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Feature Articles: Housing


Couple in front of house with sold signHow do I buy a home?

Brenda Procter, M.S., state specialist and instructor, Personal Financial Planning, University of Missouri Extension


There are so many details in buying a house that it is easy to get confused. Always ask your realtor or attorney to explain anything you do not fully understand. In general, these are the steps you will take when you buy a house.


  • Carefully and thoughtfully examine your monthly budget. Decide how much you can afford in principal, interest, taxes, insurance and maintenance. Remember, you probably want to avoid paying more for the house than two and a half times your annual salary and keep your monthly debt payments to 35 percent or less of your gross monthly income. Depending on your comfort level with debt, you may want to buy a house worth less than the general rules indicate.

  • After you decide how much you can spend, go house hunting. This is the fun part. Remember that realtors usually represent the seller of a home, even if they do spend time with you as a buyer. You may be able to arrange for a buyer’s agent, who is only responsible to you. Be careful because realtors get a commission no matter who they represent.

  • Select the home you want and can afford to buy. Using a realtor or attorney, contact the seller of the home.

  • Give the seller a written offer of the purchase price. It is probably obvious, but never make an offer on a house that you aren’t positive you want to buy. In the contract, consider including:

    • Details about both the move-in and closing dates.
    • A rental agreement in case the seller needs to stay in the home past the closing date (typically a triple-net lease, which requires the seller to pay property taxes, utilities, repairs and fire insurance until they leave).
    • A clause that makes the sale contingent on your ability to find a loan with terms (interest rate, length of the loan, amount of the loan) that are acceptable to you.
    • A list of what sells with the house (e.g., window treatments or drapes, specific appliances).
    • Specifics about who has to pay if your structural inspection reveals that there are problems with the house (e.g., basement leaks, sagging roof, water damage, etc.) or mechanical equipment (e.g., furnace, water heater, appliances).


  • If the seller does not accept your first offer and makes a counter offer with a higher price, you can either accept it or come back with another offer. This process can be repeated several times before you and the seller can agree on the price and terms of sale. If you cannot agree, the sale does not go through.

  • You and the seller sign the agreed-upon contract and you make an earnest money deposit to show that you are serious about the offer. Earnest money sits in an escrow account and goes toward the purchase price at closing. You may lose your earnest money if you back out of the deal for reasons the contract does not specifically allow.


Go mortgage shopping if you haven’t already. Many buyers shop for the loan before they make an offer. By getting prequalified or preapproved by a lender, you can shorten the time it takes to close the deal on the purchase. You also may look more appealing as a potential buyer if the seller has more than one offer on the house and yours is the only one with loan approval.



Israelsen, C. 2003. Personal and Family Finance class lectures at the University of Missouri, Columbia.

Israelsen, C. and Weagley, R. 2002. Personal and family finance workbook. 3rd ed. Dubuque, Iowa: Kendall/Hunt Publishing Co.

Kobliner, B. 2000. Get a financial life: Personal finance in your twenties and thirties. 2nd ed. New York: Fireside.



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