The First 3 Steps to Purchasing a Home

Countless articles have been written about the steps to purchasing a home, and many of them do a good job explaining the process. So I don't plan on reinventing the wheel with this article. Instead, I'd like to focus on the first few steps you should go through when purchasing your first home.

Why this focus on preliminary steps? Because that's where first-time home buyers make most of their mistakes, in the early stages of the process. For example, many people skip step #2 entirely, which sets them up for failure later on. So I want to focus your attention on the first (and most important) steps to purchasing a home, so you can have a greater chance of success.

The First Steps to Buying a Home

If you go through the three steps I've outlined below, you will be ahead of most first-time buyers. You will be much more likely to succeed in the purchase of a home. Lastly, you will be in a better position financially, because you will have purchased a home within your means. In other words, you'll be less likely to face a future foreclosure. So without further ado, here are the first three steps to purchasing a house that I recommend taking:

1. Research and Education

The first phase of the process requires plenty of research. First, I want you to read our expanded article on the steps to buying a home. You don't have to memorize it or anything (there's a lot of information in that article). Just read through the various steps listed in the article to get an idea of how the purchasing process works.

Next, you should spend some time learning the terminology or lingo associated with the home buying process. In particular, you should learn the mortgage terms, since that is where first-time buyers often get confused.

The third step in your research process should be the various types of mortgages available to you. This overlaps with the terminology research mentioned above, but it goes beyond that. Instead of just learning the names of the various mortgages, you should find out how they work. In particular, I recommend that you study the difference between adjustable and fixed-rate mortgage loans. This is another area where first-time buyers often wander astray, choosing an ARM loan when they should have chosen a fixed mortgage instead.

So, to sum up this section, your initial research should cover three key areas:

• The basic process of purchasing a home
• The lingo associated with mortgages and home buying
• The types of home loans available, and how they work

Trust me. Taking some time to learn the process and the terminology early on will make things much easier for you. It is the most important step to purchasing a home for the first time.

2. Establishing Your Budget

The next thing you should do is establish a home-buying budget for yourself. This is a separate step from the mortgage application process, and it should happen before you start talking to lenders. This is one of the steps to purchasing a home that many first-time buyers skip altogether -- and usually at their own financial peril.

Here's what you need to take away from this section. It's possible to get approved for a mortgage loan that's too big for you. In fact, it happens all the time. The primary cause of mortgage foreclosure is when people spend too much money on their home purchase, and it usually happens because they've skipped this all-important step to purchasing a house.

Here's an article that will help you establish a budget for yourself:
How Much House Can I Afford to Buy?

3. Getting Pre-Approved for a Mortgage Loan

Let's start by defining what this means. Within the context of mortgages and home buying, pre-approval is a process where the lender reviews your finances and tells you how much you can borrow. Just remember what we said earlier, about getting approved for a mortgage that's too big for you. Start with your own budget first, and then get pre-approved by a lender. Do not exceed your monthly spending budget, regardless of the pre-approval amount.

This is another key step to purchasing a home, because it will help you narrow your house-hunting process to the homes you can afford. Some real estate agents won't even work with buyers until they've been pre-approved, for this very reason. After all, the last thing you (or they) want to do is spend weeks looking at houses that are outside your price range.

Related Articles

I hope this article helps you understand the steps to purchasing a house, and I wish you well in your home buying process. Here are some related articles you might want to read:

10 Basic Steps to Buying a Home
House Hunting Checklist