Buying a home

There's no doubt about it—owning a home is an exciting prospect. But buying a home can be stressful, especially when you're buying one for the first time. Fortunately, knowing what to expect can make it a lot easier.

Where to Start

How much can you afford?

Most people finance their home purchases and the amount you can afford to spend on a house is often tied to figuring out how large a mortgage you can afford. To figure this out, you'll need to take into account your gross monthly income, housing expenses, and any long-term debt.

Generally, if you're applying for a conventional mortgage, your monthly housing expenses (mortgage principal and interest, real estate taxes, and homeowners insurance) should not exceed 28% of your gross monthly income. In addition, most mortgages require borrowers to have a debt-to-income ratio that is less than or equal to 43%. In other words, you should be spending no more than 43% of your gross monthly income on longer-term debt payment.

When you're buying a home, mortgage lenders don't look just at your income, assets, and the down payment you have. They look at all of your liabilities and obligations as well, including auto loans, credit card debt, child support, potential property taxes and insurance, and your overall credit rating. Use our new house calculator to determine how much of a mortgage you may be able to obtain.

Use this calculator to help you find out

House or Condo?

House or Condo. Which is best for you?

The housing market has changed dramatically over the past few years. Because of this, you will probably find there are many options available in the area you are looking to live. To give yourself the best set-up going forward, it’s important to weigh the choices carefully, including whether to purchase a house or a condominium.

Check out the pros and cons of each

Using an Agent

Should you use a real estate agent or broker?

A knowledgeable real estate agent or buyer's broker can guide you through the process of buying a home and make the process much easier. This assistance can be especially helpful to a first-time home buyer as an agent or broker can:

Help you determine your housing needs
Show you properties and neighborhoods in your price range
Suggest sources and techniques for financing
Prepare and present an offer to purchase
Act as an intermediary in negotiations
Recommend professionals whose services you may need (e.g., lawyers, mortgage brokers, title professionals, inspectors)
Provide insight into neighborhoods and market activity
Disclose positive and negative aspects of properties you're considering

*Keep in mind that if you enlist the services of an agent or broker, you'll want to find out how he or she is being compensated (i.e., flat fee or commission based on a percentage of the sale price). Many states require the agent or broker to disclose this information to you up front and in writing.

The Offer

Making the offer

Once you find a house that has the features you want, you'll want to make an offer. Most home sale offers and counteroffers are made through an intermediary—such as a real estate agent—and all terms and conditions of the offer, no matter how minute, are put in writing to avoid future problems. If the seller accepts the offer to purchase, he or she will sign the contract, which becomes a binding agreement between you and the seller. For this reason, it's a good idea to have your attorney review any offer to purchase before you sign.

Once the seller has accepted your offer, you, your real estate agent, or the mortgage lender will be busy preparing the mortgage loan, appraising the house, surveying the property, and getting homeowners insurance. Typically, offers are contingent upon the satisfactory completion of a home inspection, so now's the time to get this done too.

The Closing

The closing meeting, also known as a title closing or settlement, can be a tedious process—but when it's over, the house is finally yours! The closing may require some or all of the following entities to be present: the seller and/or the seller's attorney, your attorney, the closing agent (a real estate attorney or the representative of a title company or mortgage lender), and both your real estate agent and the seller's. Depending on what state you live in, all parties may be required to attend the closing at once or the closing can take place over the course of several weeks. Some closings can be conducted by mail or via the internet.

During the closing process, you'll need to provide proof that you have insured the property. You'll also be required to pay certain costs and fees associated with obtaining the mortgage and closing the real estate transaction.

In addition, you'll receive and/or sign a variety of paperwork, including:

Closing Disclosure

This lists all of the final terms of the loan you've selected. Your lender is required to send you the Closing Disclosure at least three business days before the actual closing meeting.

Promissory Note

This spells out the amount and repayment terms of your mortgage loan.

Mortgage

This gives the lender a lien against the property.

Deed

This transfers legal ownership of the property to you.

Take the next step.

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Buying a Home