How to Buy a House in 2025: Complete Guide

Buying a house is a major financial decision. The process can seem complex, especially for first-time buyers. The market in 2025 offers more choices and less competition than in previous years. Understanding the basics can help make the process clearer.

Can I Afford to Buy a House?

Affordability comes down to three main factors that lenders examine closely. Your credit score shows how you've handled debt in the past. Your income and debt-to-income ratio reveal whether you can handle monthly payments. The cash you have available covers your down payment and closing costs.

Most conventional loans require a credit score of at least 620. FHA loans work for buyers with scores as low as 580. VA and USDA loans have more flexible requirements for eligible buyers.

Check Your Credit Score and DTI

Your debt-to-income ratio (DTI) is simple math. Add up all your monthly debt payments and divide by your gross monthly income. If you earn $5,000 per month and pay $1,500 in debts, your DTI is 30 percent. Lenders typically want to see a DTI below 36 percent.

• Check your credit report: Look for errors that might lower your score

• Pay down high-interest debt: This improves both your DTI and credit score

• Avoid new credit applications: These can temporarily lower your score

Estimate the Monthly Payment With Current Rates

Your monthly mortgage payment includes four main parts:

• The principal pays down the loan balance

• Interest is what you pay the lender

• Property taxes go to your local government

• Homeowners insurance protects against damage or loss

If you put down less than 20 percent, you'll often also pay private mortgage insurance (PMI). This protects the lender if you can't make payments.

Mortgage calculators help you estimate payments based on loan amount, interest rate and loan term. Current rates in 2025 remain higher than the historic lows of recent years.

Factor in Additional Housing Costs

Beyond your mortgage payment, homeownership brings other monthly expenses:

• Property taxes: Vary by location and home value

• Homeowners insurance: Required by lenders, costs vary by area and coverage

• HOA fees: Apply in some communities for shared amenities and maintenance

• Utilities: Electricity, gas, water, internet and trash service

• Maintenance and repairs: Budget one to three percent of home value annually

First Step to Buying a Home: Get Pre-Approved

Getting pre-approved means a lender has reviewed your finances and expects to be able to lend you a specific amount. This step comes before you start seriously shopping for homes. Pre-approval gives you a clear budget and shows sellers you're a serious buyer.

Pre-Qualification vs. Pre-Approval

Pre-qualification is a quick estimate based on basic information you provide. Pre-approval involves a thorough review of your financial documents and credit report. Lenders verify your income, assets and debts before issuing a pre-approval letter.

Pre-approval carries more weight with sellers because it shows you've already cleared the major financial hurdles.

Documents Lenders Need

Gather these documents before applying for pre-approval:

• Pay stubs: Last 30 days showing current income

• Tax returns: The previous two years with all schedules

• Bank statements: Recent statements for all accounts

• Employment verification: Letter from your employer or recent W-2s

Having these ready speeds up the application process when you apply with multiple lenders to compare rates and terms.

Fully Underwritten Approval Advantage

Some lenders complete the full underwriting process during pre-approval. This means they've already verified everything, and your approval is nearly guaranteed. Fully underwritten approvals make your offers more competitive because sellers know the financing likely won't fall through.

Choose the Right Mortgage for You

Different loan types serve different situations. Your credit score, down payment amount and eligibility for special programs determine which options work best for you.

Fixed vs. Adjustable Rate Loans

Fixed-rate mortgages keep the same interest rate for the entire loan term. Your monthly payment stays the same, making budgeting easier. Adjustable-rate mortgages (ARMs) start with lower rates that can change after a set period.

ARMs work well if you plan to move or refinance within a few years. Fixed-rate loans provide stability if you plan to stay long-term.

Compare Loan Types

FHA loans help buyers with lower credit scores or smaller down payments. VA loans serve military members and veterans with no down payment required. USDA loans work for rural properties and have income restrictions. Conventional loans are the most common option for buyers with good credit.

Rate Locks and Buydowns

A rate lock freezes your interest rate from application to closing, even if market rates rise. Most locks last 30 to 60 days. A 2-1 buydown temporarily reduces your rate for the first two years, then returns to the standard rate.

How to Save for a Down Payment Faster

Saving for a down payment takes time and strategy. While 20 percent down avoids PMI, many buyers purchase homes with three to five percent down through various loan programs.

Automate Your Savings

Set up automatic transfers from checking to savings to build your down payment fund consistently. Even $200 to $300 per month adds up over time. Pay down high-interest debt like credit cards to free up more money for savings and improve your credit score.

Down Payment Assistance Programs

Many states and cities offer help for first-time buyers:

• Grants: Free money that doesn't need repayment

• Low-interest loans: Borrowed funds with favorable terms

• Tax credits: Reduced tax burden for qualifying buyers

Search your state housing finance agency website for local programs. Requirements typically include income limits and first-time buyer status.

Gift Funds and Family Help

Family members can gift money for your down payment. Lenders require a gift letter stating the money doesn't need repayment. If you currently own a home, you might use a home equity loan or line of credit to fund your next purchase.

Home Purchase Steps From Search to Closing

The actual buying process follows a predictable sequence. Each step builds toward the final closing where you become the official owner.

Define Your Must-Haves and Nice-to-Haves

Start with two lists:

• Must-haves include location, number of bedrooms, school district or accessibility features

• Nice-to-haves might include updated kitchens, pools or specific architectural styles

This exercise prevents you from getting overwhelmed by options and helps you make decisions when you find potential homes.

Tour Homes Online and in Person

Online listings let you filter by price, size, location and features. Virtual tours and photos give you a sense of layout and condition. Schedule in-person visits for homes that meet your criteria.

Take notes and photos during tours to help you remember and compare properties. Some companies like Opendoor offer self-tour options where you can visit homes on your schedule without appointments.

Make a Competitive Offer

Your offer includes the purchase price, earnest money deposit and any contingencies. Earnest money shows you're serious about buying — typically one to three percent of the purchase price.

Common contingencies include:

• Inspection contingency: Lets you back out if major problems are found

• Financing contingency: Protects you if your loan falls through

• Appraisal contingency: Allows renegotiation if the home appraises low

Your real estate agent helps structure an offer that's competitive but protects your interests.

Schedule Inspection and Appraisal

Once your offer is accepted, hire a professional inspector to examine the home's condition. Inspectors check major systems like plumbing, electrical, HVAC and structural elements. You typically have seven to 10 days to complete the inspection.

Your lender orders an appraisal to confirm the home's value matches your loan amount. This protects the lender from lending more than the property is worth.

Close on Your New Home

The final walk-through happens 24 to 48 hours before closing. You'll verify that any agreed-upon repairs were completed and the home's condition hasn't changed.

At closing, you'll sign loan documents, transfer ownership and pay closing costs. Bring a cashier's check or arrange a wire transfer for your down payment and closing costs. Once everything is signed and funds are transferred, you get the keys.

How Do I Buy a House While Selling My Current One

Many buyers face the challenge of buying their next home while selling their current one. Timing these transactions requires planning and sometimes creative financing solutions.

Sell First, Then Buy

Selling your current home first gives you a clear budget for your next purchase. You'll know exactly how much equity you have available and won't carry two mortgage payments.

The downside is potential timing gaps. You might need temporary housing if your new home isn't ready when you sell. Some buyers negotiate rent-back agreements to stay in their sold home for a few weeks while transitioning.

Buy First, Then Sell Options

Buying before selling gives you more time to find the right home, but requires managing two properties temporarily. Bridge loans use your current home's equity to help finance the new purchase. These short-term loans typically last six to 12 months with higher interest rates.

Some buyers rent out their current home instead of selling immediately. This provides rental income but requires being a landlord and doesn't free up your equity for the new purchase.

Opendoor Cash Offer Solution

Companies like Opendoor can provide cash offers for your current home, eliminating the uncertainty of traditional sales. This approach lets you know exactly when you'll close and how much money you'll have for your next purchase.

Digital Tools That Speed Up Home Buying

Technology streamlines many parts of the home-buying process. Digital tools can save time and reduce paperwork while maintaining security and legal compliance.

Self-Tours and Digital Contracts

Some platforms offer keyless entry for touring homes without scheduling appointments. Digital contract systems let you make offers and sign agreements online. Companies like Opendoor combine self-tours with fast purchase options at set prices.

Electronic Signatures and Remote Services

E-signature platforms allow you to sign documents from anywhere. Remote notarization lets notaries verify your identity over video calls. These tools reduce the need for in-person meetings while maintaining legal requirements.

Many mortgage lenders and real estate platforms offer apps that track your progress, store documents and facilitate communication with your team.

Rights and Assistance Programs

Federal and state laws protect homebuyers from discrimination and unfair practices. Government programs also provide education and financial assistance.

Fair Housing Protections

Federal law prohibits housing discrimination based on race, color, national origin, religion, sex, disability or familial status. If you experience discrimination, you can file complaints with HUD (U.S. Department of Housing and Urban Development).

Lenders must follow equal credit opportunity rules that prevent unfair lending practices based on personal characteristics.

Homebuyer Education and Grants

HUD-approved homebuyer education courses teach the purchase process, budgeting and mortgage basics. Some down payment assistance programs require course completion.

State and local housing agencies offer various programs:

• First-time buyer grants

• Down payment assistance loans

• Closing costs help

• Special loan programs

Check your state housing finance agency website for available programs in your area.

Common Mistakes to Avoid

Learning from others' mistakes can save you time, money and stress during your home purchase.

• Getting too much house for your budget is a common error. Lenders might approve you for more than you can comfortably afford. Consider future expenses, job changes and life events when setting your budget.

• Waiving important contingencies to make your offer more competitive can backfire. Inspection and financing contingencies protect your earnest money if problems arise.

• Skipping the final walk-through means missing your last chance to verify the home's condition before closing. This step catches any new damage or incomplete repairs.

Move in With Confidence

After closing, several tasks help you settle into your new home safely and efficiently:

• Contact utility companies to transfer or start service for electricity, gas, water and internet

• Update your homeowners insurance with the new property details

• Change all exterior door locks since you don't know who might have keys from previous owners

• Update your address with the postal service, banks, employers and subscription services

• Consider setting up a security system if the home doesn't already have one

When you're ready for your next move, you can request a cash offer for your home through services like Opendoor's address entry page.

Frequently Asked Questions About Buying a House

How Long Does Buying a House Take From Start to Finish?

Most buyers close within 30 to 60 days after signing a purchase contract, but the entire process including house hunting and getting pre-approved may take two to six months depending on market conditions and your preparation level.

What Salary Do You Need to Buy a $400,000 House?

Lenders generally want housing payments below 28 percent of gross monthly income, so you'd typically need around $90,000 to $135,000 annual salary for a $400,000 home with a standard down payment and current interest rates.

What Happens if a House Appraises for Less Than the Purchase Price?

If you have an appraisal contingency included in your offer, you can negotiate with the seller to reduce the price, bring extra cash to closing to cover the difference or cancel the contract and recover your earnest money deposit.

Please read your purchase agreement carefully as the language and your related rights may be different, and consult your attorney or agent with any questions.