’s value annually for upkeep.

Some lenders allow gift funds from family members to help with your down payment—check their guidelines.

Step 3: Determine How Much Home You Can Afford

Before house hunting, it’s important to understand how much house you can afford based on your income, expenses, and debt.

Breakdown of Your Monthly Mortgage Payment

Your mortgage payment typically includes:

• Principal & Interest – The actual loan payment.
• Property Taxes – Varies by location; paid through escrow.
• Homeowners Insurance – Protects your home and belongings.
• Private Mortgage Insurance (PMI) – Required if your down payment is less than 20 percent.
• HOA Fees – If buying in a community with a homeowners association.

How to Calculate an Affordable Budget

A common rule of thumb is the 28/36 rule:

• Spend no more than 28 percent of your gross income on housing costs.
• Keep total monthly debt payments (including home loan, auto loans, etc.) under 36 percent of your income.

Example Calculation

• Gross monthly income: $6,000
• Maximum mortgage payment (28 percent): $1,680
• Maximum total debt payments (36 percent): $2,160

Use an online mortgage calculator to estimate your payment, factoring in loan terms, interest rates, and down payments.

Step 4: Get Pre-Approved for a Mortgage

Pre-Qualification is a quick estimate based on self-reported income and credit details where Pre-Approval is a detailed process where the loan officer verifies financial documents and runs a credit check. Some real estate agents require pre-approval before showing homes to ensure buyers are financially prepared. It also shows sellers that you’re a serious buyer.

Why is Pre-Approval Important?

• Tells you how much you can borrow.
• Makes your offer more competitive when bidding on a home.
• Helps you identify any financial issues before house hunting.
• Helps you understand current mortgage rates.

Documents You’ll Need for Pre-Approval:

• Proof of Income – Pay stubs, tax returns (2 years), W-2s
• Proof of Assets – Bank statements, investment accounts
• Credit Report & Score – Pulled by the lender
• Employment Verification – Letter from employer or recent paystubs
• Debt Information – Student loans, car loans, credit cards

Avoid big financial changes after pre-approval. Don’t take out new loans or change jobs before closing. If changes are necessary, communicate with your loan officer first.

Step 5: Find a Real Estate Agent

You don’t always need to have a real estate agent. However, having one can make the home buying process much smoother, especially for first-time buyers. They are typically more aware of housing market changes too.

What Makes a Good Real Estate Agent:

• Responsive: Replies promptly and keeps you informed.
• Educates You: Walks you through the process and answers your questions.
• Negotiates Effectively: Works to get the best deal for you.
• Handles Details: Finds homes within your budget, negotiates the price, and manages contracts and paperwork.

Questions to Ask Real Estate Agent Before Hiring Them:

• How many buyers have you worked with in the past year?
• What’s your experience in this specific neighborhood?
• How do you negotiate in a competitive housing market?
• What are your commission fees?
• Can you connect me with trusted lenders and inspectors?

Step 6: Start House Hunting

Things to Consider When Searching for a Home:

• Location: Evaluate the commute, schools, crime rates, and local amenities.
• Home Size & Features: Consider the number of bedrooms, bathrooms, and storage space.
• Condition of the Home: Decide between a fixer-upper or a move-in ready property.
• Future Value: Assess the potential resale value and appreciation over time.

What to Bring to Showings:

• Checklist: Make sure you have a list of must-have and nice-to-have features.
• Measuring Tape: Check if your furniture fits the space.
• Flashlight: Inspect dark areas like attics and basements.
• Notebook/Phone: Take notes and pictures to remember important details.

Red Flags to Watch for in Homes:

• Strong Air Fresheners: Could be masking unpleasant odors.
• Cracks in the Foundation: May signal structural issues.
• Water Stains on Ceilings: Potential leaks or water damage.
• Electrical Issues: Flickering lights or outdated wiring could be a concern.

Step 7: Make an Offer & Get an Inspection

Making an Offer

Once you’ve found a home you like, your agent will guide you through the process of making a competitive offer. Here’s what you’ll need to consider:

• Offer Price: Your agent will help you determine a competitive price based on market conditions and comparable home sales.
• Contingencies: Include conditions like home inspection and financing to protect yourself in case something goes wrong.
• Negotiations: Be prepared to negotiate repairs, price adjustments, or seller credits to address any concerns.

Home Inspection

Before finalizing the deal, it’s crucial to schedule a home inspection. This helps identify potential issues with the property and gives you peace of mind.

• Purpose: A home inspection evaluates the condition of key systems and structures (roof, plumbing, foundation, etc.).
• Common Issues Found in Inspections:
  • Roof damage
  • Plumbing leaks
  • Mold in crawl spaces
  • HVAC system issues
  • Faulty wiring

If significant problems are discovered, you can:

• Negotiate Repairs: Ask the seller to fix the issues before you proceed.
• Request Price Adjustments: Lower the offer price to account for repairs.
• Walk Away: If the issues are too major, you can choose to back out of the deal.

Why You Shouldn’t Skip the Inspection

Even in a competitive market, skipping the home inspection is a risky move. It’s your opportunity to avoid costly surprises and make sure you’re not inheriting major repairs.

Step 8: Finalize Your Loan & Close the Deal

Before closing, there are a few key steps to complete to ensure everything goes smoothly:

Before Closing, You Need To:

• Lock in Your Interest Rate: Confirm your mortgage rate with the mortgage lender to avoid any surprises.
• Get Homeowners Insurance: Ensure you have insurance coverage in place.
• Review the Closing Disclosure: Carefully examine the final loan paperwork and costs outlined in this document.
• Do a Final Walkthrough: Visit the home to verify that everything is in order before signing the deal.

Closing Day:

On the big day, be prepared with the following documents:

• Government-Issued ID
• Proof of Homeowners Insurance
• Closing Disclosure (shows final loan details)
• Cashier’s Check or Wire Transfer Confirmation for down payment and closing costs
• Final Contract Agreement

Example of a Successful Closing Process:

• Morning: Complete your final walkthrough to check the home’s condition.
• Afternoon: Sign the loan and title documents at the closing meeting.
• Evening: Receive the keys and celebrate your new home!

Common Closing Delays & How to Avoid Them:

• Issue: Loan approval takes longer than expected → Solution: Get pre-approved early to streamline the process.
• Issue: Missing documents → Solution: Double-check your paperwork to ensure everything is in order.
• Issue: Seller’s home repairs aren’t completed → Solution: Request proof of repairs before closing day to avoid last-minute issues.

Bonus Tips for First-Time Buyers

• Understand Closing Costs: Prepare for additional expenses such as inspection fees, appraisals, and title insurance, which can add up quickly.
• Factor in Future Expenses: Think beyond your mortgage payments. Consider property taxes, homeowner’s insurance, and utility costs.
• Learn About Property History: Check if the home has any issues that could impact its value or your insurance rates, such as past damage or flooding.
• Negotiate for Seller Concessions: In some cases, sellers may cover some of your closing costs, so don’t hesitate to ask.

Conclusion

Buying a home is an exciting and life-changing event, but proper preparation is key to making sure it goes smoothly. By following these eight steps—starting with checking your credit, saving for a down payment, and finding a reliable real estate agent—you can avoid common pitfalls and set yourself up for long-term success. Remember, buying a home is a process that requires careful planning and decision-making, so take your time, do your research, and ensure you’re financially ready.

Get your credit mortgage loan ready with Dovly! Our AI-powered credit engine helps you check, track, and improve your credit effortlessly—so you can qualify for better rates and save thousands over the life of your loan. Sign up for Dovly today and start optimizing your credit for homeownership!