Buying a House in Today's Real Estate Market

Buying a house will likely be the biggest purchase in a homebuyers lifetime. To ensure a smooth transaction, a buyer should plan a buying strategy well in advance.

The process begins with the search for a reputable real estate agent. A good agent will be knowledgeable about current market conditions and will be able to guide the buyer through the complex house buying process.

In the initial interview with the agent, the buyer will describe the specifics of the desired home while the agent will explain the home buying process.

After selecting the real estate agent, a reputable lender must be found. They are divided into direct lenders, such as banks, credit unions and the like, who lend money directly to the public, and mortgage brokers who generally don't lend their own money, but who locate lenders who will. Mortgage brokers' specialty is their ability to find loans that fit the financial needs of homebuyers.

The chosen lender will begin the loan application process by running the homebuyer's credit report. This report will ultimately dictate how expensive of a house the homebuyer will be able to buy. Depending on the loan, it will also specify the amount of the down payment that the buyer will have to have in cash at settlement.

For most borrowers, the down payment will be their greatest challenge. Depending on the borrower's credit score and the type of loan chosen, the cash needed for the down payment can be as low as 5% but may be as high as 20% or more. Lenders will advise the buyer whether gifts from family members can be used for any part of the down payment. They will also advise that under federal law, first-time homebuyers can borrow from their 401(K) retirement plans for their down payment without penalty.

First-time homebuyers should investigate first-time home buyer's loans that are guaranteed by the Federal Housing Administration (FHA). Such loans may also be available through the funding of individual State real estate bonds. Veterans will want to explore their eligibility of obtaining a Veterans Administration loan that they may qualify for without a down payment.

Once the loan has been approved, the lender will issue a Letter-of-Loan-Approval, which makes the buyer/borrower the equivalent of a cash-buyer to any seller. This letter will stipulate the borrower's credit worthiness and the lender's willingness to lend a specific amount of money to purchase the house.

With the loan secured, the actual house hunting can begin in earnest. The real estate agent will provide an on-going list of available houses in the lender-approved price range to the buyer that they will then visit.

For each house viewed, the buyer should evaluate the house prior to leaving the property. At its simplest, the evaluation will have the buyer rate each house from one to five, with five being the perfect house for the buyer. Every successive house will then be graded in comparison to the previous house viewed until the buyer has a ranking of houses from least to most desirable.

Once the perfect house has been found, the real estate agent will submit an offer along with an Earnest Money Deposit that is part of the buyer's down payment, to the seller for consideration. The seller will either accept the offer or make a counter-offer. Rarely will the seller reject the buyer's offer outright without countering it, unless a competing offer is more attractive to the seller.

Ideally the negotiations will end in a mutually agreeable price that will seal the deal. The real estate agent will continue to move the process towards settlement by scheduling a home inspection, if that was part of the deal, and will follow up on the myriad number of details that are part of any real estate sale.

About two weeks before settlement, the settlement agent will send a letter to the buyer with final instructions, detailing the amount of certified funds that the buyer is to bring to settlement.

On the day of settlement and after signing many documents, the homebuyer will take delivery of the newly purchased house keys and become a new home owner.

It will be a day of celebration!