3. Savings for down-the-road expenses. Of course, you also have to take into account maintenance and other potential costs that may come up as a homeowner. If you live in a particularly competitive or pricey market, such as San Francisco or the District of Columbia, it’s reasonable to expect your monthly costs to be higher than 28 percent at the start.
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Before you start working with a Realtor and seriously searching for you home, you should find a mortgage lender and get pre-approved for a mortgage. It shows your Realtor and the sellers that you’re qualified to purchase a home, and it ensures you know the price range you should be looking for. In a competitive market, many sellers won’t consider an offer without a letter from a lender ensuring that the potential buyer can qualify for the mortgage.
Home inspection, a physical examination of the condition of a real estate property, is a necessary step to not only know about any problems with the property, but also get a look and feel of the surroundings. If you find a serious problem with the home during the inspection, you'll have an opportunity to back out of the deal or ask the seller to fix it or pay for you to have it fixed (as long as your purchase offer included a home-inspection contingency).

The good news? There is a tried-and-true formula, involving multiple good financial steps and habits, that can lead you directly to the purchase of your dream home, and on a fast schedule, too. The downside is simple and direct -- if you don't follow the home buying formula, your chances of landing a new home are significantly reduced, if not completely eliminated.
How to avoid this mistake: If making a minimal down payment is an accomplishment, the choice is simple: Don’t buy discount points. If you have enough cash on hand, the value of buying points depends on whether you plan to live in the home longer than the “break-even period.” That’s the time it takes for the upfront cost to be exceeded by the monthly savings you get from a lower interest rate.
Minneapolis-St. Paul scores high for its flourishing job market and quality of life, but the area increases its appeal with a low cost of living. The Twin Cities have a median home value of $223,995, according to Zillow, which is slightly over the national average at $211,731. But residents still only pay 25.71 percent of the blended annual household income toward housing and utilities.

As long as you have lived in your home for two of the past five years, you can exclude up to $250,000 for an individual or $500,000 for a married couple of profit from capital gains. You do not have to buy a replacement home or move up. There is no age restriction, and the "over-55" rule does not apply. You can exclude the above thresholds from taxes every 24 months, which means you could sell every two years and pocket your profit—subject to limitation—free from taxation.

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Take as much time as you need to find the right home. Then work with your real estate agent to negotiate a fair offer based on the value of comparable homes in the same neighborhood. Once you and the seller have reached agreement on a price, the house will go into escrow, which is the period of time it takes to complete all of the remaining steps in the home buying process.
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