First it is important to put the horse before the cart. Many people, anxious to begin the house hunt, tend to start the process by looking for a house. While this is fine, it is recommended to be done in the same frame of mind as you would window shop for any other product. By starting at this point, you will still be unaware of how much house you can afford and therefore may be looking outside of your price range. Obviously one does not want to become emotionally attached to a home only to later learn that you cannot afford it.

There are several ways you can do this. If you are just looking to get some estimates, there are several rules of thumb that you can use on your own to give you a general idea of whether you'll be qualified and for how much you will be qualified. However, since there are several factors that go into consideration, this should just be used as a guideline. Each lender uses different criteria, and each person has a different situation (down payment, credit history, etc), therefore the only way to truly know what you will qualify for from the lender is by going to a lender or mortgage company and having them provide you with “prequalification”.

There are many ways you can do this. There are several sites on line that offer national searches, as well as many local real estate offices that now offer their listings online. One thing to pay close be mindful of, is the cost of the house. Often times sites will list “your monthly payment”, however this amount may not include insurance, home owners association dues, and so on. This amount is also based on an interest rate that may be over or under what you will get depending on your credit history as well as the housing market at that time.

As well as with other products, you will definitely want to see the house in person. For this you may prefer to contact and find your own realtor (aka buyer's agent). Before you contact a real estate agent, it is recommended that you have been prequalified. In fact, some real estate agents may require you to provide them with a prequalification letter before they begin their work.

It is important to find a realtor that you want to work with. The process of finding a house varies greatly from individual to individual. It may take months, it may take days. You may want to see the house from top to bottom or prefer to have a family member be your guide. Whatever your preference, its best to have a realtor that can accommodate your personal preference, otherwise you may find yourself unmotivated to spend a day darting from house to house.

STEP THREE: MAKING AN OFFER

Once you have been prequalified and have walked through a house that fits within your budget, you may be ready to make an offer.

Ask your real estate agent (unless you have another method for doing this) to provide “comps” for the area. This will be a report that they can provide that shows recent sale prices of houses in the same area. This is extremely helpful in negotiating a price. There are many ways that people use this comp report. For example, you may want to figure the other homes' sales prices' cost per square foot (take square living space of house divided by the total sale price of the house) and run this price against the one you are planning to buy.

When making an offer, ensure that you have a statement that allows you to perform an inspection and that if there are any findings in the inspection, you are provided with either a way out of the contract OR the ability to submit a new offer.