7 Steps to Buying a House
Find out how much you can afford.
Before your first steps to buying a new home, your mortgage lender will look at a couple different numbers to find out your spending limit.
The first figure is your take-home pay. Banks like to follow the 28/36 rule: Your monthly mortgage payments should total no more than 28 percent of your net paycheck, and your total debts, including car payments and student loans, shouldn't inch over 36 percent.
Get pre-approved for a loan.
For a small fee, a lender will contact your employer, bank, and others to verify your income, assets, debts, and credit history. You'll then get a letter stating that your mortgage is approved for a certain amount (which will help you determine your price limit!) up until a certain date. This document is more for the home seller's benefit to prove that you're a serious buyer. There's no obligation on your part to actually get a mortgage.
Start searching for new digs.
A good way to start is to look at advertisements of homes located in neighborhoods you might want to check out. Then see who the listing agent is -- chances are that company does a decent amount of business in the neighborhoods you're interested in. Also use our finding a home tool .
Make an offer.
Do your own research in your local paper, office of public records, or Zillow to find out what similar homes in the area have recently sold for. Choose a number for your initial offer. If it's far below the asking price, be prepared to defend it with your research. Don't let your real estate agent pressure you into making the first number any higher than you're comfortable with.
Settle on a price.
The seller will respond in one of three ways: an acceptance, a counter-bid (giving you a number somewhere between your offer and the asking price), or declining by sticking to their original asking price. Find out why the sellers are digging in their heels. If you can agree on a number, you'll sign a contract and be asked to put down a “binder" or “earnest money." Make sure the contract specifies that you can get this money back if you withdraw your offer.
Get an inspection.
Close the deal.
Once the inspection is done, you'll need to contact your lender and hire a lawyer to set up a closing date. Go buy some champagne and celebrate!