Buying a home is probably the largest purchase you will make. Last week, I discussed signs you should not buy a house. If you have decided to buy, though, you have a complex path ahead of you. Between picking the right agent, home, neighborhood, and mortgage, there are many opportunities for things to go awry. While by no means all-inclusive, avoiding these slip-ups will help ensure a smooth journey through the home-buying process.

1. Not doing your homework. Educate yourself as much as possible before you even begin working with an agent. Start searching online to get a sense of the areas you are interested in and familiarize yourself with their price points. There are many free real estate search engines online, such as Trulia, Roost, and Zillow.

 

 

Also consider what type of loan suits you. The standard, "safe" choice is a 30-year fixed-rate mortgage. If you know you will be in the home for the long haul, a 30-year fixed mortgage ensures stable payments for the life of your loan. Be vigilant about adjustable-rate mortgages, or ARMs. These have dominated housing crisis headlines for their extremely low "teaser" rates that can balloon after a few years, massively increasing payments. There are different types of ARMs, some of which are sneakier than others. The initial period of low interest rates varies, but is usually five or seven years. Some have a set schedule of rate increases. Even with all that has ensued since the end of 2007, many lenders are still pushing ARMs. ARMs can make sense if you're planning to move within five years and you are sure you can cover higher interest rates in a worst-case scenario (such as not being able to sell). You should not use ARMs to stretch for a bigger loan, however. If you can't afford the house without an ARM, you can't afford the house. Stay on guard and do not let your lender or agent talk you into an adjustable rate mortgage if it's not really right for you.

 

 

2. Using the seller's agent. It is the job of the seller's agent to fetch the highest possible price while making few concessions. They are directly compensated for bringing in higher prices, as they are typically paid a percentage of the selling price, usually 5%-7%. Get your own agent. Interview several before picking one. Buyers' agents usually still get paid a percentage of the purchase price (keep that in mind if they suggest you can afford a more expensive home), so they will still have an interest in you paying more, but they also have a stake in making you happy, as their future business depends on referrals.