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Understanding the process for purchasing a home is the best way to cut mistakes and make the best decision. The process takes a lot of time and much effort, but it’s worth the time and effort in the end and you stand a chance of avoiding huge financial mistakes.

The first step in understanding the process is to determine how much you can afford. The general rule of thumb is that a home costs no more than 3 to 5 times your annual income providing you intend to make a 20 percent down payment and have little debt.

After you’ve determined the amount you can realistically spend on a home, research the homes that interest you within the area you want to move. Magazines, newspapers and online sites contain real estate listings that will give you an idea of housing trends and prices.

Make notes about the specific homes you like so you can talk to your future real estate agent in an educated manner. Before you speak to an agent and begin to tour homes it’s best to get prequalified and preapproved for a mortgage.

Your real estate agent is an important partner to have when buying or selling a home. Your agent has privy to much information that isn’t online or otherwise accessible. His or her knowledge of the market and the buying and selling process will prove extremely valuable in your home search. Go to your real estate agent armed with likes and dislikes, must-haves and deal-breakers so she can help point you in the direction of the neighborhood and homes in your price range. Most people cannot afford what they really want, so think about what you might sacrifice within the home rather than the location of where you want to be. Making improvements in the home is easier than changing the neighborhood.

Begin touring homes with the help of your real estate agent, but don’t depend on her for all of the leads. Look online and drive around the neighborhood. Your dream home may be one that’s for sale by owner or has not been placed in the listings as yet.

When you find the one home you think you have to have, you’re ready to make an offer. After seeing many homes, you may tend to forget a home’s good and bad points, so it’s best to take pictures or make videos so you can review the home again when you’re ready to place an offer.

A home inspection is critical to the home buying process. After your offer has been accepted by the sellers you should hire a certified home inspector to look for structural damage or other problems that might need fixing.

Your agent will help you place a contingency on the home in lieu of the final inspection. This contingency can help you renegotiate the price on the home and withdraw your offer without paying a penalty in case the inspection uncovers significant or expensive damage.

Before you make a final decision on buying a home, assess your lifestyle. Can you see yourself living in the home for the next ten or so years and do you have emergency funds for unexpected bills and expenses.