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Shopping smart

Once you have your wish list and your pre-approval letter, it's time to start house hunting. Here's the last (and most important) way to outsmart yourself and help take emotion out of the buying process: Don't look at homes outside your price range.

This seems simple, but it's not as easy as it sounds. Your real-estate agent will want to show you houses that are at the very top of your budget—or maybe cost a little bit beyond it. If she tries to push you out of your price range, politely refuse. If you don't look, you can't be tempted.

Stick to your budget and be patient. It can be tempting to snatch up the first good house that comes along because you're afraid of missing out. But the more you look, the better you'll know the market. You'll learn what features are typical for your area and be able to spot good deals.

Do what you can to prevent emotion from carrying you away. Set priorities, try not to compromise, and take your time. And remember that buying a home is a purchase, not an investment, so treat it like any other shopping decision: Do your research, shop for quality, negotiate a good price, and then keep it for a long time.

Tip

Before you make an offer on a house, ask whether you'll have to join a homeowners association (HOA). Some people like them—some don't. If you like uniformity and standards, an HOA might be just your style. But be aware that HOAs usually charge a monthly fee, which could be a deal breaker if you can't afford it.

Picking a Mortgage

Once you've found a home and made an offer, it's time to select a mortgage. Happily, because you've been pre-approved and stayed within your budget (right?), financing shouldn't be too tough.

Tip

The best thing you can do when shopping for a mortgage is to learn more about them. Start by spending a few hours reading the archives at The Mortgage Professor (www.mtgprofessor.com).

One easy way to research mortgage interest rates is to go online. Sites like BankRate.com, ShopRate.com, and Money-Rates.com can help you find the best rates from around the country. If you'd rather shop locally, your credit union or community bank is likely to have good rates, too. But perhaps the best way to find a good lender is to ask family and friends (not your real-estate agent). Personal recommendations offer color and nuance you can't get from a website.

Tip

You may also want to check out the Up-Front Mortgage Brokers Association (www.upfrontmortgagebrokers.org), whose members pledge to be clear about their fees and give objective advice.

When shopping for a mortgage, consider these factors:

Good rates. Many first-time homebuyers don't realize that even a small change in interest can make an enormous difference in their monthly mortgage payment—and in the total cost of the loan (see the table on Picking a Mortgage).

Low fees. Find out what sorts of fees each lender charges. Closing costs (like those listed here: http://tinyurl.com/FR-closing) can have a big impact on the total cost of the mortgage, but many people ignore them, probably because the cost of the mortgage is so huge that these charges seem small by comparison. Be sure to get a good-faith estimate (http://tinyurl.com/wiki-gfe) whenever a lender or broker gives you a quote.

Gut feeling. If the broker seems shady, find someone else.

Your goal is to find the lowest total cost for your loan. In most cases, this means focusing on the best interest rates, but if you expect to have your mortgage for only a couple of years, you might be better off paying a higher rate to get lower fees. Always run the numbers for your situation, using a mortgage-comparison calculator like this one from LendingTree: http://tinyurl.com/LT-mtgcalc.

Once you find a lender you think you can work with, ask lots of questions. When they "lock" your rate, how much time do you have to close the deal? What's the mortgage's annual percentage rate (APR)? (The APR doesn't just take into account the loan's interest rate; it factors in other fees and payments,