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How To Buy A Home That’s Within Your Budget

By Dan Green

When you buy a home, you’ll balance your head and your heart to keep from overspending. Here’s the best way to go shopping for a house.

Shopping For Homes: Be Smart, Be Fast

Today’s home buyers experience home buying differently from their parents.

Homes are shopped online at all hours of the day. Paperwork is signed instantly and electronically. Contracts are written from a phone.

Plus, with tools such as FaceTime and Facebook Live, real estate agents can help you buy a home without you ever stepping foot in it.

Want to buy a home? Here’s what you can expect.

1. Visualize yourself as a homeowner

The first step in buying a home is to begin thinking about your life as a homeowner, and how you’d like to live.

For some people, thinking about your home means choosing a city in which to live; or, choosing a particular type of home, such as a condominium or a home on a lake.

Thinking about your home also means thinking about your needs, including how many bedrooms and what amenities you need to make this work.

As you visualize yourself buying a home, you may not even feel like you’re “actively looking”. It’s an important step in the process, though, because as you visualize your life in a home, you mentally commit to homeownership.

Making that commitment is the first step to moving on.

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2. Make a choice about your budget

Of all the things you buy in your life ever, you will likely never buy something more expensive than a house.

Homes are expensive.

This is why people borrow money to buy houses — they don’t have hundreds of thousands of dollars just sitting in the bank. They borrow money to buy the place.

When you borrow money to buy a house, the loan is called a mortgage .

As with car loans and student loans , mortgage loans come with monthly payments. Those monthly payments cannot be skipped.

Part of the process of buying a home is knowing the monthly maximum you’d be willing to pay. This figure becomes your answer to: “How much home can I afford?

Don’t shop for homes by price range. Shop for homes by payment.

3. Ask a mortgage lender to look over your numbers

There are tens of thousands of licensed mortgage lenders nationwide. To help you make sure your numbers make sense, connect with at least one of them.

A mortgage lender can get you pre-approved for a mortgage.

A pre-approval letter is an official document from a lender which states that you’re qualified to buy a home; and, that your mortgage will be approved so long as you stay current on your bills and your income remains about the same.

Ask a lender to send your mortgage pre-approval by email. Keep it somewhere handy. You’ll need it.

4. Connect with a really good real estate agent

There’s great real estate information available via websites and apps today. As a home buyer, you can research any home, in any city, and track down just about any piece of data about that house that you want.

But access to data is only half of what you need. You also need representation.

Never buy a house without the help of a real estate agent . Also, never let the seller’s agent represent you as a buyer.

There are several reasons why you should have your own agent.

First, when you’re buying a home, you don’t pay to use a real estate agent. Your agent’s time and expertise is free to you. The seller actually pays for your agent.

Here’s how it works: When you buy a home from a seller, the seller pays a commission to its real estate agent. That real estate agent then splits its commission with your real estate agent, so you pay nothing.

Second, you don’t buy homes often enough to represent yourself.

Buying a home is an emotional process and it can be hard to be objective. A good real estate agent will help you stay clear-headed and focused; and, will handle the day-to-day paperwork that can bog down your home buying experience.

It’s good to have a third-party on your side.

Lastly, having your own real estate agent gives you somebody to look out for your bottom line. That won’t happen if you let the seller’s real estate agent represent you, too.

Real estate agents that represent home sellers are legally obligated to negotiate the best possible deal for the home.

When your real estate agent also represents the seller, you’re not going to get your best deal. This is because your real estate agent is legally obligated to make you pay as much for the house as possible.

Get your own real estate agent. Be represented better.

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5. Narrow your short list for homes

There’s a ton of information available to buyers of homes today and a good real estate agent will help you make sense of what you’re seeing.

As your home search picks up steam, narrow down your potential list by neighborhood, size, and amenity. Look for the home features that excite you most.

Then, when you find a home you love, let your real estate agent help you to make a strong offer.

6. Submit A Formal Offer To Buy

It’s common for offer letters to be written and submitted electronically, with an expected response time of about a day. If you took the time to get pre-approved in advance, attach your pre-approval letter to the offer.

Home sellers are more likely to accept offers accompanied by a legitimate pre-approval letter.

Remember, though: an offer for a home is not a contract. Offer letters are proposals. They’re the starting point for negotiations to the final price of a home.

Once the buyer and seller agree on a price and terms, the letter becomes a contract and you’re on your way to closing.

More From: How To Buy A House

The details of exactly how you buy a house will be unique to your circumstances. How you live, where you live, and what’s important to you will affect the path you take.

Everyone’s path to homeownership, though, passes the same major milestones. For as much as you do differently, you’ll do a lot of things the same.

Read more from our series on How To Buy A Home:

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Written by Dan Green

Dan Green is a personal finance expert and the founder of Growella. His expertise has been cited by The Wall Street, NPR, and CNBC; and, his advice has helped millions of people make better choices with their money. Dan hosts the mortgage news show "The Mortgage Minute-and-a-Half" three times weekly on YouTube.

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