Smart SpendingSmart Spending

7 things every homebuyer should know

Don't even think about searching for a new house until you know these steps.

By MSN Money Partner Oct 21, 2013 12:03PM

This post comes from Maryalene LaPonsie at partner site Money Talks News.

Money Talks News on MSN MoneyIt seems like everyone gets new-house fever in the spring, but if you're serious about buying, prime time for making a purchase may be right around the corner instead.

Real estate site Trulia says house searches cool off in the fall and slow to a crawl in December. What does that mean for you? Less competition and more opportunities to score a deal on the house of your dreams.

But before you jump head first into a house search, here are some things you need to know.

Know what you need vs. what you want

Before you even think about hitting an open house, you need to know what you are looking for. Otherwise, you may find yourself falling in love with something impractical or, worse, sweet-talked by an agent into placing an offer on a home that doesn't fit your needs.

Start by sitting down with a pen and paper -- and your honey if you will be buying a house with one -- and write down two columns: "needs" and "wants."

Under needs, list your non-negotiables. For example, if you have a growing family, you may need three bedrooms, two baths and a fenced-in yard for the dog. Under wants, put your wish list. Maybe you crave a gourmet kitchen or a large master suite. These are things you can live without, but life would be nicer if you had them.

Armed with this information, you can quickly weed out the homes that don't meet your needs. Then you can focus on whittling down your short list to the ones with features on your wish list.

Home for sale © Digital Vision Ltd.However, it goes without saying there is no perfect house and, especially if you don't have a lot of money to play with, you should be prepared to sacrifice some items on your want list in exchange for an otherwise serviceable house in your price range.

Know the right process for buying a home

Now we get to the nitty-gritty. You need to follow certain steps if you want your home search and purchase to go smoothly.

Let's review:

Financing first. Your first stop should always be the bank. There are three reasons to get a loan preapproval, if you can.

  • You know what price range you can afford.
  • It can give you an edge in the event there is a competing offer on a house.
  • It can speed up the underwriting process once you have a purchase agreement.

Unfortunately, many banks no longer issue preapprovals and only offer to pre-qualify a potential buyer. It's not as helpful as a preapproval but it may be the best you can do.

Agent second. Once you know how much you can afford, it is time to find your agent. It may be tempting to go it alone until you find a promising house, but a buying agent can provide an inside track on hot listings or steer you toward perfect properties not on your radar screen.

You want someone who is going to negotiate a great deal, so now is not the time to sign on with your cousin simply because she's family. Find the right agent by asking the following:

  • How long have you been licensed?
  • Do you work part time or full time?
  • What percentage of your clients are buyers?
  • How well do you know the area?
  • How often will you provide me with new listings?
  • Do you specialize in a certain type of property?

Then make a fair offer. OK, you've found the perfect house and are ready to make an offer. Remember that buying agent you found? This is where she earns her keep by helping you settle on an offer that isn't insulting to the seller but is still a deal for you.

Confirm with an inspection. Finally, shell out the couple hundred dollars it costs to have the house inspected by a professional. Walk through the house with the inspector if at all possible. Sure, you'll get a written report, but it is so much better to be able to ask questions and have potential problems pointed out to you in person.

Have a Plan B. And if the inspection turns up a major problem, you need to have a Plan B in mind. Your most excellent buyer agent has, of course, included a provision in the purchase agreement stating the sale is contingent on a good inspection. When an inspection finds trouble, you need to implement your second option, whether that is to back out of the agreement and retrieve your deposit or renegotiate the price with the seller.

Know what other costs are involved

Let's say you sit down with the loan application officer and learn your monthly payment will be only $750. Yes! That’s cheaper than renting.

Or is it?

Having your own property is great, but homebuyers need to walk into ownership with eyes wide open. That means factoring in all the costs associated with having a place of your own. When calculating the affordability of a property, ask for estimates on the following costs:

  • Taxes.
  • Utilities.
  • Insurance.
  • Lawn maintenance and/or winter snow plowing.
  • Homeowners association fees.

In addition, remember that when the roof springs a leak, there is no landlord to call for a fix. Don't buy a home if you don’t have an emergency fund or if you aren’t able to put money aside each month in a repair and maintenance fund.

The winter months mean home sales tend to go cold, but they can be a hot time to get a low price on the house you want.

More on Money Talks News:

Oct 21, 2013 1:46PM
Yes, don't forget homeowners association fees (spelled r-a-c-k-e-t) if you really want to move into a house in a place in which it can be dictated what you can and cannot do with your own house and property.
Oct 21, 2013 2:30PM
Oct 21, 2013 6:49PM
HOA's and Condominium Organizations stink. In Ohio; the Banks now have to approve the Condominium Association.  DON'T BUY ONE if you ever want to sell it.  I am so happy to no longer be a Condominium owner.  Icky....
Oct 27, 2013 10:21AM

This report is just a few suggestions not a real home buying guide. I think the best guide is the following: (1) Realistically determine how much you can afford for a house note. If you are currently paying rent that is a good starting place. If you have storage fees or other outside costs associated with you home add those in and this is the best place to start.  (2) Working back from that number use a calculator and determine how much house you can afford. If that amount gets you a $90K house then set your budget at an $80K home because you will have costs for insurance, taxes and PMI fees if you don't have a 20% down payment. (20% down payment is NOT always necessary)

(3) Identify where your down payment will come from and where you will get your closing costs from. Once that has been done contact either a mortgage company, your credit union or a bank with whom you have a relationship (accounts) so they have an interest in keeping you as a client. Find out if your credit will allow you to prequalify for a mortgage and if so how much. (4) If the amount you qualify for is greater than the amount you feel you can pay, use the lower amount. Now determine which area of the city you want to live in and then find an agent to help you locate houses within your payment range.


Now this is a guide to buying a house you can afford.

Oct 27, 2013 4:05AM
What about PMI (Private Mortgage Insurance) required unless you have 20% equity in the property? That's ANOTHER $100 for a $175,000 loan. Mortgage, taxes, insurance, PMI. Then throw on HOA fees if applicable.
Reality:  (mortgage payment)  + (mortgage payment x 65%) = ACTUAL monthly payment
Oct 27, 2013 12:26PM
Remember, HOA or maintenance fees only go one way - UP. If you are going to purchase a Condo, or Co-op, or a home in a development, you should always check any pending, or likely future "special" assessments. If there is ANY kind of problem with the property,or if major improvements are necessary, the assessment cost is divided among ALL the homeowners. You could end up paying thousands for problems that have nothing to do with your specific apartment, condo, townhouse, or home.
In addition,these unexpected costs are more likely to happen, with more frequency, with older homes 
developments, or buildings.  Even newer construction, if poorly built, will start costing you big time when the flaws start to show up.
Buyer Beware!  

Oct 21, 2013 4:01PM
Home loans? That is the opportunity for the bank to treat you like a criminal....unless you can prove to them twenty dif ways that you are not.
Oct 27, 2013 9:17AM

This report is misleading, it has no usable info on what to look for in a new house rather it's filled with info on how to buy a house and put your trust in somebody else's opinion of a house.


Oct 27, 2013 12:13PM
An inspector for a couple of hundred?
Oct 27, 2013 12:55PM
When I started the home buying process, I did my homework:  paid off all outstanding debts (was debt free for 6 mos prior to financing), made sure I had a high credit rating, got pre-approved, secured 20% down, bought within my means and ended up with my "diamond in the rough".  I did alot of the work myself, and hired out the things I couldn't do myself.  Yes, I have a HOA (not a huge fan), but with a low interest rate and no mortgage ins, my payments AND HOA together are still less than what I could rent for......and I had 12,000-15,000 left to put into my home!  No, it isn't the mansion I'd love to have, but I don't need a mansion, it's mine, I'm paying for it and I'm proud of it.
Oct 27, 2013 1:24PM
Sounds great and the only things I would add is don't buy and pay more that you think you can sell it for if hard times hit around the corner...... at the least make sure your losses wouldn't put you on the street living in a cardboard box and eating out of the garbage cans.
Oct 21, 2013 4:16PM
Most important of all....having cash on hand enablinh you to ciumvent  taking out a mortgage should give you leverage in negotiating final purchase price.  Remember, cash is king, especially in this day and age
Oct 27, 2013 11:31AM
There is no place like home! Buy a good one that will feed your soul. You can't put a
price on that. 
If you can't afford to buy one now then work up to it.
Take common-sense  precautions when purchasing one. Get good advise!
 Be knowledgeable about the market, avoid buying someone else's problems. Recognize a good deal when you see one. Be ready to act by doing your homework now. 
Be patient. It only takes one! 
Oct 21, 2013 3:04PM
The first thing you might want to know is if the house sits on a permanent foundation. Almost all banks will not finance a home that has wheels or isn't anchored to the ground in some fashion, so forget those manufactured or mobile homes.  
Oct 27, 2013 11:38AM
Stay away from the Ark in Rehoboth Beach De.
Oct 27, 2013 1:51PM
The HOA:  an association probably managed by a mob influenced bunch of office racketeers,  which you pay an exorbitant monthly fee so that your neighbors in rentals can't do what they otherwise probably would,  like park old cars on jacks in the yard and keep appliances on the porch.
Home ownership is a wonderful form of slavery:  you work,  work,  work,  and pay, pay,  pay.  The banks first,  all the other expenses and upkeep,  and of course the property taxes which you little to no control over.
But it could be worse.  You could live in a rental,  and pay all that stuff on somebody else's behalf,  plus a little profit.

Oct 27, 2013 5:27AM

Sorry, Shil- gotta disagree with you regarding (at least some) homeowners associations.  You gotta do your own list of pluses vs minuses, just like the wants vs needs above. I'm lucky - the pluses from my Association far, far outweigh the minuses.

Oct 27, 2013 1:44PM
Home Ownership is another crap shoot.
Oct 21, 2013 2:51PM
Here's what you need to know, The whole system is a RIP-OFF designed by the banks and realtors to justify the Ridiculous Price increases If wages Don't Tipple every two to three years then neither should housing.   
Oct 27, 2013 10:54AM

First you must keep in mind YOU NO LONGER Need worthless real estate agent.

Please help us to maintain a healthy and vibrant community by reporting any illegal or inappropriate behavior. If you believe a message violates theCode of Conductplease use this form to notify the moderators. They will investigate your report and take appropriate action. If necessary, they report all illegal activity to the proper authorities.
100 character limit
Are you sure you want to delete this comment?


Copyright © 2014 Microsoft. All rights reserved.

Fundamental company data and historical chart data provided by Morningstar Inc. Real-time index quotes and delayed quotes supplied by Morningstar Inc. Quotes delayed by up to 15 minutes, except where indicated otherwise. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by Morningstar Inc.


Smart Spending brings you the best money-saving tips from MSN Money and the rest of the Web. Join the conversation on Facebook and follow us on Twitter.