Steps in Buying a House comments (2)

Guest Post by Leonard Baron MBA, CPA, San Diego State University Lecturer | Tuesday June 1, 2011

Ready for the joys of homeownership?

Not everyone fully understands the steps in buying a house, so I’ve tried to put some of my expertise on paper here for you by providing general guidelines to keep in mind up front, and then clearly outlining the steps in buying a house herein.

Everyone knows that buying a house can be a time consuming, stressful, complex process.  Rest assured, however, that the more you know, the more you can increase your chances to eliminate some of that stress, and make smart decisions.

General Home Buying Guidelines

Guideline 1
Before you move ahead with a home purchase, make sure it really makes sense for you to buy a home at all.  A simple rule of thumb to follow is that if you do not plan to own any given home for at least five years, you will most likely be better off renting someone else’s property.

Guideline 2
Owning shouldn’t be significantly more expensive than renting. Ownership usually is somewhat more expensive but shouldn’t be incredibly more so, so just make sure that whatever you’re buying makes sense for you. Note this rule of thumb, however: The fancier the house, the more owning will cost over renting.

Guideline 3
Don’t buy in an area unless you know it really well!  Remember the #1 rule in real estate: Location, location, location!  Take the time to know the area—you can change the house after you buy it, you typically can’t make the neighbors move away or the crime rate in the neighborhood go down.

Once you’ve determined you really should buy a house, it’s time to get qualified by a reputable loan officer to see what price property is affordable for you.  Then you should interview a few, and select one that’s qualified and professional to represent you throughout the home buying process. 

Once you’ve done that, you are ready do start seriously shopping for a house.

Now the real fun starts! Buying a House: Step By Step

Step 1. Determining Type, Location and Amenities
The trick is to find some areas that match what you can afford with what you desire to own. Think through the amenities you want, like good schools, parks, nearby retail centers, etc.  Then think urban versus suburban, whether you want to be near specific highways or commuter railways, schools, work places and so on.  Also consider whether you’d like to own a single family home versus a condo or apartment or townhome.

Step 2. Shopping for Properties
You should expect to look for a few months as you drive areas, go to open houses, review online listings and have your sales professional give you property tours. Online websites like Zillow, Trulia and Redfin are a huge help, and you should view at least 15 homes in person, to get a feel for what the market has to offer.

Step 3. Property Offers
When you find the “right” property, make an offer quickly. You typically have a study period and little money at risk for 7-17 days as you do more research of the property and area. Depending on the market, it may be just the first of many offers you will make, as you fight other potential home buyers for the better properties.

Step 4. In Escrow
If you strike a deal with the seller, you are in escrow! This is when you work through the terms of your contract, such as doing the home inspection and other due diligence to make sure it is the “right” property for you. Mind all the contract terms and timelines carefully, as you may soon have money at risk.         

Step 5. Mortgage Loan
Once you are in escrow, it’s time to move forward with your mortgage financing immediately, as loans take 30-45 days to complete. Get all the newly required and re-requested documents to the bank quickly. It’s a lot of paperwork, but that is the process.

Note: Do not buy any cars, furniture, run up credit card debts or forget to pay bills on time during this process. It could kill your financing and hence the deal!  See the FinancialRx article on this topic, called Home Buying Mistakes to Avoid: Major Financial Changes, for more information on this potentially costly new home buyer mistake.

Step 6.  Moving Forward
As your lender works through their underwriting process and requirements, you should work through your due diligence of the area, property condition, HOA documents, title report, property insurance, etc. There are plenty of steps in buying a house and you will learn that they can take a lot of time, so keep moving forward!

Step 7.  Closing Escrow and Owning the Property
As the bank does its final loan approval, escrow will prepare documents to transfer title to you. Escrow will prepare a preliminary HUD-1 showing how much money you need to close the purchase. You must get your funds over to the escrow company (typically by writing them a check), you will sign loan and purchase documents, the bank will fund the loan, and record your title to the property at the courthouse. 

Congratulations!  You’ve just joined the world of real estate ownership!

Those are the basic steps in buying a house. It is likely the largest purchase you will ever make, and taking the time to learn some of the basic processes can help to make your ownership experience a good, long-term, wealth-building one.


For further help, you can download and review a Due Diligence Buying a Home Checklist from Leonard Baron’s website at no charge and with no log in required, under Chapter 1 at

Don’t skimp on protecting yourself on your largest purchase. Take the time, energy and effort to consider the real and significant issues with real estate ownership, and significantly lower your risks by making prudent choices that will last for years.

Leonard P. Baron, MBA, CPA, is a real estate lecturer at San Diego State University and author of Real Estate Ownership, Investment and Due Diligence 101 - A Smarter Way to Buy Real Estate.

Leonard is a long term residential real estate owner. He buys investment properties now, he does commercial real estate investment consulting at – and he loves kicking the tires on a good piece of dirt!


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Comments for Steps in Buying a House
By Shelly Ray on June 02, 2011

Nice article. In your “Step 1. Determining Type, Location and Amenities” there is a tool available online called Walk Score that i would like to recommend to your readers. It will tell you how a house compares to others based on its proximity to shops, restaurants and parks. After a long commute it is nice to be able to walk to places nearby and this tool tells you if a potential house can provide that. Just my 2 cents!

By Wendy on June 02, 2011

My dream home is one where you can walk to fabulous shops and restaurants, so I love the Walk Score tool too.  Thanks for your comment, Shelly!

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