This is a guest post from Mike at Quest for Four Pillars, a Canadian financial blog.

Buying a house is a difficult process — there are large sums of money involved, the transaction costs and hassle of moving mean that you can’t just buy another house if you don’t like the one you end up with, and you don’t have enough information to make a completely informed decision. The best you can do is to educate yourself in all aspects of the house hunt, keep a clear head, and buy a house that fits your situation.

Here are some things for first-time homebuyers be aware of when looking for a new house:

  1. Consider location. How far is the house from where you work? Can you handle the time/money involved in the commute? If you have young kids or are planning to have them, how far are the grandparents from the house? (They tend to be the best babysitters.) What about schools and shops?
  2. Set a budget. It’s nice to say “buy within your budget” but that might not realistic. Do a quick budget estimate, look at some houses that you might be interested in, and then revise the budget or revise the houses. If you really can’t afford a house then don’t buy one. There is nothing wrong with renting.
  3. Know your market. It’s critical that you know the market you are looking in. The asking prices for houses are often not indicative of their true value. The only way to be able to estimate value is to look at as many houses as possible. Take notes and find out what other properties have sold for.
  4. Don’t trust your real estate agent. Most house buyers should use an agent. But keep in mind that although they may be very competent, their commission structure ensures a conflict of interest. Don’t trust your real estate agent.
  5. Don’t end up house poor. Sometimes homebuyers “fall in love” with a house or neighborhood (or even just the idea of owning a house). This can lead to regret when the novelty wears off and you don’t have any money to do the things you’d like. Try living for six months on a “pretend” mortgage payment and see how it goes.
  6. Take your time. Until recently, many buyers were afraid of missing out on future price gains or being “priced out of the market”. If you are renting and saving as much as you can, you will be fine. Here are some tips for renters to be able to keep up (or down, as the case may be) with their house owning friends.
  7. Make a decision. Once you know your market, you should be able to purchase a house fairly quickly. If you are looking for the perfect house or trying to time the market, then you will never buy a house. I know people who did ten year home searches, which is a big waste of time. The reality is that you could be happy with many of the houses you look at, so as long as you can eliminate the worst choices then you will be thrilled with your new home.
  8. Don’t worry about the down payment. Yes, I know — it sounds pretty shocking in the sub-prime era to suggest that a down payment of less than 20% is acceptable. But in my opinion, the ability to make the mortgage payments is the main factor for affordability. In other words, it’s the size of the mortgage that matters. Of course you can get better rates with a larger down payment so it’s better if you have one, but don’t sweat it if you have a small or zero down payment.
  9. Don’t blow your budget on remodels and furniture. When many people buy a home, the mortgage payments are so large that they have to be “made to fit” into their budget, straining other priorities. While this is not the best way to buy a house, some buyers then make things worse by spending more money on renovations and home decorating. Unless you buy a total wreck of a house, you do not need to spend big bucks on renovations. You can live with the non-granite kitchen counter and the couch set that doesn’t fit the room perfectly. I don’t care if the house has full-on 1970s decor — you can live with it for a year or more until you can fit the extra expenses in your budget.
  10. Be careful of flip properties. There are people and contractors who will buy a house, fix it up quickly, and turn around and sell it for profit. The problem with these houses is that they tend to look very good on the surface (nice paint, trim, granite counters, etc.), but deep inside they may be ugly (substandard electrical, insulation, etc.). If you are interested in one of these houses, then make sure they have closed permits, and check with the inspector to see their inspection notes. Better yet, just don’t buy one.
  11. Don’t buy the perfect house. If the house is livable and you have a good life, then you will be happy with whatever home you end up buying. If you spend more money on a “better” house, then you will quickly get used to it and will be no happier than if you had bought an “average” house. To me, a house is just a house. The people inside are what make it special.

Learn as much as you can about real estate, your budget, and your local housing market, but realize that buying a house is all about compromise, incomplete information, and a lot of doubt! If you keep at it, however, the odds are very good that you will find a home that suits your needs.

J.D.’s note: These are solid guidelines for first-time homebuyers, but not every tip is applicable in every instance. Kris and I have purchased two homes while violating several of these points. What about you? Do you have some specific tips to offer first-time homebuyers? And are there different things to consider with the current housing market?

This article is about House and Home