Going through the process of buying your first home can seem very intimidating, making you second guess your decision by either grabbing the first house that you like or return to being a renter. To make the process easier, you need good information that you can act on.

We will make the process clearer and simpler by explaining what you need to consider before making the purchase and what to expect from the process so you can maximize the value of your purchase both financially and experientially. We will also include some tips to make the transition to new homeowner easier.

Things to Consider Before Buying

This section can be summed up as “Buy with a plan.” The purchase of a home is a long-term investment, so the idea is to connect the buying of a home with a financial plan to bring added financial security to your life. Attempting to avoid rent payments that only reduced your income is not a plan, nor is the idea of having a measure of personal freedom gained because there are fewer concerns with the neighbors a plan. Specific and tangible goals for deciding on the purchase of a home need to be set before beginning the process.

Give a fair amount of thought to these five questions:

What type of home is suitable for your requirements?

This is step one of the process in determining your goals. There are advantages and disadvantages to each type of residential unit, and your choice will be based on which of the options meets your goals. Two options for all the types of houses are new or a unit that requires work to be performed on it to bring it to a place suitable for living. The new unit may cost more, but the alternative is to spend not only money, but the time and effort in making the changes. With either choice, the total costs must be carefully weighed.

Four basic options for home ownership are: Single Family Home, Condominium, Townhouse, 2-4 unit multifamily.

What will the finished home look like?

This is divided into two groups: features of the home what you need, and features of the home that you want. This is a critical decision because while you are not likely to have everything you want, you will definitely have to have everything you need. It is also likely to be the biggest decision of your life, so the basic decisions such as what neighborhood to live in and the size of the home are also part of the smaller decisions, such as bathroom layout and kitchen appliances.

What is the maximum mortgage that you are qualified to receive?

Money is always a big issue, and it is good to know just how much you are able to spend before shopping. Factors such as monthly income, total amount of debt, and length of employment can reduce the amount of money a lender is willing to loan you. Your choice of an ideal $300,000 home can be reduced to a $200,000 fix-it-upper because the money is not available.

Realistically, how much can you afford to invest?

The other side of the coin is that a bank may be willing to lend you more than you anticipated. While this may look like an advantage, there are other considerations beyond the monthly mortgage payment such as property taxes, increased insurance, additional closing costs, and a potentially increased down payment. A house that requires some fixing may be even more expensive if the repairs are large or there are many to do.

Who will take you through the home buying process?

A first time home buyer will need both guidance and advice though the process, and a licensed real estate agent is the first choice in giving you that help. From both locating the neighborhood to live in and the type of home to buy, to viewing and pricing prospective homes, professional real estate agents are the leaders to look for. They can also help you avoid the many pitfalls as well as get a loan, complete the paperwork, and give the seller an offer they cannot refuse.

The Buying Process – Now that a long-term plan has been designed, the actual home buying process begins. This likely will tax your patience and have you wondering why you decided to do this in the first place. There will be offers and counteroffers, and even more paperwork to complete, but however you may feel, there is a process to the madness.

First, find a home – With the advances in the Internet and technology, there are more ways to conduct a search and read more information about the housing market, available finding, and where the best for sale signs are going up. Do not forget about your helper, the real estate agent, who can arrange for visits to a home or neighborhood, or just point you in the right direction. Family and friends are often good sources of information to the quality and pitfalls of areas of interest to you.

Second, weigh your financing options and then secure the financing – There are a variety of loans available, from federally backed loans for first time home buyers to loans for people who fail to make the minimum 20 percent down payment required by lenders. State programs may also be available. Keep a watch on the mortgage interest rates, as they may vary between lenders. What appears to be a small difference in rates can cost thousands over the long-term.

Third, make an offer – Here, the real estate agent is valuable for helping you decide the amount of the offer to make, what terms to negotiate such as closing costs, and any special conditions you may want to include in the offer. Your agent will then present the offer to the seller’s agent, which has three possible outcomes: accepting your offer, making a counteroffer, or rejecting the offer altogether. The first option will have you making a good faith deposit which is placed in escrow – the money is held and the home taken off the market until the property is inspected and the deal is closed. The second option will have you renegotiating until a settlement is agreed to or the negotiations end. The third has you going back to square one.

Fourth, perform an inspection of the home – As a first time home buyer, the expertise of your real estate agent will be vital. Though everything may appear to be fine, the agent will be able to look for common problems often unseen by first time buyers. The quality, condition, and safety of the home are essential considerations before entering into an agreement with the seller. Should there be problems, large or small, with the house that were not initially disclosed by the seller, the offer made can be withdrawn by you with a full refund of the deposit, or further negotiations can be conducted to determine the best way for the newly discovered problems to be resolved. You may negotiate for the seller to bear the expense of repairing the problems or may negotiate a reduction of the original offer price.

Finally, close or move to the next choice – The process of closing involves more than enough paperwork to keep several people busy for several days, and one has to hope that everything goes smoothly. This is the step you have worked hard to get to, and the inspection will have revealed no significant problems that would cause any delay in the process. Mortgage companies will require the house to be appraised for their own protection, performing a title search, and obtaining mortgage insurance. A title search is performed in order to make sure that there are no other claims against the house.

CONGRATULATIONS! YOU HAVE NOW COMPLETED THE PROCESS OF BUYING A NEW HOME!

The final papers have been signed and the movers are at the door to wake you at an early morning hour. Yet there are still a few more things that can be done to convert a building into your home.

Continue to save money –Start an emergency fund and to it at least once a month to plan for unexpected repairs and expenses, such as a new hot water heater or replacing a damaged roof.

Keep the property properly maintained – The idea of maintenance is to avoid having small problems become large ones, draining financial resources and potentially damaging the value of your investment. A leaky water pipe in the wall can cause wood damage and invite insects to take up residence with you.

Keep current but stay objective about the price of your home – The price of your home on the market is only important if you are going to be putting it up for sale on the market. The housing market will have its ups and downs, but the biggest factor in determining how much you can sell your house for will be the conditions under which you choose to sell it. A financial crisis or forced relocation will present a different set of circumstances to sell your home versus selling your home at a time convenient to you. The difference between the two will result in a major profit or minimal return.

Do not plan on your home providing you with a substantial retirement income – A home is only a piece of your retirement plan, so for the long-term steadily increase the amounts you deposit into your retirement accounts. Other people’s successes in selling their homes will not necessarily be your success story. Completely paying off the mortgage will have the money set aside for monthly mortgage payments available to be used to pay medical and living expenses in your retirement years.