Step 1: Are You Ready?

10 Steps to Home Ownership

Knowledge and experience are the keys to successful real estate transactions. REALTOR.com® contains an enormous amount of valuable information, and such data -- combined with the expertise, experience and training of local REALTORS® -- can be the essential keys to your success.

One of the keys to making the home-buying process easier and more understandable is planning. In doing so, you'll be able to anticipate requests from lenders, lawyers and a host of other professionals. Furthermore, planning will help you discover valuable shortcuts in the home-buying process.

Do You Know What You Want? 

Whether you are a first-time home buyer or entering the marketplace as a repeat buyer, you need to ask why you want to buy. Are you planning to move to a new community due to a lifestyle change or is buying an option and not a requirement? What would you like in terms of real estate that you do not now have? Do you have a purchasing timeframe?

Whatever your answers, the more you know about the real estate marketplace, the more likely you are to effectively define your goals. As an interesting exercise, it can be worthwhile to look at the questions above and to then discuss them in detail when meeting with local REALTORS®.

Do You Have The Money? 

Homes and financing are closely intertwined. (Financing is the difference between the purchase price and the down payment, commonly referred to as debt or the mortgage.) The good news is that over the years new and innovative loan programs have evolved which require a 5 percent down payment or less. In fact, a number of programs now allow purchasers to buy real estate with nothing down.

In addition to a down payment, purchasers also need cash for closing costs (the final costs associated with closing the loan). Several newly emerging loan programs not only allow the purchase of a home with no money down, but also underwrite closing costs.

Not everyone, however, elects to purchase with little or no money down. Less money down means higher monthly mortgage payments, so most home buyers choose to buy with some cash up front.

As to closing costs, in markets where buyers have leverage, it may be possible to negotiate an offer for a home that requires the owner to pay some or all of your settlement expenses. Speak with local REALTORS® for details.

Is Your Financial House in Order?

Those great loans with little or nothing down are not available to everyone: You need good credit. For at least one year prior to purchasing a home, you should assure that every credit card bill, rent check, car payment and other debt is paid in full and on time.

Loans versus credit cards

Personal loans let you borrow up to £25,000; the key sell being you get "structured repayments" so you know how long you're borrowing for and what it'll cost each month. Yet in general, borrowing on the cheapest credit cards substantially undercuts the cheapest loans; meaning in many circumstances they should be used first.

Are you trying to make existing credit card debts cheaper?

In most cases a loan won't be cheapest for you. Credit card balance transfer deals are designed to allow you to shift other cards' debts to them at a special cheap rate, usually much cheaper than the best loan rates.

This doesn't mean you need to keep shifting debts between short term 0% deals; some cheap deals last until ALL the debt is repaid (see Best Balance Transfers). Though do ensure you make at least similar repayments to what the loan would cost each month.

Do you want to borrow for under a year or less than £1,000?

Loans over short time periods or low amounts are almost always expensive. Instead there are a variety of techniques possible that cut the cost. Many credit cards allow new customers to spend on them at 0% for up to the first year - read 0% cards guide.

Providing you can make the purchase on a card, and will definitely pay it off before the 0% deal ends, that's the best option (read Short Term Interest Free Loans for full details).

Need to borrow for a specific purchase / a lump sum?

Here loans are difficult to beat, not because they're particularly cheap, but as it's difficult to do any other way. However if you're money savvy, there's a way to replicate the facilities of a loan using a credit card, cutting the interest rate to around 7% APR . Read Cut Price Plastic Loans.

Looking to try and cut the cost of an existing loan?

Don't automatically assume that switching to a cheaper interest rate will save you money. Many loans, especially older ones, have lock in penalties which mean even though you'll pay less interest, when you add in the fine for moving, overall you pay more.