Home-buying tips from my financial advisor

I was helping move a family in our church last Friday, and my financial advisor happened to be helping out there, so we got to talk a lot about "best practices" when it comes to buying a home. He's a homeowner and also a lender, so he gets to see both sides of the home-buying transaction. Here are a few of his tips:

Qualify for a home loan before you go house hunting - It's better to know that you're limited to $250,000 when you're shopping for homes. You'll avoid looking at homes that are out of your price range. You'll also avoid getting attached to a great $300,000 home, finding out you can't afford it, and then comparing every other affordable home to "the one that got away". Better not to even go there by being smart upfront.

Make your own decisions about what you can afford - Your lender has your best interests at heart…that is, he doesn't want you to default on your loan because your mortgage payment was too high. But that's about as far as your interests and his interests overlap. But Your lender has his own ideas about what size mortgage you can afford, and he may try to convince you that, "Sure, you can afford this mortgage payment. It may be a bit of a stretch, but you can afford it." Make your own own decision about what you can afford when it comes to buying a home. Do you want to be paying for your 6-bedroom house for the next 30 years, and struggling to make each payment? Or would you be more at ease living in a 4-bedroom house, paying it off in 15 years, and being confident in your ability to make each payment?

Buy a yard, too - You're buying a home in order to get away from the whole renting scene, right? If you've been living in an apartment, you'll understand that it's nice to have some distance between you and your noisy, nosy neighbors. Distance requires yard space. A privacy fence doesn't hurt, either. So, when you're buying a house, don't skimp on lot size in order to buy a larger house. A yard may be just the thing to make your home a real sanctuary from the world.

Have an exit strategy in mind - If you're only going to live in the house for four or five years before selling it, focus on increasing the return on your investment. Some useful ways to do this include buying an under-landscaped yard, because you may not be able to recoup the premium you'd pay for an overlandscaped yard. You might also consider buying a house with three to four bedrooms, since this is the most popular house size and you'll have an easier time finding buyers. If you're planning on staying there for the rest of your life, you might keep in mind how best to pass your house on to your kids and avoid estate taxes.

Know the math - "The More You Know" isn't just a good name for U.S. public service announcements. It applies when buying a home, too. If you know how to do mortgage calculations, and if you understand points and other fees, you're that much less likely to fall for the tricks of a sneaky lender. Not that lenders are all sneaky, but it doesn't hurt to know what you're doing when you make one of the most important decisions of your life. Buying a $30 financial calculator (such as a Texas Instruments BA-II Plus or an HP12C) and learning how to use it can be a wise investment.

Make friends with a real estate professional - I like this piece of advice the best (and so does my financial advisor friend ). Take him out to lunch and pick his brain. Even if you don't end up buying your house or getting your mortgage through him, you'll have a great resource when it comes time to buy your home. That $40 lunch might save you thousands. I'm trying to convince my financial advisor to consent to an interview, so keep an eye out. I want to add more audio to the website, especially useful interviews, and I think that would be a great way to start.