The next step you’ll want to take is to speak with a lender. The lender can be your bank or a mortgage broker. If you don’t already have a relationship with someone, ask around. Anyone who has purchased a home or refinanced might be a good source of information for you. It’s important to get a feel right up front about your purchasing power; what loan amount meets your financial qualification.

When you meet with the lender, be prepared to bring all your information with you. You will need your pay stubs, W2s, bank account statements and the last two years tax returns to verify income. If you are self-employed, you will need to meet additional requirements. You also need to disclose your debt. The lender will run your credit reports and use your FICO scores as well as the debt listed on the report to determine your debt-to-income ratio.

Typically you will be able to borrow up to 31% of your gross monthly income with no more than a total monthly debt of about 36%…these are estimates and your lender can help you further with this. It is important that you disclose all your debt, even if it doesn’t seem to be on your credit report. Your lender is your advocate, but the last thing you want is for something unexpected to pop up at the last minute. You could end up losing the loan and the home.

These are some other important things to avoid while you’re trying to get a mortgage:

• Don’t apply for any new credit such as credit cards or car loans
• Don’t pay off a credit card balance
• Don’t close any credit cards
• Do not max out a credit card
• Do not pay off any collections or old charge offs
• Do not change jobs

While some of these things seem counter-intuitive, credit can be complex. One misstep could potentially lower your score and cost you a loan. Consult a professional before you adjust your existing finances.

Now that you know how much you can qualify for, it’s time to decide how much you want to spend on the new home. These are not necessarily the same thing! Even though you can qualify for up to about 31% of your monthly gross income, that doesn’t mean you want to do that. It’s easy to be excited about a price range and pre-qualification, but before you head out to see homes, take a moment to understand how that monthly mortgage payment might affect your lifestyle.

What other expenses do you need to include in your monthly expenditures? Do you enjoy dining out on a regular basis or perhaps a round of Sunday golf? What about vacations and children sports clubs. There are many other demands on our income, and it’s easy to feel “house poor” by delegating too much for the mortgage payment.

Lenders will help you consider all your loan options as well as give you an estimate of extra costs involved in buying a home such as homeowner’s association dues (HOA), property taxes, and extra fees. It’s important to remember that these costs will vary depending on the home you find to buy; for instance, homeowner’s association fees can vary drastically from one community to another. As you review the information you receive from your lender, take note of adjustments to such extra fees.

The last step you should take is to consult your tax professional. Learn how a possible new purchase will affect your taxes. If you are a first time home buyer, you might find that even with a larger monthly payment, you might actually save money due to the tax savings.

Now that you have an idea of your budget, it’s time to consider where you would like to live. If you are simply looking to up or downsize, this might be as simple as looking around the corner or down the street, but most of the time it’s more involved than this. You might be moving across town or even across country and need to decide where the best possible community is for you and your family.

Fortunately, there are many online tools available to help you. With websites offering everything from home listings to school and crime statistics, you can do some preliminary research to help you identify some possible options. Of course, unless you’re already familiar with the area, you’ll need to see the neighborhoods in person, but you should be able to narrow the search by spending a little time online. Searches might include:

• Home listings
• Local schools and rankings
• Crime statistics
• Local cultural events, theater, art
• Shopping and dining

There are many sites available for you to peruse. Another tip is to use Google Earth to zoom into the communities and homes you see.

There is a difference between a good listing agent and a good buyer’s agent. At times they are the same person, but the activities they perform are different. The buyer’s agent represents your side of the real estate transaction. From the very first contact, they listen to your ideas, needs, wants and financial goals. They will then work with you to find the right home based on this information. They have a fiduciary duty to protect your interests. They will be your representative in the process and handle all the negotiations for you, ensuring you get the best possible sales price and terms.

A buyer’s agent will bring a team of experts together to work with you depending on your needs. Such services might include a tax consultant, mortgage broker, credit counselor as well as home inspectors. They will help you explore communities and help you learn about the neighborhood, community amenities, school districts, resale value and all the other aspects that you should consider to make an educated home purchase.

Once you go under contract, your buyer’s agent stays right beside you! They will not only negotiate the price and terms of the contract but issues which arise during the escrow process. You will have a home inspection, and there could be a request for repairs. You might also need help with insurance quotes, appraisal inaccuracies, and title discrepancies. These are all situations your buyer’s agent is prepared for and experienced in solving.

While the buyer’s agent is still paid their commission from the seller proceeds, they are the buyer’s representative only and work in the buyer’s best advantage. The buyer’s agent will help the buyer write the purchase offer, negotiate repairs and other adjustments during the transaction and manage the buyer’s side of the transaction until it closes.

Now comes the fun part….looking at homes. This is where that list you made comes into play. Most buyers today have already done some searching on the Internet and have a few homes they want to see. Your agent will sit with you and talk about the homes you have an interest in and perhaps offer suggestions for some you haven’t seen or are new to the market. Even if you come prepared with a list, it’s important to listen to what your agent tells you about each one. They might be aware of a neighborhood issue or new road which will affect the noise level of the property.

If you are relocating from out-of-town, you might feel pressured to find the right home the first day, but most buyers have a little time. Consider your list of musts, needs and wants as you view each home and make sure you do not compromise on essentials because you’ve fallen in love with the kitchen backsplash. A few things you need to think about are:

• The road, noise, and traffic
• Neighborhood amenities
• Homeowner’s Association expenses and services
• Property taxes and special assessments
• Schools and crime statistics

Once you do find a home you’d like to write an offer on, you and your agent will discuss price and terms. If you can’t offer a competitive price, sometimes offering a quick escrow or fewer contingencies can still help you succeed with your offer.

Once the sellers accept your offer, you will enter the escrow period. There are two important elements to this period. The first is to arrange for financing if you are planning to acquire a loan to purchase the home. Your lender will start the process of getting the final approval for your loan. They will work with escrow to get the data they need about costs and present you with a Good Faith Estimate of your costs and terms of the loan. The lender will also order a formal appraisal of value. The appraisal value must match or exceed the amount you offered for the home, or the lender will not be able to lend the full value you are expecting. The next section will discuss contingencies in more detail.

The second important element is your final due diligence and investigations of the home condition. The sellers will provide you with a complete disclosure of issues they are aware of with the home and neighborhood for you to review. Until you remove contingencies, you can still cancel the purchase without any financial penalty, so this is the time to check out the community, the home and the other factors that will affect your enjoyment of the property.

As soon as you have entered into a contract with the sellers, you begin the contingency period. This is the time to do all your investigations regarding the property and your ability to enjoy living in the home. Purchase contracts include a variety of contingencies which must be released in writing or they remain in effect. Until you remove these contingencies, you can still cancel the transaction with little to no monetary penalty. Your agent will help you navigate this process.

Typical contingencies include:

• Home inspection, this might include geological surveys and inspections as well as perhaps mold inspection
• Termite inspection
• Appraisal, the home must appraise for the offered value
• Loan Approval
• Clear title, the sellers must have the legal ability to sell
• Insurability, you must be able to obtain reasonable home fire insurance
• HOA, you will have time to review the rules and financial stability of the association

One of the most common misunderstandings about contingencies is that as long as the seller fixes the issue, the buyer must complete the sale. This is not entirely true. For instance, if the home inspection discovers a root problem with a tree that is pulling up the sidewalk, the seller might take out the tree. But what if there are a few other similar trees on the property? They could eventually cause a problem, as could the roots which were left behind. The buyer has the option of canceling in such circumstances.

If the home inspection discovers an issue the buyers are uncomfortable with, they can ask the sellers to make repairs. This is a formal request for repairs. The form used will release the buyer’s home inspection contingency if the seller agrees to the repairs. It is important to take this step once all inspections are completed and issues uncovered.

While there was once a time when buyers could request that torn window screens be replaced, today the request for repairs is reserved for more serious issues…true deal breakers. Your buyer’s agent will walk you through the inspection results and help you understand common requests and what you might expect.

Once the seller receives the request for repairs they can:

1. Agree to the requested repairs
2. Refuse to do any or all of the repairs
3. Offer a monetary amount instead of making repairs

Just like the original contract, a request for repairs can have several counter offers made before an agreement is reached. Again it’s important to realize that once the parties come to an understanding, then the home inspection contingency is removed and the buyer cannot use that as a reason for cancellation without a possible financial penalty.

The closing is often not as dramatic an ending as you might expect. By this time the loan approval has been completed and mortgage documents signed. The close is really just the day the title transfers from sellers to buyers. This is accomplished in a series of steps which involve:

• Funding the loan
• Reconciling the funds and paying the sellers
• Title change and recording

That’s it! You own the new home!

Buying a home is exciting! By taking it step by step, you can easily navigate the process and find the right home for you and your family.