- Step 1
Decide if it makes sense for you to buy a house or keep renting. If your job keeps you on the move, it may not be worth it. You may need to stay put for at least three years to recoup your closing costs. If your desire to own a home is based on wanting to create stability, keeping control over your living situation, building equity and investing in your future, go for it.
- Step 2
Strengthen your credit: Pay off credit cards, resolve any credit disputes or delinquencies, and cancel unused cards. Your credit rating takes into account both how you use the credit you have available and whether your available credit is too high for your income. Call a credit reporting agency and request a copy of your credit report, which may cost around $20.
- Step 3
Decide what sort of home you want. A single-family home in good condition offers instant livability. While it's more work than a condominium, and likely more expensive up front, you don't have to share ownership or pay condo fees (that only increase over time). Or build equity quickly if you have the skills and ample time by purchasing a fixer-upper and making it livable. Spec homes (new homes constructed by a builder that don't have a buyer yet) can also be a good deal if the builder is eager to get its money out of the project. Multi-families can be an excellent way to generate income, by occupying one unit and renting the other(s).
- Step 4
Simplify your search by defining the area you'd like to live in. Scout out what's available in the vicinity. Look at prices, home design, proximity to shopping, schools and other amenities.
- Step 5
Visit a few open houses to gauge what's on the market and to see firsthand what you want, such as overall layout, number of bedrooms and bathrooms, kitchen amenities, and storage.
- Step 6
Use a mortgage calculator to determine how much house you can afford, whether renting or buying is more advantageous for you right now, and how much you'll likely be able to borrow. However, take these figures with a grain of salt; some are inaccurate. Get pre-qualified to get the actual amount you can pay. Most lenders allow you to put up to 28 percent of your gross income or 36 percent of your net toward a house payment.
- Step 7
Be ready to hand over a substantial down payment. Most mortgages are based on the buyer putting down 10 to 20 percent of the purchase price. Putting down less up front often requires you to pay private mortgage insurance (PMI), which increases your monthly housing cost.
- Step 8
Shop for a home on your own only if you understand the tradeoffs. When you walk into an open house without representation, that agent running the open house represents and is working on behalf of the seller of that property. The agent is obligated to treat you fair and honest but still represents the seller.
- Step 9
Shop for a real estate agent who will search for suitable properties, represent your interests and negotiate on your behalf. A buyer's representative can evaluate the properties you view, do a market analysis to determine its value in the marketplace, select an appropriate price to begin negotiations and advise you in writing the contract.
- Step 10
Go into exhaustive detail when describing to your agent what you want in a home: number of bathrooms and bedrooms, attached garage, land and anything else that may be important, like good light or a big enough yard for the kids. Find an agent who listens attentively.
- Step 11
Shop aggressively. Unless you're under the gun time-wise, look at as many homes as possible to get a sense of what's available. Don't rush into buying if you don't have to.
- Step 12
Look beyond the home to the neighborhood and the condition of nearby homes to make sure you aren't buying the only gem in sight. The area in which your home is located is sometimes a bigger consideration than the home itself, since it has a major impact on your home's resale value. Buying a fixer-upper in the right neighborhood can be a great investment, and being able to identify up-and-coming communities--where more people want to live--can lead you to a bargain property that will only appreciate in value.
- Step 13
Visit properties you're seriously interested in at various times of the day to check traffic and congestion, available parking, noise levels and general activities. What may seem like a peaceful neighborhood at lunch can become a loud shortcut during rush hour, and you'd never know it if you drove by only once.
- Step 14
Determine whether you need to sell your current home in order to afford a new one. If so, any offer to buy that you make will be contingent on that sale. Contingent offers are more risky and less desirable for the seller, since the sale can't be completed until the buyer's house is sold. You may want to put your current house on the market first.
- Step 15
Try not to fall in love with one particular property. It's great to find exactly what you need, but if you get your heart set on one home, you may end up paying more than it's worth because you're emotionally invested. The deal may also fall apart.
- Step 16
Work with your agent to present an offer. In this market, inventory is down and multiple offer situations are quite possible; your agent should help you craft a competitive bid that makes the most of your financial assets. He or she can help you determine how close to the asking price you should be and, if your offer's turned down, how to counteroffer.
- Step 17
Make sure final acceptance is predicated on a suitable home inspection.
- Step 18
Include earnest money with your offer. Your agent can assist in arriving at a suitable amount--usually $1,000 to $5,000. Once you sign an offer, you are officially in escrow, which means you are committed to buy the house or lose your deposit, unless you do not get final mortgage approval. During escrow (typically 30 to 90 days), your lender arranges for purchase financing and finalizes your mortgage. This is also when all inspections must be completed.
- Step 19
Request the following surveys and reports: inspection, pests, dry rot, radon, hazardous materials, landslides, flood plains, earthquake faults and crime statistics.
- Step 20
Close escrow. This final step in buying a home, usually conducted in a title office, involves signing documents related to the property and your mortgage arrangements. The packet of papers includes the deed, proving you now own the house, and the title, which shows that no one else has any claim to it or lien against it. If any issues remain, money may be set aside in escrow until they are resolved, which acts as an incentive for the seller to quickly remedy any problem areas in order to receive all that is owed.
Sitting in my local bagel shop enjoying the irrisistable delight of sesame and scallion, I couldn't help but overhear the conversation at the next table. Two gentlemen, most likely father and son conversed or should I say, the son did all the talking and the father responded with the occasional "been there, done that" grunt in between lettuce-dripping, roast beef bagel sandwich. Does the grunting constitute an actual exchange? Well evidently, the son was in the process of purchasing a new construction townhouse in Western Massachusetts and was astonished, not to mention completely distressed, by the amount of work and energy it required and his exact words were, "buying a house is NOTHING like buying a car." (NO KIDDING!) I wanted to turn around and hand him my Windhill card and explain that if he was working with the right advisor, he would not be so exhausted by the process. I'm proud of my team of advisors. They do a great job of alleviating the pressures a real estate transaction can often times produce, "spreading out the cream cheese" nice and smooth so all the client has to do is sit back, sip their coffee, enjoy their bagel and wax poetic about their new home and when the first barbecue will be.
Here's what it takes...don't go it alone. Hire a Windhill Advisor for a smooth transaction.
Instructions Level of Difficulty: Challenging