How do I get ready to buy a home?

Do you think you are ready to buy a home? Before you take the plunge, there are steps you can take to simplify the task.

First carefully consider whether home ownership is for you. It's expensive and time-consuming to own rather than rent. You can't call the landlord if a sink clogs or the roof leaks. However, home ownership has many benefits—tax relief, equity build-up, control over where you live and pride of ownership—are well worth it, as long as you're realistic about what's involved.

So, you're convinced you're tired of renting, the next step is to determine what you can afford to pay. To qualify for a mortgage, a lender will check your credit and review your finances and employment record. If you're self-employed you will have to provide copies of tax returns for the last two years.

Talk with a loan agent or mortgage broker to get a preliminary opinion of what you can afford. Be sure you know how much cash you have available for a down payment and closing costs and itemize your debts—car loans, student loans and charge card balances. This is called prequalification.

The next advised step is to get preapproved for the mortgage you'll need to buy a home. This involves submitting a complete loan application to a mortgage broker or lender.

Preapproved buyers know exactly how much they can borrow, and they have an easier time negotiating with sellers. If you're buying in a market with many multiple offers, you will need to be preapproved to compete.

Sometimes it is difficult to obtain homeowner's insurance, which a lender will require before funding a mortgage. Check with their current home insurer if you are a repeat buyer. First-time buyers with a renter's policy may find it easier to get homeowner's insurance. If you don't have renter's insurance, consider taking out a policy with an insurer who also provides homeowner's insurance.

The next step is to decide what and where you want to buy. Keep in mind the closer you are to the city, the higher the prices, and vice versa.

As soon as you know where you want to buy, you're ready to find a real estate agent. Ask friends who bought a home recently for recommendations. Getting along with your agent is an essential ingredient to a good working relationship, as are trust and respect.

How will you know a good deal when you see it? The key to understanding local pricing is to look at a lot of property. Find out what the listings you liked sold for and keep a record of this information. Then, when you see a home you want to buy, you'll know what to offer.