Tips on Buying a House

Before you learn how to buy a house, evaluate if you should buy a house. Are you up to date on all your bills and able to stay that way? Is your income secure? Do you have enough money for closing costs and an adequate down payment? Do you really want the responsibilities of owning a house? Are you up to the financial commitment, not just for the mortgage but for routine maintenance and improvement? And do you plan to stay in the area for the foreseeable future, rather than relocating within a few years?  If you can answer yes to most of these questions, you probably are ready for home ownership.  You'll learn many things as you work through the buying process.

Review your finances, and then ask the people at your credit union to help you decide how much house you can afford. This step is called pre-qualifying. It lets you know what price range to investigate and makes it highly probable you'll qualify for a mortgage when you've found the house you want.

Start House Hunting

It's a cliché in real estate, but one you should heed: When you look for property, consider location, location, and location. So before you even look for a house, spend time in neighborhoods that interests you. Are there parks, schools, libraries, and other appealing features nearby? Is the area safe? Would you be close to work, childcare, recreation, or other activities important to you? Identify a few neighborhoods that meet your needs, then investigate houses for sale there.

Think about what size house or condominium or cooperative you want. Do you want room for visitors, hobbies, and maybe even a home business? If you plan to operate a home business, is that permissible in the neighborhood? Make a detailed list of your requirements. It's unlikely you'll match them all but it helps to have a wish list.

Sample the market by following leads from friends and co-workers and by calling about properties sporting sale signs, or ads in newspapers and shopping flyers. You'll likely end up using the services of a real estate agent or agents, too. Ask friends for referrals, and look for agents or brokers with experience in the business and the community.

As a buyer, never forget the agent works for the seller, not for you (unless you hire a buyer's broker). That means you should be careful about what information you share with the agent, who's legally obligated to inform the sellers of your intentions. You can benefit from working with a professional agent. A good agent or broker can help you decide what your needs are and how much house you can afford, and show you houses in your price range. Choose an agent belonging to the local Multiple Listing Service (MLS) so you'll have access to information from the majority of houses for sale in your market.

It's important to look at several houses so you develop a sense of the market and various neighborhoods. Make notes about each property you see on a copy of your wish list. After you see even a few houses it becomes hard to keep their features straight.

Try to restrain your enthusiasm when you find a house or houses that seem just right. Be picky about the major operating systems-heating, air conditioning, plumbing, and water for example. The "bones" of a house are harder and more expensive to fix than skin-deep cosmetic details such as interior paint and decorating features, although those qualities get your initial attention.

Make An Offer

When you find a house you want to make an offer on, you'll be glad you looked at so many other places. Being familiar with the market is the only way to have a sense of how much to offer. The agent can help you draw up the "offer to purchase." It's also called a contract, bid, binder, memo, deposit receipt or other names in some areas. But don't discuss your strategy with the agent - it's the same as discussing strategy with the sellers.

And if there isn't time to have your lawyer look over the offer to purchase before you sign, make it "subject to the approval of the attorneys for the parties within (so many) days." The offer will include the purchase price and method of payment, verification of title, the date possession will transfer, a list of any personal property included in the sale, inspection contingency, financing contingency, and so on. Because there are so many details it's important to have a lawyer review the offer to protect your interests.

It's usual to deposit some earnest money with the offer to demonstrate that you mean business. The amount of money is determined by local custom, but typically ranges between $2,000 and $5,000. The agent puts the amount in escrow until you conclude the deal. If the sellers don't accept your offer within the number of days stated in the offer, the check comes back to you. If the sellers accept the contract but you withdraw from the deal, you lose the money. That's why it's to your advantage to offer the lowest acceptable amount. If the deal goes through, the earnest money is applied to the sale at the closing. The sellers will respond by accepting, rejecting, or countering your offer. If they reject or counter, it's your option to counter. Keep your goals in mind. If the counter offer is not in line with your priorities, keep looking. Once the parties agree on terms, you have a binding agreement, a contract.

At several stages, though, the contract may fall through. Say the professional home inspector you hire to fulfill one of the contract contingencies tells you the roof has one winter left, ditto the furnace, and the plumbing is seriously deteriorated. You can either pull out of the transaction or renegotiate the terms. For example, you could offer less money in anticipation of the expenses of fixing up the problems, or require the seller to fix the problems. Of course, the repairs would be subject to a satisfactory inspection, too.

Arrange Financing

One major contingency in your offer will make the deal subject to your obtaining a mortgage at a given rate, amount, and term. If you pre-qualified, this phase should go faster and more smoothly. Call your credit union to discuss the various types of mortgages available.  The people at your credit union can provide more information and recommend other resources to help you.