This story is based on an episode from Life Kit's guide, How To Buy A House. Check out these episodes: "Mortgage Secrets That Will Save You Money" and "Should I Rent or Buy A House?" Subscribe to listen later on Apple Podcasts, NPR One or your favorite podcast app.
The journey to buying a house can lead you down some perilous roads, past pushy real estate agents, self-interested bankers and not-so-meticulous home inspectors. We lay out a step-by-step approach to help you avoid those pitfalls, from what to look for in a house that will truly make you happy to assembling a team to help close the deal.
1. Find a good buyer's agent.
You can search for a house on your own through sites such as Zillow or Opendoor.com, but Ilyce Glink, author of 100 Questions Every First-Time Homebuyer Should Ask, doesn't recommend it. Real estate agents come in both buyer's and seller's versions: When you buy a home, a buyer's agent will represent your interests.
"They owe you a fiduciary duty, meaning that they have a responsibility to help you do things in the very best way that they can for your benefit," Glink says.
Be picky about the agent, Glink says, and make sure they're someone you are comfortable with and listens carefully to your needs.
"You really are interviewing for what I would call a short-term marriage," she says.
2. Make a list of what you need in a new home, and another of what you want.
Glink recommends that people buying as a couple each make their own list. When she and her husband were buying a house, she wanted a fireplace, while her husband wanted to be a half-hour or less from the train station.
And while a granite countertop and hardwood floor might thrill you for a time, what makes you happy over the long run might be different, says Elizabeth Dunn, professor of psychology at the University of British Columbia who studies happiness and spending.
Dunn says those unchanging features fall victim to hedonic adaptation — our tendency to return to a set level of happiness once a novelty wears off. For lasting happiness, look for things that change — a view from a window or a backyard that varies with the seasons.
Even more important for happiness is how we spend our time, Dunn says. A positive: space to hang out with family and friends. A huge negative: a long commute.
"If you want to be unhappy, you should arrange to have a really long commute to work every day," Dunn says. "Going from having no commute to having a one-hour commute to work has an equivalent negative effect on happiness as becoming unemployed."
3. Get preapproved for a mortgage before you start serious house-hunting.
Preapproval will help you understand how much house you can afford, and will also make sellers take you seriously.
It also means when you find a house you love, you can get the paperwork moving quickly. "Preapproval means that you know that the lender is going to be there when you're ready to buy," Glink says.
4. Plan on a monthly mortgage payment that is no more than a third of your take-home pay — and don't just listen to what the bank says you can afford.
A lender often doesn't account for other demands on your budget, such as childcare, or the price of home maintenance and repairs, says Michelle Singletary, a personal finance author and columnist with The Washington Post.
"If you buy a 100-year-old house, I promise you it's going to have 100-year-old problems, and those can be pretty expensive," Glink says. "New houses aren't problem free either and so it's a good rule of thumb that you'll expect to spend between $5,000 and $8,000 a year taking care of your property."
5. Make an offer for what the house is actually worth.
Your agent can help you decide what a house is worth, based on how long it's been on the market and how many people are looking at it, Glink says.
"You don't want to go in too low, because when you go in with a lowball bid, unless that house has been on the market for two years, they're going to laugh at you," she says. "They're not even going to respond."
6. Remember: There will always be another house.
Don't fall so hard for a house that you pay more than it's worth or that you can afford.
"It seems like there isn't another house because you've seen all the houses on the market," Glink says. "But all you have to do is wait a week, two weeks, a month or so, and then a whole new crop of sellers are going to put their houses on the market."
7. Get a good home inspection before you buy.
Your agent can give you a list of names that the real estate agency has already vetted, Glink says. She suggests you ask for references from recent clients and whether you can accompany the inspection to make sure no dark corners go unchecked.
Glink also suggests hiring a lawyer to look over your mortgage documents just in case something unexpected pops up as you close on the home.
"It's not inappropriate to spend $400 or $500 on the home inspector and $400 on your attorney," she says, "because this is what goes into making a purchase feel like as safe and solid an investment in your future as you can."