Be sure to get your credit score before you shop for a house
Everyone has a credit score calculated at the time your credit report is requested.  It's based on over 100 different proprietary variables and algorithms developed by Fair Isaac (FICO).  The range is 300 to 850. Most lenders consider people above 650 to be prime borrowers, meaning they will most likely be approved at favorable rates.

Every person you come in contact with wants to sell you something.
Don't you dare think that anyone you'll come in contact with is looking out for your best interest.  Every person you come in contact with wants to sell you something.  That's their job, their #1 priority.  Your happiness is 2nd to their mission statement. Once you overcome this common naive mistake that most home buyers make, you'll be able to make much better informed decisions that will save you the most money.

Just because you are approved for $200,000 does not mean you have to spend that much.  If you can get a great house for much less than you are approved for, then that is the best move financially for you.   There is no rule that says you have to spend the max, although most people finance on the outer fringes of their ability to sustain the payments.  Don't let your agent try to qualify you for more than you are comfortable spending. They act like they are doing you a favor. They'll tell you "Oh, I can get you approved for a higher mortgage through my banking contacts".  

Translation: "I want to sell you a more expensive house and get a higher commission.  Buying a more expensive house does not always mean it's better, it just costs more." Your credit score will be used against you so find out what it is from The "merged comprehensive reports from the big 3 credit bureaus" are the ones to get.

Common Home Buyer Mistakes
Many home buyers mistakenly think that they are protected by using a "Buyer's Agent", or a mortgage broker who will "find them the best mortgage".  When I ask them who is paying the buyer's agent, they respond with "They just get a percentage of the sales price".  OK, and how is this different from a seller's agent?  You can put a sheep's clothing over a wolf, but it's still a wolf. The higher the selling price of the house, the more commissions are earned by the seller's and buyer's agents. Another common mistake home buyers make is thinking the price in writing is set in stone. The pen is mightier than the sword and sellers use it to their advantage when selling houses. But you can bypass this common buyer’s mistake by adopting a counter intuitive method of thinking. Just remember this one important rule:

Sellers do not set the price, it’s the buyers who set the price
How many times have you sold or traded in a used car and not gotten anywhere near what you wanted for it? This is because you thought you could set the market, but the market told you otherwise. Whether it’s a house or a car, the market sets the price, not the seller. Once you get past this mental roadblock, you'll find it much easier to offer much less than the asking price. The stock market is a good example. If you were unfortunate enough to buy the over hyped $150 “dot bomb” stocks in early 2000, you soon found they were selling under $1. Although you wanted $150 when you sold them, no one wanted your shares, and you suffered a huge loss. Houses are the same and many sellers are under the wrong impression that real estate must appreciate. There are no rules of what appreciates or depreciates.  So don't be bashful about offering a low price on a house. Some homeowners who are selling their homes get the idea in their head that their house should sell for say $200,000 because they bought it a few years ago for $175,000.The seller may become indignant when you present them with a low ball offer. They may have bought the house when the market was hot, and in a soft market, their house may not be worth the asking price.

During the dot com rush of 1998-2000, many homes in Silicon Valley sold the day they went on the market, selling for much more than the asking price, thanks to foolish buyers and bidding wars.  See my point? The buyers set the selling price, not the sellers. People were shelling out $500,000 for tiny 2 bedroom 2 bath, one car garage "doll houses" that you and I would never consider living in at all.  When the dot coms became dot bombs in 2000-2001 and layoffs were in full swing, it took weeks to sell their homes, and many people took a bath on the resale.  Sellers often got thousands more than their high asking price thanks to idiot buyers caught up in bidding wars.

By nature, us foolish humans have a hard time dealing with the fact that our property might be worth less than we paid for it.  In overdeveloped areas, houses can lose their value rapidly, and you can use this to your advantage when buying a recently built home. One area of Pembroke Pines, Florida was bursting with development for a few years straight. People selling homes they bought new 2 years before were losing $20,000 on the sale of their homes because they were competing with all the new construction nearby. Buyers bypassed 2-3 year old houses for brand new homes with better amenities and updated building codes for the same price or slightly higher.

You cannot guarantee impartiality
Anytime your real estate agent's commission is based on the selling price of the house, you cannot guarantee that the agent has your best interest at heart.  The only way to guarantee that is to pay a large fee to a real buyer's agent, and they don't get any percentage of the selling price.  That fee however, removes the benefit of bypassing the commissioned real estate agent in the first place.  Never tell anyone but yourself how high you are willing to go.  By law the seller's real estate agent has a fiduciary responsibility to the seller, and they WILL tell the seller everything you say, so pretend you are in a police interrogation.  The agent will ask you how high you are willing to go on the house.  Don't fall for this trick.  Just give them the price you want to pay for the house and if they ask how high you are willing to go, tell them that's it.

Don't buy a house in an urgent rush
Don't wait until the day you have to move out of your old house or get transferred to buy a house.  You need time to carefully plan your purchase.  It can take 2 months or more to get an agent, shop for the house, get approved for a mortgage, and close escrow.  If you know you will be relocating and need a house soon, you should start looking now, because you don't want to be pushed up against a wall and forced into making costly and hasty decisions with adverse financial ramifications that will come back to haunt you. Never let a dealer know you are desperate for a house. If the sellers know you are desperate to get a house soon, they will not drop the price. This little mistake can cost you thousands.  Always make the sellers think you have plenty of time and resources to analyze each deal carefully.  Make sure they know you are the one that they have to chase.  then the deal will proceed on your terms, not theirs.

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