First-time Homebuying 101

How much house can you afford? If you have a trust fund or you own a software company, this is an easy step. Otherwise, you'll have to consider issues like how much of a down payment you can get together (20 percent of the sale price is a safe amount, although you can get away with less if you need to), how much you can afford to put toward housing every month (the general recommendation is 28 percent to 33 percent of your income), and how much debt you can afford to pay off (up to 36 percent of what you earn) [source: CNN].

For an in-depth calculator, check out CNN Money: Home Affordability.

The downside of the 21st century housing-market crash is that it can be harder to get a loan. It's best to get preapproved before you make an offer. This makes you a more attractive buyer. Whether you go through a bank, a mortgage broker or a small lender, you can submit all your financial information and get a preapproval letter for the maximum amount they'll loan you. You can also look into government or state homebuyer programs for additional assistance. With some government help, you may be able to afford a bit more than you think.

See HUD's information on Federal Housing Administration loans and state and local programs.

This part can be fun -- what type of location are you looking for? How many bedrooms? How about a yard? A fireplace? Are you up for a fixer-upper or does it need to be move-in ready? A good approach is to make a list of what you need, what you want and what you don't want, and then figure out which characteristics are negotiable and which aren't.

Showings are the meat of your homebuying experience. Lots of people hire a real estate agent to help with the search, and with good reason: Finding your needle in the haystack means sifting through countless listings, contacting countless agents or sellers, and finding your way around strange neighborhoods on a schedule. An agent can make the search a lot easier, and as a buyer, it costs you nothing (it costs the seller anywhere from 3 percent to 6 percent of the sale price, typically).

If you decide to go it alone, or you just want to do your own research, check out the MLS -- everything on sale will be listed there. Craiglist.org and your local newspaper classifieds are also good places to get a feel for what's out there.

Once you find your dream home (or something close to it), it's time to get in there and start the bidding. Your agent, if you go that route, can help you decide what to offer -- it'll most likely be below what the sellers are asking, but going too low is risky. You could seem like you're not a serious buyer.

You'll need to pay "earnest money" so the sellers know you're not fooling them. You could lose this money (typically several thousand dollars) if the sellers accept your offer and you then break the contract after a pre-set deadline.

Once you make your serious offer, the negotiations start. The sellers will either accept your offer or counter it. If they counter, you'll either accept their counter or make your own counter.

When (or if) you eventually agree on a price, you'll begin the parade of experts. An inspector will look over the house and let you know about any problems. You'll then decide if you want the seller to fix anything (or everything), and the seller will let you know if they're willing to fix anything (or everything) you're asking for.

In addition to the inspection, an appraiser will come in and determine the value of the home. If it appraises for less than the loan amount you're approved for, you could end up with a problem because you probably can't borrow more than the home is worth. The hope, though, is that it appraises for at least the price you've agreed on with the seller. (If not, you need to go looking for another lender, renegotiate the price, or get the rest of the money from a rich uncle.)

If you can sign your name 50 times without your hand cramping up, you're good to go for the closing. This is where you sign all the paperwork -- after reading it. Don't just assume it's all legit, because there are unscrupulous people in the real-estate industry just like in any other. You'll turn over your money (into an escrow account) and walk out with your keys. Or, if you haven't arranged to take possession at closing, at least with the promise of keys.

At this point, your home-buying work is done, and the work of moving out of your old home and into your new one begins.

In a month or so, you'll barely remember the agony.

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