Buying a house, whether it's your first or your fifth, is one of the largest, most significant financial transactions you're likely to undertake. You probably won't regret it, though. Benefits include enormous tax deductions for mortgage interest, the hedge against inflation that holding property can provide, the additional creditworthiness that owning confers, and the satisfaction of building equity rather than paying rent.
Like so many aspects of personal finance, however, finding and buying a home has been forever altered by the Internet. This transformation occurred in just a few years: when I bought a house almost four years ago, it never occurred to me that the Web would be useful in the process. Today, I wouldn't dream of searching for a house without going online. The latest statistics I've seen indicate that about one-quarter of all home buyers now use the Net as a real-estate tool, compared with just 2 percent five years ago.
Not everything has changed, though. The basic steps for joining the ranks of leaf-rakers and leaky-faucet-fixers remain the same. But the Internet delivers more choices and more power to buyers at each juncture. So if you're interested in becoming a homeowner, fire up your browser. And if you already own a home, check out some of these tools to see what its current value is (and to figure out whether it's time to think about trading up or adding on).
How Much? How Much? How Much?
The first step in home shopping is figuring out exactly what you can afford. Any self-respecting personal-finance portal, such as Quicken.com and MSN's HomeAdvisor.com, offers a home-affordability calculator. Each of these asks you the same three questions: How much money do you earn? How much debt do you owe? And how much money do you have for a down payment? Now, most of these general finance sites are designed more for selling you a home loan than for helping you understand your situation. That's why I advise starting out with a real-estate site instead. Two that provide excellent supplementary information for first-time buyers are Realtor.com and iOwn.com.
Once you know what you can afford, you need to come up with a plan. iOwn.com offers an excellent discussion of limiting factors (a tactful term for requirements such as a small down payment) and even suggests strategies for accumulating a down payment. Saving enough money for a down payment is a big financial goal, but it can be done if you plug away at it systematically. There are also more-creative strategies, such as getting help from relatives, attracting private investors, and finding a roommate. The important thing is to develop a plan and stick with it.
The Loan Arranger
Let's assume that you've scraped together a down payment by cashing in your stock options, selling your collection of ceramic cottages on eBay, guilt-tripping your parents, and tightening your belt. The next step is to shop for a loan. For this, visit Quicken.com m, HomeAdvisor.com, Realtor.com, iOwn.com, eLoan.com, Homes.com, and mortgage.com. Look for good potential lenders and get a feel for current interest rates. Homes.com, HomeAdvisor.com, and eLoan.com all offer "rate-watch" services that notify you by e-mail when rates move up or down. Once you're acquainted with the pros and cons of various types of loans, you can apply online for preapproval. When you've been prequalified for a loan amount, you can make offers on properties.
But wait a minute. Aren't we forgetting somebody? What about the real-estate agent, the man or woman in the gold blazer with the big car? Although it's more practical than ever to buy a house without using an agent, first-time home buyers in particular may want to work with an experienced agent. That way you know there's somebody at your side who has been through the process before and has a vested interest in seeing it go off without a hitch. However, some of the traditional functions of agents have been supplanted or augmented by the Web.For instance, on sites such as Realtor.com, Homes.com, and iOwn.com, buyers can browse through home listings. You can even tour a property virtually, without ever leaving your Mac. The portal with the most listings is Realtor.com but, as I mentioned, iOwn.com has the best content for people striving to educate themselves. My advice: visit them both.
The Web has also encroached on the agent's role as neighborhood advisor. Want to know what kind of public schools you can expect in a particular suburb? How many residents in one part of a city are homeowners, versus renters? The average income of your potential neighbors? Crime rates for the past year? All of these statistics are easily available from the real-estate portals.
You can even use the Web to help you find an agent. HomeGain.com will take basic information about what you're seeking, and then invite agents to submit proposals to represent you. Make sure to pick an agent who's open to having you do some of your own house-hunting on the Web. If several agents are competing for your business, ask whether they're flexible about commissions -- particularly when you're willing to do some of the work (like looking for suitable properties) yourself.
Finally, on the chance you could save some big bucks, check out sites that cater to individuals selling their own homes. "For Sale by Owner" used to mean putting an ad in the paper and sticking a sign on the front lawn. Now, through sites such as Owners.com, people can post pictures of their properties and advertise them all over the world.
The most important advice for potential home buyers: gather as much information as possible -- about the process, about the market, and about the neighborhood. If you use the Web well, you'll find yourself collecting potted plants at a housewarming before you know it.
JAMES BRADBURY is the former editor of MacUser and former online editor of Macworld .