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Guide to Home Buying

Aug 17, 2007
It's an expensive, long-term commitment. If you change jobs or the neighborhood declines, you can't quickly get up and go. Selling a house can take months and cost lots -- likely 10% of a home's value -- in agent fees, closing costs and moving expenses.

Do you plan to live in your new home at least three years?
Are you financially prepared? Steady employment, a good credit score and a 20% down payment are needed to obtain the best mortgage rate.
Is it the right time to buy? (See "3 bad reasons to buy a home.") If area homes have experienced huge appreciation over the past five years, prices are bound to return to a more affordable level.
Don't count on your home to be a great investment. Historically, the stock market outperforms real estate as a hedge against inflation. (See "Why rent? To get richer.")

Ready, set, research
Once you're ready to take the plunge, figure out what you can afford. Many lenders prefer that your housing costs -- mortgage, property taxes and homeowners insurance -- amount to no more than 33% of your monthly gross income, but some will go much, much higher.

If you're buying in an inflated market, a fixer-upper is a good choice. (See "7 creative ways to buy your first house.")
You can buy anything from slum dwellings to upscale homes if you're looking into the foreclosure market. Don't count on massive cost savings. (See "The safest ways to buy foreclosures.")
Select an experienced, full-time real-estate agent before you begin your search. Ask friends and family for referrals. Check newspapers and Web sites to see which agents are working hard to market homes.

Interview at least three agents. Contact references and verify the agents' record of integrity with the state licensing board.
Realtors -- agents licensed by the National Association of Realtors -- must abide by a code of ethics. Realtors also have access to the Multiple Listing Service.
Make sure you can work with your agent. The average home shopper looks at 15 houses before buying.
Know who your real-estate agent represents. Unless you have a buyer's agent, your agent will be working for the seller.
Shop for a loan.

Compare the APR -- annual percentage rate -- detailing the interest and fees you'll be charged to get the loan. Those who participate in first-time-homebuyer programs should beware. Is the loan officer paid a commission after steering you to a particular program?
Compile a home wish list. How many bedrooms do you need? Are good schools and access to public transportation priorities? Do you need a large fenced yard?

Most people purchase a single-family home. Other options are available, like condominiums, tenancy in common (see "Tenancy in common questions and answers"), stock cooperatives and co-housing. (See "Co-housing.")
When you find your dream home, do more homework.

Talk to residents about what they like and don't like about the neighborhood.
Observe traffic patterns.
Check the zoning on vacant lots.
Ask your real-estate agent for a written comparative market analysis to see if the asking price is fair.

More steps for your protection
If you're satisfied, it's time to present an offer listing the purchase price, earnest money, the closing and move-in dates and other details.

Once negotiations are complete, take several steps before you go to closing, the final meeting where you sign documents and take possession of the house.

Get a home inspection, preferably by a member of the American Society of Home Inspectors. Attend the inspection and read the report. If the home has problems, ask the seller to agree in writing to make the repairs.

Compare rates for homeowners insurance. An additional policy is needed for a home in a flood zone or earthquake-prone area.

A home warranty may make sense if you're buying an older home. Read the fine print to learn what the policy will cover. Note that warranty companies prefer to repair rather than replace broken items. (See "A home warranty is no guarantee.")
If you're planning to sell your house, keep the following in mind:

Set a reasonable asking price. If the price is too high, your home won't compare well with similarly priced houses, and you won't even get shoppers, let alone a buyer.
Hundreds spent on landscaping, paint and deep cleaning can add to its value by thousands. (See "Speed your home sale with these fast fix-ups.") Bake cookies before you show your home.
Make sure your real-estate agent has a detailed marketing plan that includes Internet exposure. Or explore ways to reduce the agent's commission. (See "3 ways to pay lower real-estate commissions.")
Desperate to sell your house but now owe more than you can get? Persuade your lender to take a "short sale." (See "Facing foreclosure? 9 options.")
About the Author
Rod hewitt is 27 years old and lives in Portland, Oregon, webprogrammer and web designer, owner of Php Scripts Fully scripted PHP website templates.
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