Home-Buying Advice from a Recent Home-Buyer

Sarah, a recent client and first-time home-buyer, answers a few questions about her home buying experience -

• Q: What was the hardest part of buying your first home?
• A: Reconciling myself to yardwork.
  
  
• Q: How did you know your new house was "the one"? Were you tempted to keep looking?
• A: I had looked at several homes in my price range - enough to know that this one was special. Basically, I was looking for reasons not to buy my house, rather than talking myself into it.
  


• Q: Would you have done anything differently?
• A: Nope.
  


• Q: What advice would you give to someone thinking about buying their first home?
• A: Don't max out your budget with the mortgage - even with very little to do inside or out, I had several big shopping weekends just getting maintenance necessities and bits and pieces to make the house a home.
  


• Q: What surprised you about the process?
• A: The loan - don't buy furniture with it, and gift money payments are not a good thing!
  


• Q: What impressed you about your Realtor?
• A: She took such good care of me.
  


• Q: How did you know your Realtor was the right one to work with?
• A: I trusted her right away - she's so straightforward and I knew she wasn't going to let me make a bad decision.

Things to Look for when Buying a House

If you're thinking about buying a new (or old!) home, this list of the "Top Things to Look for When Buying a Home" can help to get your search off to the right start. While the number of rooms, condition of the kitchen, and size of the yard are important, there are other things to consider before you make an offer.

1) Location, Location, Location
They say that the 3 most important things to think about when buying are home are location, location, location. You can live with almost any imperfection in a home if you love the neighborhood and your neighbors. You can change almost everything else. But, once bought, you cannot change your home's location. When you go house hunting, consider any potential home's proximity to your work, the charm of the neighborhood, how the home is situated on the lot, ease of access, noise from neighbors, traffic, or pets, and access to parks, shopping, schools, and public transportation.

2) Situation Factors
Beyond location, look at the particular site of the home. If the home is on a hill does it have a view, a walkout basement, or lots of stairs to climb? Do neighbors' windows look directly into the home? Is the yard suitable for kids, pets, gardening, or other uses? Is access to the property safe regarding driveway elevation, stairs up to (or down to) the front door?

3) Check Out the Neighborhood
Be sure the neighborhood, and not just the house, meets your expectations. They say that you should own the smallest home in the nicest neighborhood that you can afford. You'll have a great view! Drive around on week days and weekends, during the day and in the evening. Are homes in the neighborhood consistent in size and features? Do the neighbors keep the yards clean and tidy or are there old cars and trash around? Is the neighborhood safe enough for people to walk, run, or bike and are there children playing in the yards?

4) Consider a Home's Curb Appeal
Your home should reflect your lifestyle. Do you live a laid-back life? Then you might not want a formal Victorian or Tudor style home. Something simpler and more contemporary might be in order. Look at the exterior features. A brick home is easier to maintain, unless you live in an earthquake-prone area! Is the roof in good condition? Is the landscaping attractive and are the sidewalks leading to the home safe?

5) Size and Floor Plan
You may be thinking about buying your dream home. But is your dream home impractical? Do you really need 4 bedrooms and 4 baths when you live alone? A large home can give you the extra space you've always wanted for a home office or crafts or art projects. But you'll pay higher heating bills and have higher taxes. It will take more furniture to furnish and money to decorate. Think about how the new home space will be used and whether it will fit your lifestyle now and in the future.

6) Bedrooms and Bathrooms
Decide how many bedrooms and bathrooms you really need, and only look at homes that meet your criteria. It would be a shame to fall in love with a cozy, charming cottage that just isn't big enough. An extra bedroom is always a plus, as it can be used for a home office, craft studio, or guest room. If you think you'll be adding more room later, be sure to consult an architect who can advise you on space planning, lot usage and city regulations.

7) The Kitchen
If the kitchen is the heart of your home, don't settle for a home with a kitchen that just won't work. You can always remodel, but it's very costly. Can you just replace cabinet faces and countertops? Will an inexpensive makeover be sufficient? Don't worry about appliances, as they can usually be easily replaced.

8) Closets and Storage
Older homes tend to have little closets and not a lot of storage space. If you have lots of sports equipment, craft supplies, out-of-season clothes, and holiday decorations, be sure you know where it will go in your new home. Newer homes tend to have big closets and lots of storage. You can always add storage space, but you might have to sacrifice living space in your rooms.

9) Windows and Lighting
Do you love a bright sunny room or do you love privacy? Look at a home with light and sunshine in mind. Look at the locations of electrical outlets and fixtures. Will they accommodate your lighting needs? Is there recessed lighting in the kitchen, cove lighting in the family room and a lovely chandelier in the dining room? If not, you can add them later, but it's nice to have it in place when you move in.

10) Finishing Touches
Sometimes the simplest home looks spectacular because of the installation of moldings, hardware and a fireplace. If these elements are important to you, look for them while house hunting or be ready to add them after you move in.

If you keep these specific elements of a home in mind, your house hunting will be more successful, and you'll likely end up with the home of your dreams -- for now, that is!

(Article from http://www.about.com/)

Wondering If Now Is the Right Time to Buy a Home?

Rates are at low levels. Some say it's a buyer's market. But is the time right for you? Ask yourself some questions.

Does buying a home fit in with my larger plans?
Prioritized homeownership among any other financial goals you may have. Ask yourself:
-Would buying a home mean stretching to my financial limits? If so, where can I make changes in my budget to keep it more balanced?
-Will I still have enough for other opportunities or for unexpected emergencies?

What can I comfortably afford?
Which is better than asking, "How much could I burrow?" Rather than focusing on your lender's limits, focus on the home loan that provides you with the best opportunity for success. Keep in mind how much you can afford to spend on a home without putting the rest of your financial plans on hold.

What will lenders consider when I apply for a loan?
There are three main areas lenders review when prequalifying you for a loan: income and expenses, credit score, and down payment and closing costs.

What will my credit score need to be?
This number is generated by the credit reporting agencies and represents your overall credit health; a higher score increases a lender's confidence in your ability to pay back a loan and make payments on time. Find your credit score by viewing www.annualcreditreport.com, a site sponsored by the three credit reporting agencies, Equifax (r), TransUnion (r), and Experian (r). As a general guideline, if your score is below 620, you may want to hold off on buying a home until you can improve your credit - or talk to a loan professional about your specific situation.

What percentage will be required for a down payment?
Having at least 10% to 20% to put toward a down payment on a home tells lenders that you're prepared to make a financial commitment to the home, and increases their confidence in your ability to pay the loan. It also puts you in a strong position financially, as you won't have to burrow as much from your lender. In most cases, a down payment of less than 20% requires that you carry private mortgage insurance (PMI) at an extra cost.

Are there other options if I don't meet these lender requirements?
There are affordable loan programs to help qualified low-to-moderate-income borrowers become homewoners. Certain home loan programs require potential borrowers to receive home buyer educaion. The benefit is that you may qualify for a loan program that can help you make a minimum down payment or qualify for varying forms of assistance, depending on your financial situation or the location of the home. In many areas, home buyers can receive assistance with down payment and/or closing costs from local community agencies. Check with a loan expert at your bank to find out if you qualify for these programs.

If I can't buy a home right now, what should I do to prepare myself?
It's never too soon to begin saving for a down payment, even if buying a house is far off in the distance. Consider setting up a separate savings account for your down payment fund and depositing money regularly into it.

What are the financial benefits of homeownership?
Tax advantages are one of the biggest financial benefits of homeownership. As a general rule, most homeowners can deduct most or all of their interest payments on their home loan, property taxes, and loan points, but check with your tax advisor to be sure.

(Information from Bank of America. For more information visit www.bankofamerica.com/homeloans)

Are You Ready to Buy a Home?

Question: Are You Ready to Be a Home Buyer?

A reader asks: "I would like to be a home buyer, but I don't know if I'm ready to buy a home yet. How can I tell? Part of me is frightened that I'll lose my home or won't be able to get a mortgage. I'm 26, single and gainfully employed. Does it make sense for me to be a buyer? I mean, how do I know if I am ready to be a home buyer?"

Answer: Buyers of real estate are making the biggest investment they will most likely ever make in their lives. That can be scary for some buyers. In some states, buyers are personally liable for the mortgage.

When my husband and I bought our home in Sacramento, he was totally freaked out for a while. He walked around repeating to himself, "I owe a quarter of a million dollars." He was more focused on the debt than on our huge amount of equity.

Many first-time home buyers put down a minimum amount and buy a home using an FHA loan. This means your home is leveraged, and you cannot immediately sell it and hope to make a profit. It's a commitment. A long-term commitment, in most markets.

Top Five Traits of a Home Buyer

You need to live somewhere. If you can buy a home for around the same amount you would pay in rent, and don't mind staying put for a while to build equity, becoming a home buyer might be a good decision. You will make a good home buyer if you are:

• A buyer who conforms to the market.

  If you are the type of buyer who says, "Every home on the market is overpriced; I'm not paying that much," then you are not conforming to the marketplace. Serious home buyers research the market and have realistic expectations.

• A buyer who has savings -- enough to put 2 to 3 months of mortgage payments in reserve.

  Mortgage lenders want buyers to have a reserve. You should not take every nickel you can rub together and throw it into your home purchase. You will need a small emergency fund.

• A buyer who has the resources and time to maintain a home.

  Homes require upkeep. You'll have a lawn to mow, windows to wash, furnace filters to replace, and you may need to tend to minor repairs from time to time.

• A buyer who is employed with at least two years on the job.

  If you don't have two years of employment at the same company, then two years in the same field will suffice. Lenders expect to see stability in your employment history.

• A buyer who plans to stay in the area.

  If your state of residency is uncertain, it's probably a good idea to skip buying a home. Some buyers who relocate are able to rent out their home, but handling a rental long distance is not always wise. You don't want to be forced to sell when you don't have enough equity to pay commissions and the other costs to sell.

  (Article from About.com)

  (Image from teamaguilar.com)

How to Buy a House

Many people dream of home ownership but it mandates homework, legwork and considerable effort on your part to ensure that the process goes as smoothly as possible, and you don't bite off more than you can chew. Here's how to make your dream become a reality.

1. Strengthen your credit. The higher your FICO score, which ranges from 300 to 850, the better rate you'll qualify for. Get a free copy of your credit report so you can see what the lenders see on your credit history. Pay off credit cards and resolve any credit disputes or delinquencies.
2. Determine how much house you can afford, and how much you'll likely be able to borrow.
   
   
   • You will be expected to put down 10-20% of the appraised value of a home.^[1] (Note that the appraised value may be higher or lower than the selling price of the house.) If you have $30,000 saved for a down payment, for example, you can use it as a down payment for a home between $300k (10% down payment) or $150k (20% down payment). Putting down less often, but not always, requires you to pay private mortgage insurance (PMI), which increases your monthly housing cost but is tax deductible.
   • Find out what ratios lenders are using to determine if you qualify for a loan. "28 and 36" is a commonly used ratio.^[2] It means that 28% of your gross income (before you pay taxes) must cover your intended housing expenses (including principal and interest on the mortgage, as well as real estate taxes and insurance). Monthly payments on your outstanding debts, when combined with your housing expenses, must not exceed 36% of your gross income. Find each percentage for your monthly gross income (28% and 36% of $3750 = $1050 and $1350, respectively). Your monthly payments on outstanding debts cannot exceed the difference between the ($300) or else you will not be approved.
   • Calculate your expected housing expenses. Estimate the annual real estate taxes and insurance costs in your area and add that to the average price of the home you'd like to buy. Also add how much you can expect to pay in closing costs. (These take in various charges that generally run between 3 to 6 percent of the money you're borrowing. Credit unions often offer lower closing costs to their members.) Put the total into a mortgage calculator (you can find them online or make your own in a spreadsheet. If the figure is above 28% of your gross income (or whatever the lower percentage used by lenders in your situation) then you will have a hard time getting a mortgage.
   • 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.
3. Get pre-approved (not pre-qualified) to get the actual amount you can pay. Apply to several lenders within a two week period so that the inquiries do not damage your credit report. Do this beforecontacting a real estate agent so you have a firm idea of what you can afford, and you don't accidentally fall in love with a house that you cannot afford.
   
   
   • If you qualify, check out first-time buyers' programs, which often have much lower down payment requirements. These are offered by various states and local governments. You may also be able to access up to $10,000 from your 401(k) or Roth IRA without penalty. Ask your broker or employer's human resources department for specifics regarding borrowing against those assets.
   • If you can't afford a 10%-20% downpayment on your home, but have good credit and steady income, a mortgage broker may assist you with a combination mortgage. In that, you're taking out a first mortgage up to 80% of the value of the home, and a second mortgage for the remaining amount. While the rate on the second mortgage will be slightly higher, the interest on it is tax-deductible and combined payments should still be lower than a first mortgage with PMI. If you're buying new, consider the Nehemiah Program to get assistance with your down-payment.
4. Go house shopping. 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. Read more in How to Find Your Ideal House.
   
   
   • Sign up for an MLS (Multiple Listing Service) alert service to search on properties in your area so you can get a feeling for what is on the market in your price range. (If you sign up through a real estate agent, it is poor form to call the listing agent directly to see a house. Don't ask an agent to do things for you unless you're planning to have them represent you--they don't get paid until a client buys a house and it's not fair to ask them to work for free, knowing that you're not going to use them to buy your home!)
   • Find a good real estate agent to represent you in the search and negotiation process. The real estate agent should be: amiable, open, interested, relaxed, confident, and qualified. Learn the agent's rates, methods, experience, and training. Go into exhaustive detail when describing 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.
   • Define 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. Read the town paper, if there is one, and chat with the locals. 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.
   • Visit a few open houses to gauge what's on the market and see firsthand what you want, such as overall layout, number of bedrooms and bathrooms, kitchen amenities, and storage. 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.
   • If you are unsure about the price, have the home appraised by a local appraiser. Never buy the most expensive house in the neighborhood! When appraising a home, appraisers will look for "comparables" or "comps", homes in the area which have similar features, size, etc. If your home is more expensive than the comps, or the appraiser has to find comps in a different subdivision or more than 1/2 mile away, beware! Your bank may balk at financing the home, and you probably won't see your home appreciate in value very much. If you can, buy the least expensive home in a neighborhood -- as homes around you sell for more money than you paid, your home's value increases.
5. Make an offer.
   
   
   • Include earnest money with your offer.--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.
   • Make sure final acceptance is predicated on a suitable home inspection. Request the following surveys and reports: inspection, pests, dry rot, radon, hazardous materials, landslides, flood plains, earthquake faults and crime statistics. (You will generally have 7-10 days to complete inspections--be sure that your agent explains this fully to you when signing the purchase and sales contract.) A home inspection costs between $150 and $500, depending on the area, but it can prevent a $100,000 mistake. This is especially true with older homes, as you want to avoid financial landmines such as lead-paint, asbestos insulation and mold.
6. Close escrow. This is usually conducted in a title office and 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.
   
   
   • Consider using a real-estate lawyer to review closing documents and represent you at closing. Realtors are unable to give you legal advice. Lawyers may charge $200-$400 for the few minutes they're actually there, but they're paid to look out for you.

Tips

• 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. Be willing to walk away from any home; no home is so perfect that the seller can charge what he or she desires.
• A seller who won't allow a home-inspection has something to hide -- walk away!

(Article from WikiHow.com)

Eight Important Questions to Ask Your Agent

Qualifications are important. However, finding a solid, professional agent means getting beyond the resume, and into what makes an agent effective. Use the following questions as your starting point in hiring your licensed, professional real estate agent:

1. Why did you become a real estate agent?
   
2. Why should I work with you?
   
3. What do you do better than other real estate agents?
   
4. What process will you use to help me find the right home for my particular wants and needs?
   
5. What are the most common things that go wrong in a transaction and how would you handle them?
   
6. What are some mistakes that you think people make when buying their first home?
   
7. What other professionals do you suggest we work with and what are their credentials?
   
8. Can you provide me with references or testimonials from past clients?

How Can a Real Estate Agent Help Me?

Seven main roles of your real estate agent

1. Educates you about your market.
2. Analyzes your wants and needs.
3. Guides you to homes that fit your criteria.
4. Coordinates the work of other needed professionals.
5. Negotiates on your behalf.
6. Checks and double-checks paperwork and deadlines.
7. Solves any problems that may arise.

Opting for New Home Construction

Whether to buy an existing home or have one built is yet another decision to make during the home-buying process. If you decide to go with new construction, a real estate agent can be a powerful advocate in your corner as you negotiate upgrades, a move-in date and other terms with the home builder.
Below are some basic pointers to prepare you for the journey ahead.

Selecting a builder
Shopping for a large production or custom home builder can be a daunting task. Start by defining what architectural styles appeal to you and then seek out the builders in your area who offer those styles. Due diligence is essential. Ask friends for referrals to get firsthand accounts; verify the builder's state license status, if applicable; and check whether they're certified by the National Association of Home Builders.

The builder representative and your real estate agent
A builder representative's ultimate goal is to sell you a home. His or her role is to provide a wide range of information to help you in your decision-making, from building restrictions, roads and easements to inspections, warranties, rebates and upgrades. A real estate agent knowledgeable in new-home construction will be able to help you wade through all the data and point out the downsides and upsides of each line item. Your agent also can look out for your interests in reviewing the builder's contract, which often contains more legal jargon than consumer-friendly language.

It's all about timing
Market conditions greatly dictate a builder's incentive to make a deal you cannot refuse. When a builder has inventory on his hands, his carrying costs start adding up. When this happens, a builder might be more amenable to strike a favorable deal, whether it's throwing in upgrades or taking a bit off the asking price. A real estate agent can help you know when market conditions are right for these benefits. Also, watch for builder close-out sales. Builders promote these special events when a new subdivision is near completion but empty inventory still remains.

A word about paying up
While there are always exceptions, most builders require a deposit when a purchase agreement is signed. They also require that the buyer pay for any upgrades prior to closing. If you back out prior to closing, unless the agreement states otherwise, you will lose that money. Make sure you understand every detail in the builder's contract before signing it.

Location, Location, Location

Where you buy not only affects the home's current and future value, but it also affects your lifestyle. Your agent will be able to conduct a more targeted home search if you outline your preferences in neighborhoods and nearby amenities. Here's a checklist of items you should consider and communicate to your chosen real estate agent.

* Urban, suburban or rural
* Commute time
* School districts
* Desirable neighborhoods
* Proximity to the airport
* Proximity to restaurants and retail
* Access to major highways and thoroughfares
* Access to public transportation
* Health care facilities
* Parks and recreation
* Length of time you plan to live in the home (Your agent should be knowledgeable about growth trends and projections that could affect your investment.)

Creating Your Home Wish List

Before the home search begins, your real estate agent will want to know as much as possible about the features and amenities you desire. To help your agent better serve you, analyze what you want and what you need in a home’s features and amenities.

Features:

• Age: Do you prefer historic properties, or newer ones?
• Style: Do you have a special preference for ranches, bungalows, or another style of construction?
• Bedrooms: How many?
• Bathrooms: How many? Are they updated?
• Living and Dining Areas: A traditional, formal layout, or a more open, contemporary plan?
• Stories: How many?
• Square feet: How much space?
• Ceilings: How high?
• Kitchen: How big? Recently updated? Open to other living areas?
• Storage: Big closets, a shed, an extra-large garage?
• Parking: A garage or carport? Room for how many cars?
• Extras: Attic or basement?

Amenities:

• Office
• Play/exercise room
• Security system
• Sprinkler system
• Workshop/Studio
• In-law suite
• Fireplace
• Pool
• Hot tub
• Sidewalk
• Wooded lot
• Patio, deck, or porch
• Laundry room

Deciding How Much House You Can Afford

Your lender decides what you can borrow but you decide what you can afford.

Lenders are careful, but they make qualification decisions based on averages and formulas. They won’t understand the nuances of your lifestyle and spending patterns quite as well as you do. So, leave a little room for the unexpected – for all the new opportunities your home will give you to spend money, from furnishings, to landscaping, to repairs.

Historically, banks use a ratio called 28/36 to decide how much borrowers could borrow. An approved housing payment couldn’t be more than 28 percent of the buyer’s gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn’t be more than 36 percent. (In Canada lenders apply similar formulas to determine how much a buyer can afford. The Gross Debt Service ratio, or GDS, is not to exceed 32 percent of the buyer’s gross monthly income, and the Total Debt Service ration, or TDS, is not to exceed 40 percent of the buyer’s total debt load.) As home prices have risen, some lenders have responded by stretching these rations to as high as 50 percent. No matter how expensive your market though, we urge you to think carefully before stretching your budget quite so much.

Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.

Eight Steps to Buying Your Home

1. Decide to buy.

Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.

Base your decision to buy on facts, not fears.

1. If you are paying rent, you very likely can afford to buy
2. There is never a wrong time to buy the right home. All you need to do in the short run is find a good buy and make sure you have the financial ability to hold it for the long run
3. The lack of a substantial down payment doesn’t prevent you from making your first home purchase
4. A less-than-perfect credit score won’t necessarily stop you from buying a home
5. The best way to get closer to buying your ultimate dream home is to buy your first home now
6. Buying a home doesn’t have to be complicated – there are many professionals who will help you along the way

2. Hire your agent.

The typical real estate transaction involves at least two dozen separate individuals – insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer’s agents, seller’s agents, bankers, title researchers, and a number of other individuals whose actions and decisions have to be orchestrated in order to perform in harmony and get a home sale closed. It is the responsibility of your real estate agent to expertly coordinate all the professionals involved in your home purchase and to act as the advocate for you and your interests throughout.

Seven main roles of your real estate agent

A Buyer’s Real Estate Agent:

1. Educates you about your market.
2. Analyzes your wants and needs.
3. Guides you to homes that fit your criteria.
4. Coordinates the work of other needed professionals.
5. Negotiates on your behalf.
6. Checks and double-checks paperwork and deadlines.
7. Solves any problems that may arise.

Eight important questions to ask your agent

Qualifications are important. However, finding a solid, professional agent means getting beyond the resume, and into what makes an agent effective. Use the following questions as your starting point in hiring your licensed, professional real estate agent:

1. Why did you become a real estate agent?
2. Why should I work with you?
3. What do you do better than other real estate agents?
4. What process will you use to help me find the right home for my particular wants and needs?
5. What are the most common things that go wrong in a transaction and how would you handle them?
6. What are some mistakes that you think people make when buying their first home?
7. What other professionals do you suggest we work with and what are their credentials?
8. Can you provide me with references or testimonials from past clients?

3. Secure financing.

While you may find the thought of home ownership thrilling, the thought of taking on a mortgage may be downright chilling. Many first-time buyers start out confused about the process or nervous about making such a large financial commitment.

From start to finish, you will follow a six-step, easy-to-understand process to securing the financing for your first home.

Six steps to Financing a Home

1. Choose a loan officer (or mortgage specialist).
2. Make a loan application and get preapproved.
3. Determine what you want to pay and select a loan option.
4. Submit to the lender an accepted purchase offer contract.
5. Get an appraisal and title commitment.
6. Obtain funding at closing.

4. Find your home.

You may think that shopping for homes starts with jumping in the car and driving all over town. And it’s true that hopping in the car to go look is probably the most exciting part of the home-buying process. However, driving around is fun for only so long – if weeks go by without finding what you’re looking for, the fun can fade pretty fast. That’s why we say that looking for your home begins with carefully assessing your values, wants, and needs, both for the short and long terms.

Questions to ask yourself

1. What do I want my home to be close to?
2. How much space do I need and why?
3. Which is more critical: location or size?
4. Would I be interested in a fixer-upper?
5. How important is home value appreciation?
6. Is neighborhood stability and priority?
7. Would I be interested in a condo?
8. Would I be interested in new home construction?
9. What features and amenities do I wasn’t? Which do I really need?

5. Make an offer.

When searching for your dream home, you were just that – a dreamer. Now that you’re writing an offer, you need to be a businessperson. You need to approach this process with a cool head and a realistic perspective o your market. The three basic components of an offer are price, terms, and contingencies (or “conditions” in Canada).

Price – the right price to offer must fairly reflect the true market value o fthe home you want to buy. Your agent’s market research will guide this decision.

Terms – the other financial and timing factors that will be included in the offer.

Terms fall under six basic categories in a real estate offer:

1. Schedule – a schedule of events that has to happen before closing.
2. Conveyances – the items that stay with the house when the sellers leave.
3. Commission – the real estate commission or fee, for both the agent who works with the seller and the agents who works with the buyer.
4. Closing costs – it’s standard for buyers to pay their closing costs, but if you want to roll the costs into the loan, you need to write that into the contract.
5. Home warranty – this covers repairs or replacement of appliances and major systems. You may ask the seller to pay for this.
6. Earnest money – this protects the sellers from the possibility of your unexpectedly pulling of the deal and makes a statement about the seriousness of your offer.

6. Perform due diligence.

Unlike most major purchases, once you buy a home, you can’t return it if something breaks or doesn’t quite work like it’s supposed to. That’s why home owner’s insurance and property inspections are so important.

A home owner’s insurance policy protects you in two ways:

1. Against loss or damage to the property itself
2. liability in case someone sustains an injury while on your property

The property inspection show expose the secret issues a home might hide so you know exactly what you’re getting into before you sign your closing papers.

• Your major concern is structural damage.
• Don’t sweat the small stuff. Things that are easily fixed can be overlooked.
• If you have a big problem show up in your inspection report, you should bring in a specialist. If the worst-case scenario turns out to be true, you might want to walk away from the purchase.

7. Close.

The final stage of the home buying process is the lender’s confirmation of the home’s value and legal statue, and your continued credit-worthiness. This entails a survey, appraisal, title search, and a final check of your credit and finance. Your agent will keep you posted on how each if progressing, but your work is pretty much done.

You just have a few preclosing responsibilities:

1. Stay in control of your finances.
2. Return all phone calls and paperwork promptly.
3. Communicate with your agent at least once a week.
4. Several days before closing, confirm with your agent that all your documentation is in place and in order.
5. Obtain certified funds for closing.
6. Conduct a final walk-through.

On closing day, with the guidance of a settlement agent and your agent, you’ll sign documents that do the following:

1. Finalize your mortgage.
2. Pay the seller.
3. Pay your closing costs.
4. Transfer the title from the seller to you.
5. Make arrangements to legally record the transaction as a public record.

As long as you have clear expectations and follow directions, closing should be a momentous conclusion to your home-searching process and commencement of your home-owning experience.

8. Protect your investment.

Throughout the course of your home-buying experience, you’ve probably spent a lot of time with your real estate agent and you’ve gotten to know each other fairly well. There’s no reason to throw all that trust and rapport out the window just because the deal has closed. In fact, your agent wants you to keep in touch.

Even after you close on your house, you agent can still help you:

1. Handle your first tax return as a home owner.
2. Find contractors to help with home maintenance or remodeling.
3. Help your friends find homes.
4. Keep track of your home’s current market value.

Attention to you home’s maintenance needs is essential to protecting the long-term value of your investment.

Home maintenance falls into two categories:

1. Keeping it clean: Perform routine maintenance on your home’s systems, depending on their age and style.
2. Keeping an eye on it: Watch for signs of leaks, damage, and wear. Fixing small problems early can save you big money later.