Buying a house is an important part of the "American Dream,". It is also a way for you to express its individuality and independence. For many people, home ownership marks an "arrival" in the same way that graduation or a first child does.

Purchasing a home is probably also the most complicated financial transaction that you will undertake during a normal lifetime. The first time you try to purchase a home, the complexity of the transaction can be frustrating because there so many unknown rules and procedures. You often learn them through "the school of hard knocks." We know a number of people who simply gave up the first time they tried to buy a house because too many unexpected things happened during the process. They ended up waiting perhaps six months or a year and then starting over again. It can be that difficult.

The goal of this article is to help you to understand the home buying process so that you can approach it from a position of understanding rather than confusion. You will learn about the different types of homes available, the financial limits that banks apply to you when you try to get a home mortgage (and which therefore control the type or size of house you can afford), the extra and often unexpected costs that you will see during the closing process, and some of the hazards to watch for as you go through the transaction. Once you have finished this article you will prepared to go forth and do battle with the banks, Realtors, lawyers, and loan officers who stand between you and the home of your dreams.

The Basics

Imagine that you would like to buy a new television. In America just about anyone can drive down to the local discount store, pick out a TV, and purchase it with a credit card in about 10 minutes. The process is easy, well understood, and accepted by everyone.

Now imagine that you want to buy a house. The process is going to take at a very minimum a month, and more typically between three and six months. There is also a fairly good probability (perhaps 25%, depending on your situation) that, once you find a home you like and wish to purchase, you will be unable to buy that particular home and will have to start over again.

A typical question for the first time buyer to ask at this point is, "What do you mean that I may not be able to buy the house that I pick out?" As you go through this article you will begin to understand that there are a number of things that can go wrong if you are not prepared (and sometimes even if you are…). There are three fundamental things that complicate the home buying process:

• Each home is a large, distinct, immovable, one-of-a-kind object with a distinct one-of-a-kind seller who happens to live in it. This fact means that human emotions and personalities play a much larger role than they do in most other common financial transactions.

• No normal person has enough cash to buy a home, so you are forced to go to a bank and ask for a loan whose size may be measured in the hundreds of thousands of dollars. No bank is going to undertake a loan of this size lightly.

• All homes rest on a piece of land, and with that land is associated a certain amount of government red tape including the deed for the property and sizable taxes on the home. The process of transferring ownership of a home is not nearly as simple as it is for other objects that we commonly purchase.

Having said all of this, you can expect that any home purchase will involve at least the following steps, provided that everything goes smoothly:

1. Make the decision to purchase a house
2. Get your financial affairs in order
3. Decide on the type of house, the location, and the price range you can afford
4. Talk to a Realtor and/or start looking at houses on the web
5. Find a house that you like
6. Make an offer on the house
7. Negotiate a price
8. Shop for and select a mortgage company
9. Apply for a mortgage
10. Wait for approval on the mortgage
11. Wait for the closing
12. Attend the closing and sign all the paperwork
13. Move in to your new home

That is the normal order. If you are smart, you will actually shop for the mortgage before you look at houses, because that solves a LOT of problems.

To take the next step and see a detailed description of each of these steps, please click here.