Finding your dream home is a big undertaking, and one that can easily take months or years depending on the housing market you’re in, and what kind of home you’re looking for. While the process can seem daunting at first glance, finding the right home is something you can do step by step. This is why, rather than making you figure out just how you’ll go about house hunting, we decided to break it down
Whether you’re a first-time homebuyer or shopping for your second dream home, this little list of actionable items is sure to help. Here’s our foolproof guide to finding your dream home — one step at a time.
Finding your dream home step-by-step
Choosing the perfect home for your needs will feel like an insurmountable task if you try and do it all in an afternoon— which is why we’ve broken down the process into these seven action items. Starting with a broad online search, then narrowing down your criteria, and finally working with a real estate agent to see homes in person; these are the steps that will help you arrive at your perfect home— that is, one you can afford that you also happen to love.
Ready to find out what you can do today to start securing the home of your dreams? Keep reading.
Step 1: Search online
Like most research projects these days, your home search will in all likelihood begin online. Even if you’re a fan of doing things the old-fashioned way (ie. scouting the papers or scoping out your favorite neighborhoods), the information you can find online is unparalleled and isn’t something to be skipped.
Sites like Trulia
are the most updated places to check and see what homes are on the market and to start getting an idea of how much home you can afford. These online listings will also help you compare things like cost per square foot, acreage, and even details on the home — including how long it’s been listed at the current price, as well as how much it sold for in the past. All of these insights are things that a simple newspaper listing might miss, which is why it’s so important to start your search online. Once you have a rough idea of the size and style of house you’d like, as well as your intended budget, you’re ready to hit the streets and start scoping out neighborhoods.
Step 2: Visit neighborhoods
While online listings will give you a lot of technical information on a home, there’s still only so much you can glean from a website. That’s why it’s so important to take your search offline and simply start scoping out neighborhoods. Pick a few online listings you like, then drive by those homes to check them out.
- Try and visit homes at different times of day to get the best overall sense of the neighborhood.
- Be aware of things like noise levels, proximity to other neighbors, and even the driving distance to your local grocery store.
- Look around at the other homes and see if they look well-maintained and what kinds of cars are parked in the driveways. How big are the yards?
- Do people seem to enjoy a sense of privacy or is everyone living very close together?
- Is the road heavily trafficked or relatively quiet?
All of these questions and more can help you get a sense of the overall feeling of a neighborhood and if it's one you might be interested in living in.
Remember that finding the right home is also about choosing the best location. Take a good hard look at these neighborhoods and make sure it’s a place you can see yourself in, both from an aesthetic and practical standpoint.
Beyond scoping out the neighborhoods with new listings, you might also allow yourself to explore areas you haven’t seen before. All of this information will help you in the next steps of your home search. By combining online data with real-world insights, you’ll be able to narrow down your search and focus on the neighborhoods and types of homes you like— and you’ll be one step closer to finding your dream home.
Step 3: Filter your selection
With some combined online and in-person research under your belt, you’re ready to start weeding down your selection. This means focusing on only those online listings that make sense for you — ones that are both affordable and fit your other criteria, like homes that can be found in your preferred neighborhoods.
One of the best ways to get started with this step is by making a list of all your must-haves in a new home. This should include things like the number of bedrooms and bathrooms you need, your desired square footage if you want a garage or not, and anything else that is a must-have for your new abode. If you’re buying a home with someone, be sure you’re both on the same page with all of these factors.
Similarly, make a list of all the neighborhoods you like and order them from most to least desirable. Somewhere in these lists, you should also include your price range and the absolute maximum end of your budget. Armed with this information, and a new set of parameters on your search — you’re ready to move to the step.
Step 4: Set up search alerts
Now that you know your top neighborhoods and what you need and want in a house, it’s time to set up search alerts. Sites like Trulia and Zillow both allow for customized saved searches and can send you an email whenever a new home comes on the market that matches your criteria. Get in the habit of checking online listings at least once a day, and set up a few search alerts to be sure you don’t miss anything new.
Knowing what you want in a house is a good start, but you’ll also need to be diligent in following up on new listings, especially if you find yourself in a competitive housing market where homes are selling quickly. Because you’ll have spent more time thinking about what you want, you should be able to tell more quickly when a new listing has the potential to be worth pursuing or not — a huge time saver which will allow you to get started on these next steps.
Step 5: Get your finances ready
A lot of people fall into the trap of thinking they don’t need to do any financial prep in the home-buying process until they’re buying the home... but that’s simply not true. This is the time that you’ll want to get your finances in order and be ready for what comes next. Here are a few key ways to ready your finances before buying a home.
Check your credit score
One of the easiest ways to get started is by checking your credit score. You can find your credit reports online for free from several different websites, including Credit Karma
and Credit Sesame
. Knowing your credit score will give you a better sense of what kinds of mortgage rates (also known as interest rates) you may qualify for, which can be hugely helpful when you begin shopping around for the best mortgage packages.
Understand your financial profile
Because lenders look at a variety of factors when determining your creditworthiness and borrowing power, you need to look at these things as well. In addition to your credit score, you’ll also want to take a look at things like your debt-to-income ratio
, monthly income, and how much of a down payment
you have saved up.
Keep in mind that if you don’t have at least 20% of a home’s purchase price saved up for a down payment, you’ll likely need to purchase something called private mortgage insurance (PMI)
. This additional insurance can be costly, and typically runs between 0.5% – 1% of your loan amount annually, so it’s worth factoring into your total costs when seeing how much home you can afford. If you’re still not sure how much house you can afford, try using something called an affordability calculator. These are widely available online and can help you determine how much of a budget to set based on your down payment and your desired monthly payments.
Step 6: Get prequalified
Getting a preapproval is another important step in readying your finances as a home buyer. Becoming prequalified (or getting a pre-approval letter
) simply means a lender has approved you for a mortgage up to a certain amount. Since many sellers (and seller’s agents) like to see a pre-approved buyer, you’ll be one step ahead of the game in having this ready.
To get prequalified, you can either contact a local lender or a mortgage broker. You’ll be asked to provide some basic financial information, and they’ll crunch the numbers to decide how much of a home loan you qualify for.
Step 7: Consider what kind of loan you might want
With several different mortgage packages to choose from, it’s not a bad idea to start giving some thought to which kind of home loan you might want. While you aren’t required to go with the lender or mortgage broker writing your pre-approval letter, applying for a mortgage will be the natural next step once you find your dream home — and it helps to know your loan options upfront, and long before a loan becomes finalized in underwriting.
Take some time to decide whether you might want to borrow using a conventional loan (fixed-rate or adjustable-rate
) or even an FHA (Federal Housing Administration) loan
. In any loan, there are a variety of pros and cons to consider. Start familiarizing yourself with your options as a borrower, and then when the time comes to apply for a mortgage, the process won’t feel quite so baffling.
Step 8: Plan for closing costs
Another common mistake people make when buying a home is forgetting about all of the out-of-pocket costs that come with it. This will include things like hiring a home inspector, an appraiser, and even paying your seller something called an earnest money deposit. All of these expenses range in cost from a few hundred to even several thousand dollars, and you’ll want to be sure you have that cash-on-hand for when the time comes.
Step 9: Hire a real estate agent
With all of this information at hand, it’s time to find yourself a good realtor. Real estate agents aren’t just helpful in the early stages of home buying, but rather act as a resource throughout the entire process of buying a home. A good real estate agent can help you with everything from visiting open houses to making a competitive offer (or counteroffer), all the way to following through with steps that happen after the home goes under contract (also called escrow). This will include things like setting up a home inspection, determining what you might expect to pay in property taxes, helping you do a final walkthrough of the property, and even being present at the title company when the home officially becomes yours.
Real estate agents can also be helpful should anything come up in the process that requires you to negotiate the terms of your contract with the seller. Because of their experience, they can ensure negotiations go smoothly, and that all of your required paperwork gets completed on time.
For all of these reasons and more, you’ll want to be sure to hire a real estate agent you feel you can trust. One of the best ways to do this is through recommendations. If you have friends or family who worked with someone they liked, it's worth reaching out to see if they’re accepting new clients. Otherwise, you might spend some time looking online at local real estate agents and reading what other home buyers had to say about their experiences.
Step 10: Make a compelling offer
After you’ve narrowed your search, prepared your finances, and found a real estate agent, it’s time to get ready to make a compelling offer. A good realtor can help a lot in this part of the process, but it helps to have a basic understanding of what makes a good offer if you should choose to go at it solo.
A compelling offer can take many forms, but most importantly— it will address the needs of your seller. For this, it’s essential to find out what matters most to your seller, whether that’s closing early, accepting the highest bid, or even selling to someone who will take good care of the home. For some sellers, it's a combination of all of these things.
One simple way to ensure your offer is competitive is by offering a high price and limiting your contingencies. These are the contractual details that each party (buyer and seller) must fulfill for the deal to close. Common contingencies include things like having a home inspection and asking the seller to make certain repairs. While some of these are important and shouldn’t be skipped (notably your home inspection), it might be a good idea to be flexible on other points — especially if you’re bidding on a home against multiple other buyers.
Costs & fees
There are quite a few additional costs and fees to be aware of when getting ready to buy your dream home. Here are some of the main ones you may be responsible for throughout the process.
- Earnest money deposit. 1% - 2% of the home’s purchase price, paid to the seller once the home is under contract as a “good faith deposit”
- Home inspection. $279 - $400 on average*, paid to the home inspector at the time of inspection (usually once the home is under contract)
- Home appraisal. $312- $407 on average*, paid to the home appraiser at the time of appraisal
- Down payment. 3% to 20% of the purchase price of your home
- PMI. 0.5% – 1% of your total loan amount
- Homeowner’s Insurance. $1,477 per year on average*
*This amount may be more or less depending on the size and location of your home
The bottom line
Rome wasn’t built in a day, and you won’t find your dream house in one single day either. Start small by searching for homes online, getting your financial ducks in a row, and finding a great real estate agent to work with. Take some time figuring out a budget and what you can offer a seller, then be sure to stash away enough cash to cover your closing costs. These may seem like minuscule steps, but by starting early and knowing what to expect, you’ll be ready to present a compelling offer whenever your dream home finally comes along.