Home buying today is not as simple as it was a few years ago. Prices have gone up, interest rates are changing, and competition is fierce. On top of that, the number of available homes is still lower than the demand, which means buyers need to act fast.

For first-time buyers and even those who have bought homes before, the process can be overwhelming. Without the right preparation, you could end up spending more than you should or missing out on a great home. Knowing how to approach the market, understand your finances, and make a strong offer is key.

This guide will walk you through what you need to do before making an offer on a house.

Research the Market Before You Start Looking

Many buyers focus on finding the perfect house but forget to study the local market. Understanding real estate trends in your area will help you make a smart purchase.

Start by looking at recent home sales in the neighborhoods you’re interested in. Check how long homes are staying on the market and if they are selling for more or less than the asking price. If homes are selling quickly and above the listing price, you might need to act fast and be prepared for bidding wars.

It’s also a good idea to follow interest rate trends. Higher rates can affect how much you can afford. If rates are expected to rise, locking in a mortgage rate sooner might be a good decision.

Check Your Finances Before House Hunting

Many buyers make the mistake of falling in love with a house before checking if they can afford it. This can lead to disappointment or financial trouble later.

Start by checking your credit score. A higher credit score will help you get better mortgage rates, which means lower monthly payments. If your score is low, work on improving it by paying off debt and making sure your bills are paid on time.

Next, figure out your budget. Your monthly mortgage payment is only part of the cost. You also need to consider property taxes, homeowners insurance, maintenance, and any potential homeowner association (HOA) fees. Many experts recommend that your total housing costs should not exceed 28-30% of your monthly income.

Understanding your finances early will help you avoid surprises later in the process.

Get Pre-Approved to Strengthen Your Offer

Getting pre-approved for a mortgage is a crucial step before you start making offers on homes. A pre-approval letter shows sellers that you are a serious buyer with financing already lined up. In a competitive market, homes can get multiple offers, and sellers are more likely to accept offers from buyers who are pre-approved.

During the pre-approval process, lenders will review your income, credit history, and existing debts to determine how much they are willing to lend you. This helps set a realistic price range for your home search.

Understand the Costs Beyond the Purchase Price

Many buyers focus only on the listing price of a home, but there are many other costs to consider. If you don’t plan ahead, these extra expenses can catch you off guard.

Closing costs are one of the biggest additional expenses. These typically range from 2-5% of the home’s price and include lender fees, title insurance, and legal costs. It’s important to budget for these so you’re not short on funds at closing.

Home inspections and appraisals are also essential. An inspection helps identify any issues with the home, such as electrical problems, plumbing leaks, or structural concerns. While this costs a few hundred dollars, it can save you thousands in repairs later. An appraisal ensures the home is worth the price you’re paying, which is crucial for loan approval.

Check the Home’s Condition Before Making an Offer

No matter how perfect a home looks in pictures or during a quick tour, it’s important to check for potential issues before making an offer. A home inspection is the best way to uncover hidden problems that could cost you thousands of dollars later.

A good inspector will check for issues with the foundation, roof, electrical system, plumbing, and HVAC. Even newer homes can have hidden defects. If the inspector finds major problems, you may need to negotiate with the seller for repairs or a price reduction.

Some warning signs to watch for include cracks in the walls, water stains, a sagging roof, or uneven floors. These could mean structural issues, which are expensive to fix. Mold or a musty smell can indicate water damage. Old plumbing or electrical systems may need upgrades, which can add to your costs.

Some older homes may not meet current safety standards, which could be a problem when making renovations or reselling in the future.

Make a Competitive Offer Without Overpaying

In a competitive market, making a strong offer is key. If you offer too little, the seller may not take you seriously. If you go too high, you might overpay. Finding the right balance takes research and strategy.

Look at recent sales of similar homes in the area to get an idea of fair pricing. Your real estate agent can help with this. If homes are selling above the asking price, you may need to offer slightly more to stay competitive.

However, don’t let emotions push you into offering more than you can afford. Set a firm limit before negotiations start. You can also add incentives to make your offer stronger, such as a flexible closing date or covering some of the seller’s costs.

If you’re in a bidding war, consider adding an escalation clause. This means your offer will automatically increase by a set amount if another buyer bids higher, up to your maximum budget.

Prepare for the Final Steps Before Closing

Once your offer is accepted, you’re in the final stretch. However, there are still a few important steps before you get the keys to your new home.

First, review all paperwork carefully. Your lender will finalize the mortgage, and you’ll need to sign various legal documents. Make sure you understand all the terms before closing day.

Before closing, do a final walk-through of the home. This is your last chance to check that everything is in the agreed condition. Make sure any requested repairs have been completed and that nothing is missing or damaged.

Closing costs, which include lender fees, title insurance, and escrow fees, need to be paid at this stage. These can add up, so have funds ready. Once everything is signed and payments are made, the home officially becomes yours.

Buying a home in today’s market can be challenging, but the right preparation makes all the difference. Understanding your finances, researching the market, and making a well-planned offer will put you in a strong position.

A home is a major investment, so taking the time to check for issues, negotiate wisely, and protect yourself with contingencies is important. By following these steps, you can avoid common pitfalls and secure a home that fits your needs and budget.