Living, Money, Slide Show — May 12, 2011 2:08 am

10 Steps to Home Ownership


Photo by Danielle Koval

Thinking about buying a home? We’ve talked to the experts and compiled 10 steps that can get you there.

For many people, home ownership is the still the quintessential American Dream, and right now—with houses flooding the market and the economy rebounding in slow-mo—might be an ideal time to turn those dreams into reality. According to Jen Weil, a senior mortgage consultant who has been with Home Lending Source in Tampa, Fla., for 13 years, it’s a buyer’s market. “You can buy now for considerably less than what you could several years ago,” Weil says. “Although the underwriting guidelines are a bit more strict, the size and value of the house that you can get now is about the third of the price of what you could get a couple of years ago.”

But before you start combing through the real estate ads, there’s a lot you need to consider. Here are 10 steps that can help lead you to that home-ownership dream.

1. First, decide if you’re really a good candidate for home ownership.
Do you imagine yourself pulling weeds and mowing the lawn on Saturday mornings, or leaving your urban condo to explore the city for the day? For someone in their 20s, the experts say, buying a home should be considered first as a lifestyle investment and secondly as a financial investment. Buying a home isn’t for everyone, and believe it or not, there are some luxuries associated with renting. For example, if don’t have the capital to keep a home in working order, it’s probably best to leave that to the property owner—someone other than you. If your garbage disposal breaks down or your toilet won’t stop overflowing, it’s nice to have a landlord to call.

2. Assess your credit score.
Once you’re sure buying a home is the right move for you, it’s time to investigate any potential credit issues you may have. (A safe bet is to check your score with all three major credit bureaus: Equifax, Experian and TransUnion.) Your credit report can have a huge impact on your ability to buy a home. Lenders want to know that they’ll be loaning money to someone who is going to pay them back, so before you even attempt to apply for a home loan, check your credit and make sure it’s in tip-top shape. “Ideally you need [a credit score] over a 640,” Weil says. “The higher that score is, the easier it would be to qualify for a loan—and you would end up with a better rate.”

3. Learn as much as you can about the home-buying process.
If your credit situation is sunny, the next step involves self-education. Many agencies across the country offer first-time home buyers’ classes that lay everything out on the line—from telling you what to expect during the entire home-buying process to what to do during each of those steps. The National Council of State Housing Agencies (, for example, is a particularly good resource for first-time buyers on a quest toward home ownership. Most states also have Housing Finance Agencies that can help you find a myriad of programs that offer aid to first-time home buyers.

4. See if you qualify for special grants or down-payment assistance.
Depending on what state you live in, if you’re a recent college graduate or are earning a postgraduate degree, you might be able to receive assistance with down-payment and closing costs and lock in a favorable mortgage interest rate from participating lenders through the Grants for Grads Program. Eligible borrowers can use the grant to reduce the out-of-pocket expenses associated with buying a home. First-time home-buyer programs are another excellent resource worth investigating. Check with your local Housing Finance Agency for more details.

5. Determine how much money you can realistically spend, and get pre-qualified for a loan.
Figuring out what kind of home you want and how much money you can pay each month is crucial. There’s no use looking at castles if all you can afford is a cottage. Take the time to map out a detailed household budget, so you have a realistic sense of how much money you could afford each month in mortgage payments. Then find a lender or a mortgage broker who can pre-qualify you for a loan. If you have a pre-approval letter on hand, sellers will see that you mean business when you’re out shopping.

6. Find a good real estate agent.
Nearly 87 percent of homes are sold with the help of an agent, according to a 2009 survey conducted by the National Association of Realtors, so the road to new home might be much easier if you find a good agent to help you along the way. Since most agents are paid out of the fees that are included in the marketing price of a home, you’d be paying for one even if you don’t hire your own. Be sure to sign a buyer’s representation agreement, which is a contract that will give your agent the power to act on your behalf.  Having a contractual agreement also legally requires your agent to keep your best interests in mind.

7. Start shopping.
Always keep your agent well-informed about your likes and dislikes in a home so that he or she will make the best decisions while helping you shop for your new home. Try not to be too rigid; keep in mind that not every home will be picture perfect, so don’t let small imperfections discourage you from passing on what otherwise would be your dream home. The bathroom may not have that Victorian style sink you’ve always longed for, but with a little remodeling, you’ll not only have a fabulous bathroom, but you also might raise the resale value of the home.

8. Draw up a contract.
Once you’ve found the place you’d like to call home, you’ll need a contract. You can write one yourself, via your agent, or—if you are able to afford it—through an attorney. The contract should stipulate what you are and are not willing to pay, when you want to close on the property and when you want the house to be in your possession. Be sure to base these dates upon a complete and passing inspection; you don’t want to be stuck with a home that has major problems. Leave room for renegotiation if anything goes awry.

9. Lock in your loan and schedule the appraisal and inspection.
When you and the seller have reached a mutual agreement, contact your lender to start the loan process. Since you’ve already been pre-approved (see Step 4), this should speed things up a bit. But before the lender will hand over the money, they’ll arrange for an appraisal. You’ll also need to set up an inspection, so if there are any major problems, the seller can take care of them prior to the final sale.

10. Close on your house.
All sorts of issues can potentially arise during this final step of the home-buying process, so a little patience is a necessity. If all goes well, you might be moving into your new home within a matter of days. “Generally, at the closing table, you’re supposed to receive your keys,” Weil says. “Once you’ve already put your money down, the house is yours.”  


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