How To Buy A House, In 7 Steps 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.
Here's what to remember:
- Find a good buyer's agent.
- Make a list of what you need in a house and another of what you want.
- Get preapproved for a mortgage before you start seriously house-hunting.
- 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.
- Make an offer for what the house is actually worth.
- Remember: There will always be another house.
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How To Buy A House, In 7 Steps

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How To Buy A House, In 7 Steps

How To Buy A House, In 7 Steps

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CHRIS ARNOLD, HOST:

When you decide to buy a home, you're chasing a specific feeling. Like, what you want is that moment when you first see the house. And it's, like, wow, you know, this is the place. Yes, it's almost like meeting somebody that you love.

(SOUNDBITE OF MUSIC)

ILYCE GLINK: After 124 houses, we look at this house that was at the end of the street. And it just had this little kind of farmhouse look. It was up on a little bit of a knoll. It had a deep backyard with these 100-year-old trees. And we kind of sighed and looked to each other and said, now, that - that is what we call a house.

(SOUNDBITE OF MUSIC)

ARNOLD: But actually finding and buying that place and pulling this off, it can be a little less dreamy.

KATHRYN BANKO: Finally, our realtor just says, what the hell is this? (Laughter).

JODI GREENBLATT: Turns out that I had hundreds - hundreds of mice living in the walls.

GLINK: Ew.

ARNOLD: OK. Yeah, it's pretty bad. It was pretty bad (laughter).

GLINK: (Laughter).

(SOUNDBITE OF MUSIC)

ARNOLD: This is your NPR LIFE KIT for home ownership. In this episode, how to buy a house or a condo, we're going to talk about the step-by-step approaches to doing this the right way - how to deal with buyer's agents, what to look for in the house that's going to make you the most happy, how to put in an offer. It can be a windy, perilous road, this home-buying journey. But we're going to be your guide to get you past the pushy realtors and the not-so-meticulous home inspectors.

GLINK: Don't let the fear that you're going to make a mistake keep you from doing anything and moving forward.

ARNOLD: We're going to learn how right after this.

(SOUNDBITE OF MUSIC)

ARNOLD: I remember my parents when they bought the house that I grew up in. They had a real estate agent - you know, one of those people with their face on a for-sale sign. And they had all these stories about how great she was and how she helped them find this house that they loved. I mean, it was almost a little weird. It was like years later, they're still talking about this. This was 1974 they bought this house. And I still remember her name, Tilly Onarado (ph), just because they talked about her so much.

And it used to be that that was the only way to buy a house, right? You found an agent. You walked around. You kind of had to do it that way. But now...

GLINK: I often get the question, should I even use an agent? I can just buy a home straight through Zillow or straight through Opendoor. Why even bother with an agent?

ARNOLD: That's Ilyce Glink. She's a personal finance writer who's written this very popular home-buying book called "100 Questions Every First-Time Homebuyer Should Ask." We're not going to talk about all of those questions. But a very important question is do you want to work with an agent?

GLINK: You know, maybe this is because my mom was a very, very successful agent for more than 35 years in Chicago. I've kind of seen the downside of what happens when you don't use an agent and things go sour. So I'm more in favor of using an agent.

ARNOLD: Is it kind of like, I mean, you wouldn't climb Mt. Everest or, like, paddle the Amazon in a canoe without, like, a guide who knew what they were doing, right? Doesn't it just seem like a really good idea to have somebody along with you who can be, like, your trusted guide?

GLINK: Yes. That's the short answer, yes.

ARNOLD: Ilyce says an agent is a good idea. But there are different kinds of agents. And you want what's called a buyer's agent. So there's two basic kinds of realtors or agents. And the seller's agent is on the side of the person selling the house. That makes sense, right? They represent their interest. So if you wander in off the street because you saw a for-sale sign and you're, like, so how much is this house going for? That realtor that you talk to at the open house is a seller's agent. And they want to sell you that house for as much money as possible.

But a buyer's agent is different. A buyer's agent you find on your own first, and they take you around to see the houses. And they are on your side.

GLINK: And 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.

ARNOLD: So they might say, you know what? This house is overpriced. I mean, they're asking way too much. Or, this has been on the market for eight months, so if you really like it, I bet if you put in kind of a lowball offer, you might get a deal on this place.

So this is our first big takeaway. Call it tip No. 1. You want to find a good buyer's agent because they're going to be your trusty guide through this treacherous home-buying wilderness. At least, that's the theory.

BANKO: She wasn't giving us any really good advice.

ARNOLD: That's Kathryn Banko (ph). She and her fiance moved to North Carolina a couple years ago because they were looking for a place where they could actually afford to buy a place and settle down.

BANKO: So we're actually from Ithaca, N.Y., which is a pretty expensive place to live. And we heard about Asheville and moved down here to test it out, rented an apartment. And we loved it, so we decided to stay.

ARNOLD: And they had a pretty clear idea what they wanted - something outside of town, an older place they could fix up, maybe with some land around it. But the first buyer's agent they used had them sign a 30-day contract saying they wouldn't work with anybody else and then wasn't finding them any houses like they said they wanted.

BANKO: So with her, it was kind of like if you wanted a house, you needed to be serious and start making offers the second you see it. And we just felt really pressured into buying something just because we kind of liked it. And we actually did put in an offer on a house - a brand-new build with zero yard and zero land - with her. We didn't end up getting it. And we were both kind of relieved when we didn't get it (laughter).

GLINK: Pressuring someone? I would have immediately taken that contract, ripped it up and said, we're not doing anything for the next 30 days. So like it or lump it, we're going home. Thank you very much.

ARNOLD: (Laughter).

GLINK: And you take back control of that situation.

ARNOLD: So Ilyce says don't just jump at the first buyer's agent you find and sign an agreement to work with them.

GLINK: Take it a step back, right? What Kathryn and her husband should have done is interview a number of real estate agents that are in the neighborhood and driven around and gone to some open houses and met some different agents and had an experience of what an agent was like. And you really are interviewing for what I would call a short-term marriage. It should be a person who's been in the industry a long time, who listens to you, who engages with you, meets you at your level, is showing you places that show that they're listening to you.

ARNOLD: So Ilyce says shop around. And sometimes even a good buyer's agent might insist on you signing an agreement. It's kind of looking out for their own interests. They spend a lot of time with you. They want to get a commission, you know? But Ilyce says, look, sign the shortest agreement that you can, not more than 30 days. So if it's not working out, you don't have to wait too long to get out of it.

Now, when you do find that great agent, and even if you really like them and trust them, Ilyce has one more final tip about agents, which is this - you don't tell any of them - buyer's agents, seller's agents - you just don't tell them the maximum amount that you're willing to pay. It's always a good idea to keep that number private so realtors aren't just showing you houses that are right up against the limit of what you can afford.

(SOUNDBITE OF MUSIC)

ARNOLD: OK. The next thing to think about here is if you're going to spend 100,000, $400,000, whatever it is buying a place, this is probably the biggest purchase of your life so far. So you want to know what you're looking for. And this our next big takeaway, tip No. 2 - you need to make a list of what you need in this house and what you just want in this house.

GLINK: And then what you need to do is you need to prioritize the list. And if you're buying with somebody, I suggest that you each write your own lists first. My husband really wanted to be within a half a mile of a train station to get downtown, which is where his job was at the time. And I really wanted a fireplace.

ARNOLD: All right. So how do you really know though how to prioritize things, right? I mean, will the patio or the nice stove or being half a mile from the train station - which of these things is going to make you more happy in the long run? That seems like a pretty crucial question, right? So to figure that out, we called up an expert on happiness. Actually, she's an expert on happiness and money.

ELIZABETH DUNN: My name is Elizabeth Dunn. And I'm a professor of psychology at the University of British Columbia. I focus a lot on how we can get the biggest emotional bang for our buck when it comes to spending.

ARNOLD: And when it comes to buying a house, Elizabeth says you got to understand this thing called - wait for it - hedonic adaptation. You know, like hedonism, pleasure seeking.

DUNN: Hedonic adaptation is kind of just the sad reality of the human experience, that great, cool things happen to us in life. We'll kind of get used to them. And so, you know, if you buy, like, a big, beautiful new home, at first it will feel super spacious and luxurious and amazing. But really quickly, you're likely to adapt to the sort of stable, unchanging features that it offers.

ARNOLD: Elizabeth said stable, unchanging features. So the stuff that just sits there and doesn't change, like granite countertops or hardwood floors, you kind of stop noticing and appreciating that stuff. The novelty wears off. But things that change, like, say, a nice view of the outdoors or your backyard out the window that changes from season to season and you like looking out there, she says you're probably going to keep enjoying that.

And she says what matters a lot are the things that affect the way that we spend our time. So are the rooms big enough for friends and family to hang out together, whether it's the living room or the kitchen? And a really big one - she says this one's huge.

DUNN: One pretty clear conclusion is that if you want to be unhappy, you should arrange to have a really long commute to work every day because that seems to be a pretty robust predictor of unhappiness. So for example, going from having no commute to having a one-hour commute to work is - has an equivalent negative effect on happiness as becoming unemployed.

ARNOLD: Unemployed. I mean, this is a huge mistake that people make - moving too far out away from your job and your friends just to get that bigger house. And so to bring it back to the list, the list can be your compass. So when you've looked at 20 places, and your head is swimming, and you're kind of dazzled - you know, is the nice stove in this one what I want, and is the back patio in that one - you can go back to your list and just keep it rational and say, OK, right, this is what we are really looking for in this house.

(SOUNDBITE OF MUSIC)

ARNOLD: OK, so how much are we going to pay for this house? And to buy it, most of us are going to need a mortgage. We have a whole episode on mortgages with a lot of really, really high-value information, so check that out. But this is a quick takeaway that's really important. Tip No. 3 - before you even start seriously looking at houses, you need what's called a mortgage preapproval from a lender.

GLINK: You can't know how much you're going to be able to afford until you get preapproved or prequalified for your property. And I always recommend you get preapproved rather than prequalified.

ARNOLD: Ilyce says if you get prequalified, it's just more flimsy. You're not getting a real commitment from the lender.

GLINK: Preapproval means that you know that the lender is going to be there when you're ready to buy.

ARNOLD: And so that preapproval letter becomes your ticket to be taken seriously when you show up in an open house with your buyer's agents, and you're preapproved. You're ready to go because when you make an offer, it's clear that the bank is going to loan you the money. But this is our next tip. Tip No. 4...

MICHELLE SINGLETARY: Don't listen to just what the banks say you can afford.

ARNOLD: That's Michelle Singletary. She's a personal finance author and a columnist with the Washington Post. And she says you probably do not want to borrow the maximum amount that the bank is willing to loan you.

SINGLETARY: So when my husband and I were looking for our first home, the bank told us we could afford this amount of house. And I looked at that man like he was crazy. I said, are you...

ARNOLD: (Laughter).

SINGLETARY: Are you insane, man? He's like, oh, no. You guys got a good income. You can afford this much. We ran the numbers. No, because the numbers that they run don't include the everyday expenses that you know that you're going to keep going when you get that house - for example, child care.

ARNOLD: Child care and college savings if you have kids. Then there's your own retirement savings. And everybody's situation is a little different.

SINGLETARY: In our case, I was helping my disabled brother. So my husband I would give him a stipend every month. So their numbers that they run, it didn't include that stipend. I was, you know, helping my grandmother. It didn't include that. And so we added all our own numbers back and came with our own number of the house that we could afford.

ARNOLD: And then there's the maintenance you're going to have to do on this house. Furnaces break. Roofs leak. All kinds of stuff happens when you own a house. Ilyce says it's a good idea to be auto-depositing hundreds of dollars every month into an account so you can pay for those repairs and upkeep.

GLINK: 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. But new houses aren't problem-free either. And so it's a good rule of thumb that you'll expect to spend between five and $8,000 a year taking care of your property.

(SOUNDBITE OF MUSIC)

ARNOLD: A good basic yardstick that a lot of experts recommend is this. Your monthly mortgage payment on your house should not be more than a third of your take-home pay. And that includes your taxes and insurance wrapped up into that payment.

SINGLETARY: Now, in some areas, that's insanely low. Like the Washington, D.C., area, lots of people's mortgage or rent is 40, almost 50, in some cases, 60 percent of their take-home pay. That's not sustainable. You know, you can't - there's no room in that budget for anything to go wrong with the house or anything else.

ARNOLD: OK, so remember Kathryn with the lame-o (ph) pushy buyer's agent? So after that mistake, she got a better buyer's agent. And she and her fiance figured out what they wanted to spend. And then one day, her agent called her about this house.

BANKO: Oh, it was great. I remember it rolling up through the countryside and the Blue Ridge Mountains just kind of in the background, all around you. And then when I walked - we walked into the house, and the two owners were there just telling us about all the memories that they had in it. And my partner was walking around the yards. And there's a little creek that separates the two residential yards. And I just knew that he was falling in love with it, that this was going to be something we definitely tried to get.

ARNOLD: And when you find that perfect house, and it meets all your needs on your list and some of your wants...

GLINK: It's time to sit down and say, well, what are you really willing to pay for this house?

ARNOLD: And this is our next takeaway. Tip No. 5 - make an offer for what the house is actually worth.

(SOUNDBITE OF MUSIC)

ARNOLD: What's the best strategy for making an offer on a home that you really like? I mean, like, do you always go a little under? Do you always - you know, how do you figure out, like, all right, how am I going to write this offer in a way that's going to get me this house?

GLINK: Well, this is where your agent comes into play. But I would say, in general, how long has the property been on the market? That's No. 1, right? If it's been on the market two hours, are there other people in - also looking at the house? Your agent would be able to tell you that. You're looking at an at-list price or above-list price offer.

ARNOLD: Meaning you want to make a strong offer, probably over asking price. On the other hand...

GLINK: Has the house been on the market for two years and 14 days? Well, (laughter) you're not paying list price for that property.

ARNOLD: And you probably want to bid below what they're asking. Ilyce says a good buyer's agent is really helpful here to put together all of these factors and come up with a good price to offer. And of course, you don't want to bid too high. But she says you also don't want to bid too low.

GLINK: 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. They're not even going to respond.

ARNOLD: And you can sometimes piss off the seller. I remember my mom...

GLINK: Sure.

ARNOLD: ...When we were selling our house, she's like, this person offered - are you kidding me?

GLINK: (Laughter).

ARNOLD: (Laughter) It's just, like, you don't want to start there. Yeah.

GLINK: Right. No, you don't really want to because at the end of the day, it is possible for everybody to shake hands and leave happy.

(SOUNDBITE OF MUSIC)

ARNOLD: Ilyce says it can be important to realize that buying a house is an emotional process for you, the buyer, of course. But it probably is too for the people selling the house. Ilyce says that when she and her husband found a house that they really loved...

GLINK: We wrote a letter to the seller and said, listen, we're going to be good caretakers of this house. We're not going to tear it down. We're going to add onto it. We're going to love it. And you know what? That letter was meaningful to our sellers, who were - had lived in this house happily for the 25 years prior to us. And they wanted somebody who were going to be good stewards of it.

ARNOLD: I mean, if somebody else is offering 30 grand more than you, a letter is probably not going to matter.

GLINK: It's not going to work for every situation. But when we went in with a lower offer than we knew they wanted and we included a letter, it was enough to get us over the finish line.

ARNOLD: But Ilyce says, remember, if the seller comes back and says, hey, yeah, your letter's great and all, but we want $50,000 more than you're offering, or a bidding war breaks out on the house that you really want to buy, you don't want to fall in love with the house so much that you pay way more than it's worth or just more than you can really afford.

GLINK: You know, one of the most important things to remember when you're buying a house is that there's always another house. It seems like there isn't another house because you've seen all the houses on the market. 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.

(SOUNDBITE OF MUSIC)

ARNOLD: Call that tip No. 6. Remember there is more than one right house for you. There is always another house. OK, so when you find that house that you love, you want to buy it, right? But you don't want any unfortunate surprises. We heard from a listener, Jodi Greenblatt (ph) in Newport, R.I. And after renting for years and years, at 65-years-old, she bought a cute little fixer-upper with a beautiful old garden.

GREENBLATT: So I thought, OK, this is perfect for me. It's like a dream.

ARNOLD: But it turned out right after she bought the house that it was full of little surprises. And in this case, the surprises had whiskers and tails and sharp teeth.

GREENBLATT: The first indication that I had a really serious problem was that a rat had chewed through the pipe under the kitchen sink, and that water was flooding out. Still didn't really understand what the problem was. Then, the next day, we saw that a rat had eaten some food on the kitchen table. And that definitely got my attention. So it turns out that I had hundreds - hundreds of mice living in the walls and also - and the attic, and the rats were coming in from downstairs. So I have a cat. The cat was afraid to be (laughter) not with me or in the kitchen.

ARNOLD: The cat was afraid. It took months. They did a massive pest abatement. It cost thousands of dollars.

GREENBLATT: Things are a lot better now. The cat is calm. We don't see anything.

SINGLETARY: OK, so, like, I would have sold (laughter).

ARNOLD: (Laughter) You would have run screaming with the cat right behind you.

SINGLETARY: Oh, lord, lord, lord. I tell you, I have this thing about bugs and rodents.

ARNOLD: And this is our last tip. No. 6 - you need a good home inspection done before you buy the house. And Michelle says you want to make sure that the home inspector does a really good job looking around and doesn't miss, like, thousands of rodent droppings that were probably all over the basement.

SINGLETARY: Even when we built a new house, I kind of followed the home inspector around. (Laughter) I was like, what you doing? What you looking - did you look in that cabinet?

ARNOLD: No, I do the same - and you learn a lot...

SINGLETARY: You learn a lot.

ARNOLD: I mean, like, they're like, oh, and then - OK, so the wiring's good. Oh, yeah. What about this wiring over here?

SINGLETARY: Yes. Yes.

ARNOLD: You can just ask questions, engage, make sure they're really paying attention, you know?

SINGLETARY: And, you know, walk through yourself. Look in crevices. Open doors. But I - you know, but I give her credit that she put in the time and the money to still make this house livable for herself and her cat. (Laughter) I thought it was funny.

ARNOLD: (Laughter).

(SOUNDBITE OF MUSIC)

ARNOLD: Ilyce has some tips on finding a good home inspector to hire.

GLINK: The first thing you do is you ask your real estate agent to give you three or four names. And typically, what - the better real estate companies will just have a whole booklet of people and names that they have vetted over many, many years that they recommend. And you start calling them.

And you ask them a bunch of questions. What's included in your inspection? I plan to be there taking notes. Do you give me a written inspection report? Do you give me a video inspection report? Can you give me the name of the last three people you worked for so that I can call them and do my homework?

ARNOLD: Actually, Ilyce says you want a whole team of people around you to protect you in this home stretch - no pun intended - when you're closing on a house. You got your buyer's agent and your home inspector. But she says you also want to hire a lawyer if you can to help with any crazy things that pop up at the last minute - and sometimes they do - and even just to look over the mortgage documents.

GLINK: And people say to me, well, that's a lot of money to spend on this. And I say, yeah, but think about how much you're spending on this house, right? You're spending $300,000. It's not inappropriate to spend four or $500 on the home inspector and $400 on your attorney because this is what goes into making a purchase feel like as safe and solid an investment in your future as you can.

ARNOLD: And the good news is that once you're done with all that, you can celebrate. I remember when we bought our house, I had all my friends over. And we had some beers on the porch, sitting on cardboard boxes from moving in. And I just remember that the sun was on my face and thinking, like, this is great. Like, this is one of the best things that ever happened. And sure, the paint was peeling off most of the house. There was a ton of stuff to fix. But we loved it. And it's close to where I work, so no crazy commute. And I'm still happy.

(SOUNDBITE OF MUSIC)

ARNOLD: All right, we've covered a lot of ground here. So to help us remember the most important stuff for your home-buying journey, here come the takeaways.

(SOUNDBITE OF MUSIC)

ARNOLD: Tip No. 1 - you wouldn't paddle up the Amazon River without someone who knew what they were doing, right? That'd be crazy. So...

GLINK: Find a great buyer's agent because that's the person who's going to be your guide on the home-buying journey.

ARNOLD: Takeaway No. 2 - before you start looking at houses, make a list of what you absolutely need in the house you're looking for and the stuff that you want but could probably live without. And then figure out which things you're going to prioritize.

DUNN: If you can find a home that will change the way you spend your time in a positive direction on a typical Tuesday, that might be a pretty good choice.

ARNOLD: And remember, a long commute can crush your soul. So avoid that. Tip No. 3 - get preapproved for a mortgage.

GLINK: Get preapproved before you actually start to look for a house because if you don't know what you can afford, all that's going to happen is you're going to fall in love with a house you could never afford to buy.

ARNOLD: But tip No. 4 - don't just rely on the bank to tell you how much you can borrow. You need to figure out for yourself what you can afford to spend.

SINGLETARY: The bank told us we could afford this amount of house. And I looked at that man like he was crazy. I said, are you...

ARNOLD: (Laughter).

SINGLETARY: Are you insane, man?

ARNOLD: OK, tip No. 5 - when you find that house that you just absolutely love...

GLINK: Make an offer that thinks about what you really want to spend, what the house is really worth, what's important to the seller.

ARNOLD: But takeaway six - if a bidding war breaks out, or you just can't get the house at a price that you can really afford...

GLINK: Just remember this. There's more than one right house for you.

ARNOLD: Yeah, there is always another house. And finally, tip No. 7 - build a good team. Get good people around you to help you get to the finish line.

GLINK: You need a great agent. You need a lawyer and a home inspector who really knows his or her stuff. Put that team together, and you are definitely going to find the home of your dreams.

(SOUNDBITE OF MUSIC)

ARNOLD: For more LIFE KIT, check out our next episode about mortgages. We're going to cover the basics but also tell you about ways you can save a lot of money on payments and interest and even how you might be able to get free money for a down payment in some areas.

If you like what you hear, make sure to check out our other LIFE KIT guides at npr.org/lifekit. And while you're there, subscribe to our newsletter so you don't miss anything. We've got more guides coming out every month on all kinds of topics. And here, as always, is a completely random tip, this time from Tom Dreisbach of NPR's Embedded podcast.

TOM DREISBACH, BYLINE: If you ever have a bunch of garlic that you want to peel at once, the easiest way to get all those shells off the garlic is to actually put them in either a mason jar or two metal bowls or anything that sort of, like, has a hard surface. And you shake them around, you know, maybe five to 10 seconds pretty hard. Most of the shells will come right off.

ARNOLD: Or I just take the flat edge of a chef's knife and slam it with my fist, and the skin pops right off. But either way, if you've got a good tip, you want to suggest a topic, email us at lifekit@npr.org. I'm Chris Arnold. Thanks for listening.

(SOUNDBITE OF MUSIC)

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