How to Buy a House home
Learn the basics
1.	The Basics
2.	How much home can you afford?
3.	The Down Payment
4.	The Loan
-	Assuming a Loan
-	Owner Financing
5.	Qualifying for a loan
6.	Understand Closing Costs
Do the groundwork
7.	Get your finances in order
8.	Check Your Credit Report
-	Repair bad credit
-	Establish Credit if you don't have any
The Process
10.	Find a Lender
11.	Evaluate the bank's offer
12.	Start looking at houses
13.	Get the Disclosure
14.	Make an offer / Sign a Contract
15.	Have the House Inspected
16.	Problems on the Inspection?
17.	Renegotiate the terms
18.	Appraisal, Survey, & Insurance
19.	Appraisal went through?
20.	Closing!

After the purchase

Avoding scams

More about Mortgages

How much loan can you get?

Figuring your monthly pmt.

15- vs. 30-year loans

Prepaying your mortgage

How to figure mortgage interest

Private Mortgage Insurance

Paying Points

If you won't live long enough to pay off the mortgage

Other Topics

Renting vs. Buying: Which is better?

Homebuyer Tax Credit

Buying is an investment

Appreciation

Paying cash vs. getting a loan

The Debt Ratio

Tax breaks are actually welfare for the rich

Other

Links to helpful sites

Fan Mail

Michael Bluejay's home page

Email Me

Get an Agent and Start Looking at Houses

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Once you've been pre-qualified can finally start looking at houses. Yay! Now you get to pick a real estate agent.  An agent who works for the buyer (you) is called the buyer's agent.  A little more than half of agents are Realtors™, meaning they're members of a professional organization.  Personally I never care whether an agent is also a Realtor or not.

Benefits of using an agent

        Usually there's no downside to using an agent, because their fees are paid by the seller, not you.  Agents have access to MLS, which is a database of all houses for sale that are listed by other realtors.  The primary help an agent can give you is to help you find the kind of house you're looking for by searching MLS.  You can give your agent a list of zip codes that you're interested in, and general specifications that you're looking for (price, size, number of rooms, etc.).  Your agent can easily find all the houses in MLS which match your needs.

The second important thing your agent can do for you is to give you a professional opinion about how much a given house is really worth. This can help you avoid paying too much for a house.  You might worry that the agent has a conflict of interest, since they work on commission (typically 3% of the sale price, paid by the seller), and so the more you pay for the house, the more the agent makes.  In reality this is not so much an issue, because inflating the price a lot would net an agent only a little extra commission.  (For example, inflating the sale price by $10,000 would net the agent only $300 extra.)

HomeGain can help you find an agent.

Agents don't always offer a benefit

        The agent's ability to search MLS for you is less of an advantage than it used to be, since in most areas it's now easy to find homes for sale on the Internet. For example:

• Here's the MLS for Austin, Texas, There may be a publicly-available MLS for your area, too. (Try searching Google.)
• Google has now integrated homes for sale into its Google Maps feature, though it doesn't appear to have all of them.
• Some sellers sell themselves without using an agent, in order to save on commissions. These houses are called FSBO's (For Sale By Owner). You can find FSBO's in newspaper classifieds and on websites like Surf for Houses. Your agent typically won't tell you about such houses, for two reasons: (1) They're usually not listed in MLS, so your agent has no idea they exist, unless they start pounding the pavement looking for them, which they have no incentive to do because (2) usually the agent can't make much or any commission on an FSBO.  Sellers who go the FSBO route are doing so in the first place so they don't have to pay agent commissions.

If you can find a home on your own then you don't need an agent to help you find houses.  And you can still get an opinion of how much a house is worth by hiring an agent to perform Competitive Market Analysis (CMA) of the property, which usually costs around $75. The market analysis will compare the house to other similar houses in the neighborhood which have sold recently, and their sales prices. You need a professional opinion of value to make sure you don't pay too much for the house. Most agents will offer to prepare a CMA for free in hopes of getting you as a client, so if all you want is the CMA you should make it clear that you're not interested in having them represent you, and that you prefer to just pay their fee.

An alternative to getting a CMA from an agent is hiring an appraiser to provide you with an estimate of value. The appraisal will be much more detailed and probably more accurate than an agent's market analysis, but it will cost more, too ($400 and up). Then again, if you do decide to buy the house you'll have to hire an appraiser anyway at that point because the bank won't give you a loan without an appraisal, whether you use an agent or not.

In a pinch there are websites will give you a free estimate of how much a given house is worth, using a combination of recent sales data and property appraisal records, but they're not terribly accurate. They're good to use to get a rough ballpark idea before you buy a CMA or appraisal, but they're no substitute for the real thing. Do not base your offer on a free web-based estimate of value! Anyway, here are the free sites for fun:

• Yahoo Real Estate. Shows you the results from Zillow and ePraissal on the same page.
• Zillow. The Wall Street Journal said Zillow come within 5% of the market price in about a third of cases, was off by 25% or more in 11% of cases, and was off by 50% or more in 3.4% of cases.
• ePraisal. Also provides demographic info about the neighborhood.
• Real Estate ABC. Lets you pick and choose which comparable houses in the neighborhod to use in estimating the value of the target house.
• House Almanac. Currently lists only major cities in Texas.
• Others. Dough Roller lists five other home valuation sites.

Advantages of not using an agent

        Okay, so we've seen that an agent isn't always necessary. But is there any advantage to not using an agent?  Possibly.

Remember that your agent is paid by the seller, who pays 3% of the purchase price of the house.  If you find the house yourself then the seller won't have to pay that 3% commission, and you might be able to convince the seller to lower the price by 1, 2, or even the full 3%.

Most agents also won't tell you about houses that are For Sale By Owner (FSBO). If a private individual is selling his/her house without using an agent, then the house won't be listed in MLS, since only agents can enter houses into MLS.  Sellers often choose to sell by themselves because then they won't have to pay the 3% commission to their own agent. (A seller typically pays 3% to her own agent and 3% to yours.)  A FSBO seller might still pay the 3% commission to the buyer's agent, in order to get agents to tell their buyers about the property.  But if they don't, you won't hear about that house from your agent, since they can't make any money from the sale if you buy it.

So the potential advantages of not using an agent are the possibility negotiating a lower price with the seller, since the seller won't have to pay a commission to the buyer's agent, and the ability to find FSBO's.  But these advantages exist only if you take advantage of them. If you don't actually try to negotiate a lower price (or you're not good at it), or make no effort to find FSBO's in the first place, then you're not getting the benefits of not using an agent. And remember, it will still be up to you to look for houses in MLS (if available to you) and to a professional estimate of value for each house you're interested in.

Should I use an agent or not?

        Only you can answer that question for yourself.  Above is everything you need to know to make your decision. Let's summarize it again here though.

With an Agent	Without an agent
Agent can find houses for sale in MLS.	You'll have to find the houses yourself. If MLS is available to the public in your area, great. If not, you might not be able to find much. Check the list above for tips on finding homes for sale by yourself.
Agent can give a professional opinion of how much a home is worth. But the agent has an incentive to inflate the price, because the more you pay for the house, the bigger commission they make.	You'll pay someone for a professional opinion of value -- either a CMA from a realtor for ~$50, or an appraisal from an appraiser for ~$400. You'll have to get an appraisal anyway if you actually decide to buy the house, whether you use an agent or not. You can get a free estimate of a home's value at the websites listed above.
Agents won't tell you about FSBO's unless the seller is paying a commission to realtors. In fact, some agents won't tell you about FSBO's even if the seller is paying a commission, because the agent might not want to go through the hassle of finding out whether the seller will pay a commission.	Every FSBO is an option for you, but you'll have to find the properties yourself. Look at the ads in the newspaper, and ride around the neighborhoods you're interested in, looking for yard signs that say "For Sale By Owner".
Agent will be paid by the seller, usually 3% of the price of the home.	With no agent the seller won't have to pay that commission, so you might be able to negotiate a lower price with the seller.

If you decide to use a agent, then HomeGain can help you find an agent.

Whether or not you use an agent, all the papers for the sale are handled by and signed at the office of a title company, which makes sure (among other things) that the home is really the seller's to sell, and that there aren't any outstanding claims against the property. If you want further protection, you can hire an attorney to check the paperwork, though most people don't opt for this. I've never done it.

Researching cities and neighborhoods

There are lots of sites that provide detailed info about different cities and neighborhoods within those cities. I'm not going to attempt any kind of exhaustive list here, but here's one to help you get started.

• City Data. Provides detailed demographic info and pictures of lots of different cities in the U.S.