1. Start looking early – House hunting can be downright horrible if you don’t have the right mindset. If you just decided that you want to move into a house, and your lease for your apartment is up in 2.5 weeks, then you’d better call mommy and daddy and ask if you can have your old room back. You will not find the right house in that period of time, not to mention finish all the paperwork. The loan application, approval and closing will take AT LEAST 4 weeks, and that’s only if everything goes smoother than creamy peanut butter.

2. Research, research, research – Not only are you looking for a place for your cats to meow orders, you’re looking for an investment that might change your entire life. Lots of people make money by buying and selling homes…they’re called realtors. Obviously money can be made by making the right decisions. Compare the candidate houses to others that have sold in the neighborhood. Does the resale value of the surrounding houses keep going up? Significantly? Here are a couple of good rules of thumb:

a. Evaluate the houses in the surrounding neighborhoods by price per square foot. Divide the selling price of the house by the “heated square footage” of the house. That’s a good way to normalize the large houses selling for a lot more than the small ones; don’t just look at the selling price. Be sure to account for any major additions on the house: pool, recent re-model; additional bedrooms or bathrooms.

b. Another good rule of thumb is to always be the smallest house in the neighborhood. The increased value of the surrounding houses will only increase the value of your house.

3. HOA – Home Owners Association – Learn the three words, well, as they act like a watchdog for the value of your house. A neighborhood with an active HOA will very rarely lose value. You can tell the value of the HOA by comparing the cleanliness of the house to the fees that they charge. If the homes are pretty clean and neat and the HOA charges less than say $200 per year, it’s a great service.

4. Stay within your budget – Work through the math with your significant other. Figure out how much you can afford per month for a mortgage payment AND DON”T EXCEED THAT AMOUNT!!! More problems arise while living in a house than promotions at work, so don’t be caught not being able to make a payment. Using a mortgage calculator online is a fairly poor estimator of expenses. On top of the mortgage payment is Primary Mortgage Insurance, escrow, home owners insurance, closing costs and a bunch of other stuff they don’t tell you about. For example, you can find a house that only cost $650 per month for principle and interest payment but wind up paying over $1000 for the mortgage because of all those things listed previously. Pay close attention to that. Good rule of thumb, take your annual income and multiply it by three – that’s how much you should spend on a house. Take your monthly net income – and no more than a third of it should go towards your mortgage. And always have at least three month’s worth of mortgage saved up for rainy days.

5. Last but not least, keep your head out of the clouds – Sit back and do a sanity check often. Don’t let the idea of you living in a beautiful house cause you to make a bad decision. You can lose a lot of money by making poor decisions - and you know you can’t afford to do that.