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Buying a house? Here's a few things you should consider.

If you've decided to take the plunge and become a home owner - Congratulations! If you follow a few steps you'll feel good about your decision, and you'll be prepared for some of the work ahead.

1. Take an honest look at your finances.

You should prepare yourself by taking an honest look at your finances. While mortgage calculators are everywhere (they're right on the home search page on this site), they won't do you any real good until you've done an honest appraisal of your budget. You can use this form supplied by HUD on page 36. You'll also want to look at your savings, which may be needed for down payment, inspections, earnest money deposit and closing costs. Once you've come up with a number you're comfortable with and you've looked at your savings, you're ready for step 2.

2. Understand what a mortgage payment is.

A mortgage payment consists of 4 components, normally. These are principal, interest, taxes and insurance. In most circumstances the payment you make will include all of these, though some folks do opt to pay the taxes separate when they come due every year. If this would be a hassle for you, let the loan servicing company handle it and you'll make one payment. Most lenders set up an escrow account on your behalf to pay for insurance, taxes and possibly assessments. Principal is basically the money you borrow, the interest is calculated based on the principal amount, taxes are the annual property taxes assessed based on where the home is, and the homeowners insurance policy will cover the home and property.

3. Check your credit.

Everyone is allowed access to a free credit report from each of the three nationwide reporting agencies Experian, Equifax, and TransUnion every twelve months. You can go to AnnualCreditReport.com which is the consumer site, mandated by law to allow you to see the information being reported to the three major credit bureaus about you. You can get your score for a fee from MyFico.com for Equifax and TransUnion, and directly from Experian on their website.

Don't stop there, now is the time for you to contact your local lender or bank and let them know you're ready to begin looking for a home. Tell them you'd like them to pull your credit and help you understand how much you can afford to borrow. Your loan officer or mortgage originator can help you understand your credit report, and should be able to counsel you regarding how to fix any errors you may find. They should also be able to provide you with an understanding of the loan process and can even pre-approve you at this point.

Keep in mind while you're there, the lender works for the bank, and their job is to make money for the bank - the only person who has a fiduciary duty to protect your interests in a real estate transaction is your real estate agent or broker. Once you find a home, you can get a good faith estimate from multiple lenders and compare the closing costs, fees, interest rates and key terms of the loan to determine which is best for you. HUD has recently changed many of the forms to help you better understand the fees associated with buying a home - here's a link to those forms and a booklet to help you understand many of the fees.

4. Begin shopping for a home.

If you've been pre-approved you're now the "kid in the candy store"! Armed with your pre-approval you can now begin your home search. One way to find your new home and narrow your search is to use a website like this one. You don't have to start searching alone, in fact if you give me a call with some of your criteria, the two of us will work together to narrow your search significantly. You should be prepared to get out and drive and walk the areas you're interested in, to make certain you can see yourself living comfortably in the area. It's often fun to meet the neighbors in the community and can be an enjoyable part of your research.

5. Working with a REALTOR.

Working with a REALTOR can alleviate some of the stress involved in the real estate process. We understand the process, can answer many of your questions, and we're your number one advocate and resource each step of the way. During your consultation we'll discuss the home you're looking for, financing, down payment & earnest money deposits, making offers, inspections, repairs and we'll cover any questions I can answer to help you feel comfortable with buying a home. If you decide to work with a REALTOR or any Agent or Broker in North Carolina, you should understand who that Broker represents in the transaction. Prior to giving any personal or confidential information to any Agent - ask the Broker who he or she represents and how you can insure your information will be kept confidential.

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