Ten Steps to Buying A House – Before You Make the Offer

Buying a home is one of the most exciting and fulfilling purchases you can make in your lifetime.

 It’s also one of the scariest. 

Good news here — the general housing market seems to be strengthening in recent years. General foreclosures are down, and housing values in many regions are slowly going up. Considering that 6-10 million houses are purchased every year in the U.S., on average (wiki.answers), and around 2.5 million in Canada (Yahoo), this is encouraging.

If you’ve decided to buy, the problem is not finding a house to purchase — it’s knowing which one! Australia, for example, based on RP Data figures, can have more than 260,000 houses advertised at any given time — and that’s not counting homes sold in private.
Here are ten tips to help you through the process of buying a home, whether it’s your first or your fifth:

1. How much can you afford? One figure often used as a starting point by financial experts: 25% of your base pay per month. (Others recommend starting at 33%, but this would reduce any flexibility if your income changed.) Do you have other debts or loans? What can you honestly afford to pay every month?

2. How much have you saved as a down payment? Hopefully at least 10% — but if you can afford to pay 20% or more, you won’t be required to add on mortgage insurance. That, by the way, is one of the expenses that often must be included in your loan, along with other fees. It can beef up the final number considerably.

3. Start the loan process. Once you’ve got an amount in mind, it’s time to start figuring. One good way to begin: start a file listing not only how much you need, but how long, and what interest rate you’re shooting for. Most banks have a key facts sheet that can be helpful. While you’re researching, you can also:

4. Establish your search parameters. This is just a fancy way for asking where you want to live. Thanks to the Internet, you can research homes down the street, a few blocks, or even hundreds of miles away, with relative ease. Don’t forget to check sites like Zillow and Craigslist — they give you not only traditional listings, but ‘FSBO’ (For sale by owner) ones, as well.

5. Foreclosures and short sales can be bargains. Unfortunately, they can also take months longer, and involve bidding against others. Which leads to yet another:

6. If you can, take your time. You’re probably going to be living in this house for at least 5 years — perhaps your life. Rushing the process could mean missing out on crucial repairs (see the last tip), paying too much or making do with an ‘okay’ home while the perfect one waits just around the corner. Sometimes jobs demand a fast decision — more often, they don’t. If you’re in this position, renting or leasing short-term may give you a chance to study the market before you buy.

7. Consider a ‘buyers agent.’ This person, often a realtor, speaks and researches on your behalf. They also can give you access to MLS listings — the backbone of residential real estate ads. And they can negotiate with the the ‘seller’s agent; i.e., the other realtor.

8. Decide on loan needs – and get yourself preapproved. How long will you need this loan? A fixed rate loan sets the amount for 10, 15, even 30 years at the same interest rate. Variable loans, on the other hand, may give you a better rate and more options in the short-term. Getting preapproved reassures potential sellers that you’re reliable…and if there are problems, you’ll find out in time to be able to do something about it.

9. Go see for yourself.  The house (hopefully houses!) look great in the photos — now it’s time to make sure. Visit at least once. (More, if possible, so you can see how the light affects the yard and rooms inside.) Bring a digital camera along, for photos — and a fresh look at the property later on. What’s next door? How stable is the rest of the neighborhood? Some experts advise buying the worst house in the best neighborhood – – pricewise, it should be more of a bargain, provided you can remodel it. Which brings us to the final tip:

10. Hire a home inspector. If you’re really serious about spending tens or hundreds of thousands of your hard-earned money, you need to know if your investment’s worth it. A good home inspector (ask for certification and credentials) can alert you to ‘invisible’ problems like bad pipes and too-old wiring. Surface issues, like stained carpet and ugly painted walls, can be fixed. An insect-ridden or unstable foundation, on the other hand, is a problem that just keeps on giving.