Real estate investing expert Ted Thomas answers the question: How do you buy a home?
How Do You Buy A Home

For first time buyers, the question “how do you buy a home?” appears to be either a simple matter of getting a loan and moving in or a minefield fraught with dangers.

The truth is between these two extremes. Certainly, the process of buying a home can create some headaches. But it should not be root canal-painful. Neither is it going to be going to the park to enjoy a leisurely afternoon.

The first step is deciding how much you can afford, of course. How do you buy a home? With money. This is one place where a lot of people make a mistake. They assume the mortgage payment is all they will need to pay. Property taxes, insurance, homeowner association dues, if applicable, and other fees have to be considered. Most people roll these payments into their actual payment. Obviously, this increases how much you’ll be paying each month.

Figure out the taxes and the insurance ahead of time. The local tax office can tell you what that amount will be. Approach several insurance companies and get bids on homeowner insurance. You’ll be surprised at how much premiums will vary from company to company.

Then, you find a loan that matches what you can afford. Sometimes determining how much you can afford and finding a loan happen at the same time. Your credit score is going to affect how much you can borrow and what the interest rate will be. Your current debt load, how long you’ve had your current job and the one before will also matter. You can go through a mortgage broker, get a real estate agent to help or work directly with a lender. Expect to fill out a lot of paperwork.

This process is sometimes called pre-approval. The bank says you can borrow “this amount” to buy a home. That way you can walk into negotiations with a homeowner or their real estate agent knowing that you can close the deal. Having a pre-approved mortgage waiting is one answer to the question, “how do you buy a home?”

The most important thing to remember here is, be sure you understand everything you read and sign. If you don’t understand it, do not agree to it. Have someone explain it until you do understand.


Now it’s time to start shopping. The old saw, location, location, location matters. You need a place where a home can sold in a reasonable amount of time and still meets your requirements for a place to live. If you want to know how do you buy a home, here’s a few things to consider:

• The neighborhood. Do you need to be close to a school? Do you want to be downtown, on the edge of town or the suburbs? In short, what do you want nearby. Make a list of the places you’ll want to have close by.

• The neighbors. Are they loud? Quiet? Artistic? Older? Children?

• Parking. You’re going to need enough space to park however many vehicles you own as well as anything else that takes a lot of space. Some people have RVs, a fifth wheel, a boat, Jet Skis. These things take room and you’re going to need space. If you plan on getting something like this in the future, make sure you have space to keep it.

When you find the home, start negotiations. How do you buy a home, a car or any other really large purchase without trying to get the best deal? If the home is under contract with a real estate company, you’ll have to deal with an agent. If it is a for sale by owner, you deal with the owner. In the case of a short sale or a foreclosure, the bank is the point of contact.

At closing, the rule of making sure you understand everything still applies. You’ll be expected to sign a lot of paperwork and initial a lot of pages. Read it. Understand it. This is a significant investment you are making and you should understand everything about it. Ask anyone who’s been through this process, “how do you buy a home?” and they’ll tell you it feels like you’re signing your life away.

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