What to Expect When Buying a Home

Life-enhancing benefits of homeownership often include building equity, deducting a percentage of your mortgage interest and property tax on your annual income tax return and potentially living in the house of your dreams. Of course, owning a home also means additional expenses. Plan on allocating at least one percent of the purchase price towards upkeep every year.

When you need a mortgage, try to prepare long before you begin house hunting. Gather documents, check your credit score, make sure you're paying all of your bills on time and reduce any debts you owe. Also, before you apply for a mortgage, you will want to get prequalified so you know exactly how much home you can afford. A prequalification letter also helps you negotiate with sellers.

When you're ready to make an offer, your agent will generally ask you to sign a contract and provide an earnest money deposit. Earnest money is standard but not required and is generally at least one percent of the asking price. It's applied to the purchase when you strike a deal and returned if you don't.

Once you come to an agreement on price, hire a home inspector and negotiate repair items. If and when you reach a deal with the seller, the home is officially under contract. At this stage, your Lender will advise you on the remaining items needed to close which include attaining homeowners insurance - and provide you with a good faith estimate of closing costs. It could take 30 to 60 days for final approval.