13 Steps in Buying a House.

1. Figure out whether or not you can afford to buy a house, and if so, what kind. A quick and dirty method is to compare how much you are likely to have to pay in mortgage, property tax, and homeowner’s insurance with how much you are paying in rent right now. If they come out close, and you don’t intend to move in the next ten years, it’s a no-brainer. Buy a house. You can get most of this info from places like Zillow.com.

2. Look over the houses available in the area you wish to live. You don’t have to commit yourself to working with an agent in order to do this. Most places will have something online that will list homes with details such as number of bedrooms and bathrooms, price, etc. They often show one or more pictures. For an example: http://www.realtor.com., www.zillow.com, and www.century21.com. Also google your local newspaper’s name to see if they have something online.

3. Shop for a mortgage. Bankers tend to act like you can only talk to one, but you can get them to run basic numbers, like how much of a mortgage you can afford, without a commitment or paying anything. Just don’t let them pull your credit reports or anything before you’re ready to commit because you could end up paying them for it, and keep in mind that the federal government has taken over the mortgage lending field in a big way. There isn’t that much variety in the loans offered.

4. Get a pre-approval letter from a bank. You can do this after you have already made a bid on a house, but it will slow your closing down, which gives other buyers a chance to slip in and take a house in a hot market. Keep in mind you have to commit yourself to a particular lender to get this. so do your mortgage shopping first. Keep in mind the lender might mutter a lot of somethings about needing a particular house to plug into their computer, but you don’t have to have one picked out yet to get the pre-approval letter, and some houses you can’t even get in to look at without one.

5. Contact a real estate agent to set up times to walk through the houses that interest you. You CAN just call up whoever is listed on the signs placed in front of property that is for sale for this, but having a “buyer’s agent” for the actual sale is a good thing, and getting one early can make it easier to go through a number of houses quickly. Why is it a good thing? Because they know all the steps it takes inside and out and can walk you through it all in a timely manner.

6. Once you’ve settled on a place you can live with, make a bid. Take this step seriously. You will be expected to write a check for earnest money. Around here that will be either $500 or $1,000, depending on how seriously you want to be taken. If the “seller’s agent” is signed up as a dual agent, then simply tell him or her that you are making a bid and for how much, and he or she will pull out a contract for you to sign. If the agent is not a dual agent, then you will have to get a “buyer’s agent” to do this step for you. If it’s an arms-length agreement with no agents involved, then you better get the contract from a lawyer.

7. Wait to see if you will get a counter offer. Generally, the offer will have a time limit built in to it for when a counter offer can be made. It may be that your offer is accepted right away. You can make your own counter offer, and bounce between the two parties as many times as you like, but negotiations generally break down after the second counter.

8. Get the mortgage. If you haven’t already gotten a pre-approval letter, then you will be expected to do this now. If you’ve got all your paperwork lined up, then you might blow through right to the approval right before your eyes.

9. Get the house inspected. This needs to be in the contract. Unless you are so good at judging houses that you are sure you already know exactly what is what, and what condition it is in, then don’t skip this step. It’ll cost between $300 and $500, but can save you from buying the kind of house that never stops eating your money.

10. Get the house appraised. This is not the same as getting it inspected. Generally an appraisal is required by the lender. You will be expected to pay for it up front and won’t get the money back if you back out. It costs about the same as the inspection.

11. Arrange for home owners insurance. The bank will require this before they give you a mortgage. I’ve had real estate agents do this for me, but generally you’ll be expected to do it on your own.

12. Prepare your down payment. You need to have this ready by closing. This may be no big deal if you are only putting 3.5% down, but if you’re putting 20% or more, then remember you may have to liquidate some assets in a timely manner.

13. Closing. It all comes together at the closing. The loan has to be approved, the insurance ready, the down payment in hand – often already place in escrow. There will be all kinds of expenses, much of it having to do with the loan, but also perorations for property tax, title transfer fees, etc. It can be as much as $5,000. The earnest money you paid at the initial offer will be deducted from what you pay now. Once the papers are signed you should walk away with the key. The title goes to the bank until you’ve paid off the mortgage, but the house is yours to do with as you please.

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