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Essential steps to successful home buying

Keith Gumbinger

successful-home-purchaseWhile most homebuyers don't exactly stumble into the process of buying a home, it's fair to say that a successful, low-stress homebuying process can be elusive. Part of this is due to the need to make snap decisions or choices on-the-fly, some of which may be irrevocable and cause you to miss opportunities or end up in a house that isn’t ideal.

Much of this angst can be relieved with a little advance soul searching. Really, it's a practical matter of "buyer, know thyself."

It all starts with you. Before you research houses, run finances or contact anyone about buying a home, develop a sense of what you want, what you need and what you can compromise on. Otherwise, you could be headed into a complex series of decisions and expensive transactions without anything to guide you, raising the possibility that you won't be as satisfied as you might be with the results. Having a keen sense of what you need and want simplifies the process.

6 considerations for buying the right house

Buying a home (especially a previously-owned one) is all about compromise, and it is unlikely that you will be able to check off all the items on your wish list in a single property. For most buyers, you can only buy what is actually on the market for sale, a happenstance over which you have no control. That said, and before you start, you’ll need to have a sense of what you want; equally important is having a sense of what you don’t want, too.

1. Location. Know what you want and don't want in a neighborhood. How close do you want to be to parks, shopping, schools, and entertainment? Determine how much of a commute you're willing to endure twice each day; consider driving likely routes during your actual commute times to learn the level of inconvenience and time commitment.  If close to amenities or schools, how do you feel about traffic and busy neighborhood streets and parking problems at various times and days?

2. Style. Know what kind of houses you like and don't like. Cape Cod, ranch, bi-level, colonial, townhome, condo? Eliminate those that you don't want from consideration, and decide what aspects you can compromise on for the ones you prefer.

3. Age. Know if the age of the home is something that matters to you. Older buildings met needs of a different time and may present certain logistical challenges today, such as too-few electrical outlets, narrow hallways or plaster-and-lath walls.

4. Space. Know how much space you need versus how much you want or can get. How many rooms, bedrooms, bathrooms, closets, storage areas? Four small bedrooms versus three large ones? Walk-in or traditional closets? Cellar/attic or no? Garages or sheds?

5. Features. Know what you want and don't want in a property. How much distance would you like to have from neighbors? Do you prefer your land to be treed? Flat? Hilly? Prefer an eat-in kitchen versus formal dining space? Garage? Driveway size? Air-conditioning? View?

6. Utilities. It might not be the first thing that comes to mind, but it shouldn't be the last. Before you start digging into houses and properties, you should have a sense of whether you are OK with a well for water and septic tank for sewerage, or if you prefer city water service and sanitary sewers. In some places you'll only find one or the other, sometimes a combination, and there may be maintenance and health concerns and costs you'll need to consider here. The same is true for things like oil, gas, propane or electric heating and cooking fuels, too.

You may find a house you really like on land you really hate, or vice versa. Know that you may or may not be able to change some things. Decide what items you can compromise on beforehand.

Related: Considering the condo-or-house dilemma

4 factors affecting your mortgage loan

The items below can have important implications for mortgage loan rates and terms.

1. Down payment. Decide how much money you will have to use for a down payment and closing costs. Our Downpayment Decisioner calculator can help you to allocate those resources to best effect.

2. Income. Learn how much mortgage your income will support. The combination of down payment and income determine what you can afford to buy and affect ancillary costs such as private mortgage insurance.

3. Taxes. Learn at least a little about tax laws as they pertain to homeownership, deductibility of mortgage interest and state and local taxes.

4. Leverage. Decide if using the maximum amount of leverage against your income for your mortgage is something you are comfortable with, or if you prefer more budgetary breathing room. Don't forget to consider utility and maintenance costs as you determine your budget, as these won't be part of the lender's calculation when determining how much you can afford to borrow. More rooms or a larger property can bring higher costs or commitments of your free time. Consider how much of each you're willing to commit to your property.

7 steps to buying a home

Give a relative weight to home buying considerations and mortgage financing at the beginning of your process, then follow these steps:

1. Set home-buying priorities. If your heart is set on a specific neighborhood in a specific town, then this becomes your first priority and you must expect that meeting this need may come at the cost of compromise on any number of the other items. If the kind of house you want is the priority, then know that your compromise will likely be where it is located or the kind of property on which it sits. If a manageable monthly cost of ownership is most important, this may come at the compromise of long commutes and certain local amenities.

2. Conduct online research. Having made some decisions, you can research properties online in places you might like to live.

3. Select an agent. You're now ready to talk to a Realtor or visit a local real estate office to get in touch with a local agent who can help you locate suitable properties.

4. Choose a mortgage lender or broker. It can pay to research mortgage lenders, and you may also be referred to a local lender who will either pre-qualify you (or if you want to go a step further, preapprove you, which is usually a good idea).

5. Research properties in person. Clear some calendar space to actually visit properties. You might consider creating a working checklist of your previously-decided wants and taking that along, checking boxes off as you go... and take some pictures of your own. If you visit a lot of properties, it can be difficult to remember some details.

6. Engage an attorney. You might consider hiring an attorney to help you with sales contract language (most contracts are written with the seller's interests in mind), and with the legalese of the mortgage paperwork.

7. Line up insurance. You'll soon need a homeowner's insurance and possibly an owner's title insurance policy (optional) so you'll want to investigate those options and choices and engage those professionals before closing on a property.

One tip you should know is that is can be a good idea to close your loan at the end of a month. Now only does this avoid a lot of per-diem interest, it also means that you'll have no monthly payment due for about another month. If you're renting before buying, this can give you a month to clean, paint and otherwise prepare and furnish your new purchase (or move), taking some of the stress out of the process.

Ultimately, it should all come together. For all of this, the key is making the big decisions beforehand, knowing what you do and don't want in a house, property and neighborhood, what you will and won't compromise on, and being at least somewhat flexible throughout the buying process.

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