What Are the Steps to Buying a Home? A First-Time Buyer’s Checklist

Step 1: How to Prepare Financially to Buy a Home

The first step to buying a home is getting your finances in order, so you know what you can realistically afford.

• Build your savings: A down payment, closing costs, moving expenses, and the immediate costs of settling into a new home add up quickly. For rural properties, you should also factor in the potential for repairs, utility setup, and ongoing upkeep of the land and any outbuildings. 

Note that some loan programs, like the First-Time Homebuyer Program through Compeer Home™, can reduce down payment requirements for eligible buyers. 

• Check and strengthen your credit: Your credit score and history shape what loan options are available to you and what you'll pay for them over time. Before you apply for anything, take a look at where you stand. Address any errors, and if your score needs work, focus first on making on-time payments and paying down existing debt. Use the Annual Credit Report to check your score for free. 
• Build a realistic budget: The monthly mortgage payment, property taxes, homeowner's insurance, utilities, and maintenance all need to fit into the budget. For rural buyers, heating costs, well and septic maintenance, and the upkeep of larger properties are worth factoring in, too. Understanding the full costs associated with buying a home before you commit is one of the most practical things you can do.

Step 2: How Much Home Can You Afford?

A good place to begin is running the numbers through a mortgage calculator to see how different purchase prices, down payment amounts, and loan terms translate into a monthly payment. From there, work backward to figure out what you need to save and what timeline makes sense.

Use the Compeer Home Mortgage Calculator to get an estimate.

Step 3: Explore Loan Options and Get Pre-qualified

The next steps in buying a home are understanding your loan options and getting pre-qualified. 

• Understanding your loan options: The right loan fit depends on your credit, your savings, the property you're buying, and your long-term goals. First-time homebuyers in particular have access to a range of programs designed to lower the barrier to entry.

For rural buyers, loan options can look different. Not every program works for every property type, and not every lender is equipped to navigate the nuances of rural financing. Program terms, availability, and eligibility requirements vary, so it's worth exploring your options with a lender.

• Getting pre-qualified: Pre-qualification is an early conversation with a lender about your financial picture. It gives you a general sense of what you may be able to borrow based on your income, savings, and credit. 

When you talk to a lender, having your income, existing debts, savings, W-2s, and tax returns ready helps the conversation move faster. 

Step 4: Do You Need a Realtor to Buy a Home?

Technically no, but for most buyers, a good real estate agent is worth it. They represent your interests and help you find properties, evaluate them, write offers, negotiate terms, and navigate the paperwork through closing.

A good local agent can make a significant difference for rural property searches in particular. They know the area and can help you make connections with potential sellers and unlisted properties.

Reach out to a Compeer Home™ loan officer for recommendations. As locals, our loan officers are familiar with the territories they cover.

Step 5: Start Your Home Search

Before you start touring properties, ask yourself: what does the home need to have for your life to work there, and what are my wants vs. needs? Keeping those two categories separate helps you evaluate properties more clearly.

For rural buyers, this list often includes things beyond the house itself. How much land do you need? Do you want outbuildings, a garage, or room to expand? Does the location work for your commute? Are you comfortable with a well and septic systems? 

Every home involves compromise. The more clearly you've defined your priorities, the easier it is to recognize when a tradeoff is worth making and when it isn't.

Step 6: Making an Offer and Understanding Earnest Money

An offer is a formal proposal to purchase a property at a specific price and under specific terms. It outlines what you're willing to pay, any conditions that need to be met before the sale moves forward, and a timeline for closing. Your real estate agent will draft and submit it. Contingencies, closing timeline, and the overall strength of your financial position all factor into how an offer is received. 

Earnest money when buying a home is a deposit you put down when your offer is accepted, signaling to the seller that you're serious. The amount varies depending on the property and the market, but it typically represents a small percentage of the purchase price. It's held in escrow during the transaction and is generally applied toward your down payment or closing costs. 

Whether you get your earnest money back if the deal doesn't close depends on the terms of your contract. Most purchase agreements include contingencies that allow you to recover your deposit if something specific happens, such as a failed inspection. 

Step 7: What Happens During Inspection and Appraisal?

Once your offer is accepted, two more steps happen before you can close. 

• The home inspection: This is a thorough evaluation of the property's condition, typically performed by a licensed inspector who examines the structure, roof, foundation, electrical systems, plumbing, heating and cooling, and anything else that affects how the home functions and what it will cost to maintain.

For rural properties, inspections often include the well and water quality, septic system, outbuildings, and any other features specific to the property. These are worth paying close attention to because they can carry significant costs if they need repair or replacement.

• The appraisal: This is an independent assessment of the property's market value, ordered by your lender to confirm the home is worth what you've agreed to pay. 

Who pays for the appraisal when buying a home? In most cases, the buyer pays for the appraisal either at the time of order, or at closing as part of your closing costs. 

Step 8: Understanding Escrow, Closing Costs, and Prepaid Costs

As you get closer to closing, you'll start hearing terms like escrow, closing costs, and prepaid costs. Here's what to know: 

• How does escrow work when buying a home? Escrow refers to a neutral third party that holds funds, like your earnest money deposit, until the sale is complete. Once you close, most lenders set up an ongoing escrow account to collect a portion of your property taxes and homeowner's insurance as part of your monthly payment. It’s important to note that not all lenders require or allow escrow accounts.
• What are closing costs when buying a home? These are the fees and expenses due at closing, such as lender fees, title insurance, attorney or settlement fees, recording fees, and other charges that vary depending on your loan type, lender, and location.
• What are prepaid costs when buying a home? Common prepaid costs include the first year of homeowner's insurance, prepaid interest covering the days between your closing date and your first mortgage payment, and an initial deposit into your escrow account to get it funded.

Rural properties can sometimes carry additional closing considerations, including title complexities related to acreage, easements, or land use. Having a lender and closing team familiar with rural transactions helps ensure the process moves forward smoothly.

Step 9: Closing on Your Home

Closing is the final step in the home-buying process. It's the day you sign the paperwork, the funds are transferred, and the home becomes yours. Here's what that day typically looks like: 

• Before closing: Do a final walkthrough of the property to confirm the home is in the condition you agreed to, that any negotiated repairs were completed, and that nothing has changed since your inspection.
• At closing: Closing typically takes place at a title company, attorney's office, or lender's location. You'll review and sign a significant amount of paperwork, including your loan documents, the deed, and a final breakdown of all costs. Bring your funds in the form of a wire transfer or cashier's check, along with a valid government-issued photo ID.
• After closing: Once all documents are signed and funds are transferred, you'll receive the keys. Your lender will provide information about your first payment, how to set up your account, and how your escrow works going forward. 

Buying a Home in Rural Areas: What to Know

Buying a home in a rural area follows the same general process, but there are details that may show up in rural transactions that don't typically come up elsewhere.

Land considerations: How much land you want, how it's zoned, and how it can be used all affect your loan options. Some programs have acreage limits or restrictions on properties used for agricultural purposes.

Utilities: Many rural properties rely on a private well and septic system rather than city utilities. A well water test and septic inspection are important steps before closing.

Property eligibility: Manufactured homes, barndominiums, properties with significant acreage, and homes in certain locations may not qualify under standard loan guidelines. Working with a lender who specializes in rural financing helps you understand what's eligible before you make an offer. 

Fewer comparables: Rural properties are harder to appraise because comparable sales in the area are limited. An appraiser working outside their area of expertise may undervalue a property, which can affect your financing and complicate the transaction. 

Unique financing: USDA loans are designed for eligible rural areas, and specialty lenders like Compeer Home offer programs that cover property types and situations that conventional lenders might decline, including manufactured homes, hobby farms, properties with large acreage, and non-traditional builds.