Navigating the home buying process

I have a few friends who are currently shopping for their first homes. I've had a few people ask for my feedback on the first-time home buying process recently, so here are some thoughts. Buying a house is a big deal. Without a doubt, it is the biggest purchase you will ever make (or have ever made in your life so far). For example, my husband and I bought a house in April, 2010. We now have 29 years and 2 months left to go. That's a big commitment. Here are my top five pieces of advice:

1. Figure out why you are interested in buying a home. Do you want to put down roots? Have a stable home in which to raise a family? For investment purposes? Tax benefits? Make sure you find a home that fits your goals, and think critically about how long you are willing to stay in the home. As we've seen in the past two years, it's not always easy or profitable to sell your home when you want to.

Our house as it was being built

2. Make a list of the must-haves for the home you're looking for. Without solid criteria, you are likely to get caught up in the wow factor of a home that might not really be right for you. When we were looking for our house, here were some must-haves on our list: within 20 minutes of the city center, a backyard, enough space for us to stay long enough to have a family, and we weren't interested in a fixer-upper. We wanted a place that was move-in ready, but could be upgraded later.

3. Find a great real estate agent and mortgage broker and ask them lots of questions. We found our broker and agent through referrals from friends. Ask around and find someone who is trustworthy and informed. Everything about buying a home is confusing when you've never done it before. From the offer process, to the inspection and closing, make sure you know exactly what you're signing. A good agent, title company, and mortgage broker should answer as many questions as you can think of. In fact, I still email our broker occasionally for clarifications.

4. Be extremely realistic about your budget. You'll get approved for more money than you should probably spend on your mortgage payment each month. Keep in mind that when your broker quotes you your mortgage payment amount per month, it doesn't include property taxes, homeowners' association fees (if applicable), maintenence, insurance, or utilities. Ask for an estimated total cost.

Also keep in mind that you will undoubtedly come across last minute expenses at closing. Your closing costs are just an estimate until the day before you close. Don't put all of your liquid assets into your down payment. Ask your broker for an estimate of how much cushion is appropriate.  Then, add on any personal costs you'll accrue. For example, we didn't factor in that our brand-new home wouldn't have any window coverings. $1,100 later, we had blinds installed. Also, you may have to break a lease where you are currently living. And, don't forget about moving expenses and deposits on new utility accounts.

5. Be patient. This is the hardest one. You'll get attached to a home and excited about the possibility of moving in. Try not to get emotionally invested to a house until you sign on the dotted line. (I said try. I'm not sure if it's possible for most people!) Consider this doubly important if you are putting an offer in on a foreclosure or short sale. Closing on one of these properties can take months.

All this being said, don't let this scare you away! Although it can be a stressful process, owning a home can be very rewarding. We take a lot of pride in our house, love the sense of permanence, and enjoy the fact that each month, we own a little more of our home.

What home buying advice have you received, or have you given?