Before you approach a bank, make sure you understand your own budget. Determine how much you want to spend. If you’re cautious, budget a little extra just in case unexpected expenses crop up.

• Check Housing Costs – If you have an idea for what you want in a house, you can check what the prices of houses on the market costs. Knowing the current market value of houses that meet your requirements will set your expectations on what you can afford now or goals for what you want to build towards.
• Save Up – Most lenders will want you to put a downpayment on the home in order to close the purchase.  In addition, there will be other costs that you will be responsible for throughout the process and at closing itself. This includes inspections, taxes, insurance, etc.
• Budget Wisely – The day your house closes, you’ll find yourself a little poorer. But the money isn’t done flying out the door. If you’re up-sizing, you may need to buy furniture to fill your beautiful new home. If your new home needs some work, that expense could hit your wallet. Make sure that you put aside money for all the things you’ll need after you move in.
• Qualify High. Spend Low. – If you have a good credit score, good income, healthy savings, etc., it’s possible a lender will qualify you to borrow more than you expect or want to spend. Don’t feel compelled to spend the maximum of what you can borrow. In fact, qualifying for more than you plan to spend can signal to sellers that you are less likely to be denied a loan. In addition, a lender’s calculation of what you can afford doesn’t take into account the most important factor – your lifestyle.  Lenders don’t know how you like to live and how you like to spend your money. You might be able afford buying a more expensive house but that might mean cutting out your annual vacation or cutting back on how often you eat out.

There are things you can do to put yourself in a good position to qualify for a loan. A pre-approval can practically be a requirement, particularly in a seller’s market. If you don’t have the best credit, there are ways to improve your credit.

• Save – Make sure you have enough money to close on a house. Assume that you will put down 20% of the price of the house as a downpayment.  Your lender may not require it, but if you can put 20% down, you’ll be in better shape to get approved.
• Review Your Credit Report / Score – You can get a free credit report to know where you stand and how you look to a lender. A good score is typically anything over 700. Lenders look at a variety of things, and your credit score speaks to how much debt you have and how good you are at paying them off.
• Fix Credit Errors – In the unlikely (but very possible) event you’ve been a victim of identity theft or credit theft, you will want to make sure to get those accounts shut down and any damage done to your credit corrected.
• Pay Bills On-time – One thing that can hurt your credit is late payments on bills.  Make sure you pay your bills on time every month.
• Pay off Debt – If you’re in a position to pay off your debts (credit card balances, student loans, car payments, etc.), it will improve your “income to debt ratio”. That will show lenders that if they loan you money, you’re more likely to pay your mortgage since you don’t have debt to other institutions.
• Keep Your Job – Hold off on changing jobs until after you’ve closed. Lenders factor your employment history — how long you’ve worked for your current employer — as an indication of the stability of your income.  It’s important that your income is sufficient to pay back your mortgage, your other debts, and your living expenses. Lenders want assurance that your income isn’t temporary or seasonal since it’s likely your mortgage will be a 15- or even 30-year term. Lenders may ask for 2-3 years worth of W2 statements as a way to determine income stability.

There are lots of good reasons to pass on a house that doesn’t live up to your dream home (and we’ll get into those).  However, there are some things that  shouldn’t turn you off on an otherwise perfect house.

Don’t let the little things keep you from turning a great home into your dream home! The features below are things that you can easily change on your own:

• Interior and Exterior Wall Colors – Painting the outside or inside of a house is not expensive. In fact, you may find it easy enough to do on your own.  For just a few hundred dollars, you can easily change the wall colors to suit your own design sense.
• Hardware – Cabinet and door knobs are also a very easy and cheap thing to change.
• Appliances – Older homes may have dated appliances. As long as they are a standard size, it’s very easy to buy upgraded appliances and have them installed.
• Carpet/Flooring – Flooring is something else relatively easy to change.  The cost can range quite a bit based on the materials you choose, but it’s something professionals can complete in no time. As long as the floor is in good shape – no water damage, relatively level, etc. replacing the floors can be straightforward.

If you’re handy, there’s probably a longer list of imperfections you may be willing to overlook.

There are some big ticket items that should be examined closely if you’re buying a home to live in and you’re not looking for a remodeling project.

• Roof – Ask when the roof was installed and learn how to assess quality roofing materials. Identifying whether a new roof is on the horizon should be a big consideration in your decision to purchase. Replacing a roof can be expensive. In addition, a roof that has been patched here and there could mean other damage from a leaky roof might exist.
• Mold & Water Damage – Wherever there’s water (e.g. sinks, tubs, washer/dryer), you should check for signs of leaks, mold or water damage. Not only can mold pose a health risk, it can be expensive to eradicate some types of mold to proper health standards. In addition to repair the damaged area, there’s likely the cost to repair the leaky plumbing.
• Insulation – Make sure your inspector looks at the home’s insulation, windows, etc. A well-insulated house will not only make your home comfortable to live in but can save you money in heating & cooling. Replacing windows to well-sealed, energy efficient models can cost quite a lot.
• Floorplan – Put simply, does the house make sense? Does it have enough bedrooms for all your family members? Are there enough bathrooms to minimize waiting and inconvenience? Less important but also something for consideration is whether the layout of the house makes sense.  For example, if the kitchen is far from the entrance, hauling in groceries every week could be a regular inconvenience. Small bedrooms might be fine for your toddler now but will it be just as suitable for a teenager? Changes to a floorplan are expensive, may require permitting by the city, and remodeling / construction can be disruptive to your life. Unless, you’re up for that, find a house that has a floorplan the fits your life.

Determine the things you absolutely must have and things you can live without. While you’re making this list, consider things that can be changed and things that can’t. For example, you can’t change the location of a house. If your daily commute is an extra 30 minutes, is that a compromise you’re willing to make? Is the house near the people and places you often visit? Do you really need an guest room? How often do you actually host guests?

Take into consideration where you’ll be 3 to 5 years from now.  There’s no guarantee of where life will take you, but thinking ahead and buying for your needs down the road (e.g. expanding your family) will future-proof your house. You can avoid having to move and if you’re lucky, you could buy more house for your money now than you’d be able to afford in the future if the housing prices increase.

If you are serious about buying a particular home, putting together a “strong offer” means conveying that seriousness to the seller. Your offer should wipe away any concern a seller has about you walking away from an offer.

• Offer Price – Make sure your offer price is reasonable. It doesn’t have to match or be more than the list price. But be careful not to offer an insultingly low price. Escalation clauses can help beef up your offer in the event there’s competing interest in the house.
• Pre-Qualify – If you can’t buy the house outright in cash (and most of us can’t), getting a pre-approval letter from a lender to show you are pre-qualified for a loan will assure sellers that your financing is secure.
• Earnest Money – Use earnest money to “sweeten” the deal.  Earnest money is money you release to an escrow agent (a neutral party) to hold while the transaction is in the mutual acceptance. It shows you are making the offer in good faith and intent to buy. The amount of the earnest money signals to sellers how serious you are about buying. Since earnest money is part of what you ultimately owe for the house, it’s not an extra cost. However, because you forfeit earnest money to the seller if you breach the sales contract, a healthy earnest amount gives sellers peace of mind that you won’t arbitrarily walk from a deal.
• Waive Contingencies – Contingencies are contractually valid reasons to walk away from an offer (and in most cases get your earnest money back in full). Basically, these are your “outs”.  The more contingencies you waive, the better your offer looks to a seller since there are fewer risks the deal will go sideways. Be careful and understand fully what you are waiving.  This is where having an agent to give you sound advice can be critical.

A home inspection can take about 3-4 hours (depending on the size of the house). The cost of a home inspection (a few hundred bucks) could save you from buying a money pit. It does have its limits on what it can uncover. Make sure you are at the home inspection. Follow the inspector around so you know what they are seeing first hand.

• Know what an Inspector will Cover – Not all inspectors check for all things nor are they all as detail-oriented or thorough. Make sure you get recommendations for licensed, highly-qualified inspectors who will look for the things you are most concerned about.
• Specialists – There are some things beyond the scope and expertise of a home inspector. If there’s any doubt or concern, it’s worth bringing in a specialist to examine the house before you buy it. For example mold issues might be something a specialist is better equipped to assess. Bear in mind there’s a limit to what any inspector can uncover. They can only examine what they have access to and see. They can’t examine electrical wiring or plumbing in walls or lift up carpeting or flooring.
• Ask Questions – Ask your inspector about anything you don’t understand. You should leave the inspection having some idea for the scope and magnitude of the issues discovered. Your inspector should be able to tell you whether an issue is easy/cheap to fix or whether signs hint towards a larger, more expensive issue.

After an offer has been accepted, you may still have a chance to negotiate. The most common tool you’ll use to negotiate with is the inspection report. Your home inspector might find issues that have real dollar value implications. You can use these issues to open negotiations. Sellers can be asked to remedy the issues before the house closes or you may ask for a reduction in the price.

It’s hard to walk away when you’re in love, and that’s true in real estate too. Don’t get caught up in a bidding war. You don’t want to end up paying more than you can afford or more than you want to spend.  There are other houses on the market and you may even find something better that’s more reasonably priced. Your agent can offer you impartial perspective that might help you make a grounded decision. This outside voice can be helpful to help you get what you want for the price you’re willing to pay.

Your lender will require basic home owners insurance.  This protects you from large-scale damages to your house. However, a home warranty plan can help cover things like appliances in your new home. Home warranty plans cost a few hundred dollars a year. If your dishwasher stops working, rather than replace it or tinker with it yourself, you can pay a flat fee (typically around $75) to have a repair person sent out to your house by your home warranty company.  If new parts or repairs are necessary, you don’t pay for anything more beyond the initial flat fee.