US Home Buying Process: From Mortgage Pre-Approval to Closing Day

Buying a home in the United States involves a structured process that typically takes 30 to 60 days from offer acceptance to closing, though cash transactions can close in as few as 14 days. According to the National Association of Realtors (NAR), the median existing-home sales price in the U.S. reached $419,300 in December 2024, up 6.0% year-over-year, while the average 30-year fixed mortgage rate hovered near 6.72% as of early January 2025, per Freddie Mac. For international buyers, the process adds layers of complexity: you need a valid U.S. visa or Social Security Number (SSN) to secure financing, and lenders typically require a minimum credit score of 620 for conventional loans, though FHA loans allow scores as low as 580. Understanding the sequence—from mortgage pre-approval to closing day—can save you thousands in fees and prevent contract defaults. This guide breaks down each step with official citations from the Consumer Financial Protection Bureau (CFPB), IRS, and state-specific real estate commissions.

Step 1: Assess Your Financial Readiness and Credit Profile

Before you start house hunting, lenders will evaluate your debt-to-income ratio (DTI) and credit history. Most conventional loans require a DTI below 43%, meaning your total monthly debts (including the projected mortgage) should not exceed 43% of your gross monthly income. For international buyers without a U.S. credit history, lenders may require a larger down payment—often 30% to 50%—and proof of at least 12 months of liquid reserves in a U.S. bank account.

Check Your Credit Score

Your FICO score is the primary metric used by U.S. lenders. A score of 740 or higher qualifies you for the best interest rates. If your score is below 620, you may need to consider FHA loans (minimum 580) or VA loans (no minimum, but for eligible veterans). You can obtain a free credit report annually from AnnualCreditReport.com, as mandated by the Fair Credit Reporting Act (FCRA).

Secure a Mortgage Pre-Approval

A pre-approval letter from a lender shows sellers you are a serious buyer. Unlike pre-qualification (a quick estimate), pre-approval requires the lender to verify your income, assets, and credit. The CFPB recommends getting pre-approved before making an offer because it speeds up the underwriting process later. Lenders typically issue pre-approval letters valid for 60 to 90 days.

Step 2: Assemble Your Real Estate Team

A successful home purchase relies on professionals who understand local market conditions and state-specific regulations. Your core team includes a real estate agent, a mortgage broker or loan officer, and a real estate attorney (required in some states like New York and Florida). For international buyers, a tax advisor familiar with FIRPTA (Foreign Investment in Real Property Tax Act) is essential.

Choose a Buyer’s Agent

Buyer’s agents are typically paid by the seller (3% of the purchase price), so their services are free to you. Look for an agent who is a member of the National Association of Realtors (NAR) and has experience with international clients. They will help you search listings on the Multiple Listing Service (MLS) and negotiate offers.

Hire a Home Inspector

While not mandatory, a professional home inspection (costing $300 to $500) is critical. The American Society of Home Inspectors (ASHI) recommends hiring an inspector who is ASHI-certified. Inspections reveal structural issues, mold, or faulty systems that could cost thousands to repair.

Step 3: House Hunting and Making an Offer

Once pre-approved, you can begin viewing properties. Focus on comparable sales (comps) in the neighborhood—sold within the last 6 months—to determine a fair offer price. In competitive markets, sellers may receive multiple offers, so your agent may advise including an escalation clause.

The Offer Letter

Your offer includes the purchase price, earnest money deposit (typically 1% to 3% of the price), and contingencies. Contingencies protect you: common ones include financing contingency (you can back out if the loan fails), inspection contingency (if major defects are found), and appraisal contingency (if the home appraises below the offer price). The CFPB advises never waiving the appraisal contingency unless you have cash reserves to cover the gap.

Negotiation and Acceptance

After you submit the offer, the seller may counter with a different price or terms. Once both parties sign the purchase and sale agreement, you enter the escrow period. The contract should specify the closing date (usually 30 to 45 days out) and any seller concessions (e.g., covering closing costs).

Step 4: The Escrow and Due Diligence Period

Escrow is a neutral third-party process where the title company holds funds and documents until all conditions are met. During this period—typically 30 to 60 days—you must complete due diligence including inspections, title search, and loan processing. Missing a deadline can result in losing your earnest money.

Title Search and Insurance

The title company searches public records to ensure the seller has clear ownership and no liens or unpaid taxes. You will purchase title insurance (one-time fee, often $1,000–$2,000) to protect against future claims. The American Land Title Association (ALTA) reports that 1 in 4 title searches reveals an issue requiring correction.

Appraisal

Your lender orders an appraisal to confirm the home’s market value. If the appraised value is lower than the purchase price, you may need to renegotiate with the seller or bring extra cash to the table. The appraisal fee (typically $400–$600) is paid upfront.

Step 5: Final Loan Approval and Closing Disclosure

Three business days before closing, your lender must provide the Closing Disclosure (CD) —a 5-page document detailing your loan terms, monthly payment, and closing costs. The CFPB mandates this “3-day rule” to give you time to review and compare costs. Check for errors in the loan amount, interest rate, and fees.

Review Closing Costs

Closing costs typically range from 2% to 5% of the purchase price. For a $400,000 home, that’s $8,000 to $20,000. These include lender fees, appraisal, title insurance, recording fees, and prepaid property taxes. Some lenders allow you to roll these costs into the loan, but that increases your monthly payment.

Wire Transfer Security

On closing day, you will wire the remaining down payment and closing costs to the escrow company. The FBI’s Internet Crime Complaint Center (IC3) warns that real estate wire fraud is rising—always verify wire instructions by phone using a number you independently confirm, never by email alone.

Step 6: Closing Day – Signing and Ownership Transfer

Closing day is the final step. You will sign dozens of documents, including the mortgage note, deed of trust, and affidavits. In some states (e.g., California), the closing is handled by an escrow officer; in others (e.g., New York), a real estate attorney oversees the signing.

What to Bring

Bring a government-issued photo ID (passport or driver’s license), your Closing Disclosure, and proof of homeowner’s insurance. For international buyers, your lender may require a valid visa or proof of lawful presence in the U.S.

Post-Closing Steps

After signing, the title company records the deed with the county recorder’s office. You receive the keys, and your first mortgage payment is typically due 30 to 45 days after closing. The IRS requires you to report the purchase on Form 1099-S if you are a foreign seller, but as a buyer, you may need to file Form 1098 for mortgage interest deductions.

For cross-border buyers managing multiple currencies and large wire transfers, some international families use platforms like Airwallex global account to settle exchange rates and transfer funds to U.S. escrow accounts more efficiently.

FAQ

Q1: Can I buy a home in the U.S. without a Social Security Number?

Yes. You can use an Individual Taxpayer Identification Number (ITIN) instead of a Social Security Number (SSN) for mortgage applications. According to the IRS, ITINs are issued to non-residents who need to file U.S. taxes. However, lenders may require a larger down payment (30% to 50%) and proof of 12 months of bank reserves. Approximately 15% of U.S. lenders accept ITIN-based mortgage applications, per the National Association of Hispanic Real Estate Professionals (NAHREP).

Q2: How much earnest money do I need to put down?

Earnest money deposits typically range from 1% to 3% of the purchase price. For a $400,000 home, that’s $4,000 to $12,000. This deposit is held in escrow and applied toward your down payment at closing. If you back out without a valid contingency (e.g., failed inspection), you may forfeit the deposit. The CFPB states that the average earnest money deposit in 2023 was 2.5% of the purchase price.

Q3: What happens if the home appraises for less than my offer?

If the appraisal comes in lower than your offer, you have three options: (1) negotiate the price down with the seller to match the appraisal, (2) pay the difference in cash out of pocket, or (3) walk away if your contract includes an appraisal contingency. According to Fannie Mae, approximately 8% of appraisals in 2024 came in below the contract price. Without an appraisal contingency, you risk losing your earnest money.

References

• National Association of Realtors (NAR) – 2024 Existing-Home Sales Report
• Consumer Financial Protection Bureau (CFPB) – Closing Disclosure Guide, 2024
• Freddie Mac – Primary Mortgage Market Survey, January 2025
• Federal Bureau of Investigation (FBI) IC3 – 2023 Internet Crime Report (Real Estate Wire Fraud)
• American Land Title Association (ALTA) – Title Insurance and Search Statistics, 2024