• Drafting the purchase contract
• Price bidding and best offers
• Engaging in a bidding war

Making an offer on the home you want can be like asking that girl or boy you had a secret crush on in high school for a date — intimidating. Although there’s little risk of making a fool of yourself during the bidding-process, you should play your cards right before you tip your hand. That way you can emerge the lucky buyer who got the most home for his buck.

Once you’ve decided on the home you want to buy, your real estate agent or attorney will draft a purchase offer or contract in your name, which he or she submits to the seller’s agent, attorney or directly to the seller (if the home is a For Sale By Owner). The seller can respond in one of three ways: accept the offer, counter it with a higher asking price or reject it.

Below-price bidding

Bidding for a property below its asking price is almost par for the course during what’s called a “buyer’s market.” When there’s a glut of houses or condos on the market, for which there are not enough buyers, a prospective buyer can confidently try to skim 10 percent off the asking price off the property. But if you bid 20 percent below what a seller wants, you may be out of luck. Many experts advise against subtracting more than 10 percent from the owner’s asking price. However, you can sweeten a relatively low offer price by guaranteeing the seller a quick closing and a large earnest-money deposit. Or, if you accept the present state of the home without demanding free upgrades, you could sway the owner in your favor over other bidders.

Highest and best offer

Sometimes sellers or their agents get restless during negotiations and ask you to quote them your highest and best offer for the home. Don’t go out on a limb if you are not 100 percent sure you want this particular property. You can always reconsider if you feel you made a mistake, after comparing other properties to the one that forced you to make a blind bet on its value.

Full price offers

There’s no shame in agreeing to pay the seller’s full asking price without bartering. If the home you’re pining for is worth its price tag and you really want it, offer to pay the full asking price. Do you want to see your dream home slip through your hands because you want to pay $1,000 less for it? Another buyer may show up five minutes after you, eager to pay that difference.

Bidding wars

Engaging in a bidding war for a property with other interested buyers is not for the faint of heart. Be warned that you may end up paying too much for that dream home and regretting it. As one of an unknown number of rivals in a bidding war, you’re competing against each other blindfolded. Neither you nor your agent will know how many offers the seller has on the table, because real estate license laws allow listing agents to keep such information confidential in the seller’s interest.

You may end up having to cough up a lot of extra cash for the down payment, if you’re the winner with the highest bid. Instead, you could keep your cool and stay off the multiple offer- and counteroffer-carousel. Sometimes, all rivals for your dream home may throw in their towels and call the bidding war quits. Who knows, the seller may then come knocking at your (old) door to ask you to submit your purchasing offer. In that case, you’ll end up the real winner, possibly holding the power to barter with the seller for a lower purchase price.

At all stages of the buying process, keep a written record of negotiations between you and the seller, as well as changes to agreements made with any involved parties. In the heat of the home buying process, you may not remember that you wanted the seller to throw in his basement refrigerator, or check on the size and location of your high-rise condo’s storage unit.

• Things to look for in a neighborhood
• Researching schools online and in person
• Using public records to learn about a community

Evaluating a neighborhood and its schools is an important aspect of your search a home, especially if you have children. Will the neighborhood be safe for your kids? Does the school system have a good academic reputation? Checking public records is a good starting point, as is a leisurely drive through a neighborhood at various times of the day and on different days of the week. This will give you a good idea of what the community is like. Here are the key things to look for:

Schools. Make an appointment to tour the local school and meet the principal. Research school test scores, student-teacher ratios, average class size and special-education classes on community Web sites, and read online blogs by parents whose children attend the school you’re considering. Speak with local parents to learn firsthand about the school’s strengths and weaknesses. Also ask about transportation options and before- and after-school programs.

Crime. Visit the local police station or search online for crime statistics and information on registered sex offenders in the community. Neighborhood watch groups are a good indictor of local involvement in keeping a neighborhood as safe as possible. Good operating street lighting is a must have to prevent crime.

Public records. The county courthouse is a good tool to search for foreclosure actions, eviction proceedings and absentee owners.

Even property values. A sign of a stable investment neighborhood is one where the homes have similar sizes, styles and lot characteristics. Look for public sidewalks, paved streets and storm-sewer systems. Many buyers at resale will want these public improvements.

Properly maintained properties. Are the majority of the homes nicely maintained? The pride of homeownership by residents and routine maintenance by the local government are good signs that the neighborhood is stable.

Full public utilities. Ask about public water and sewer availability. Some areas still have private water wells and septic systems, or a mix of public water and private sewers. Private systems can be a deal killer to home buyers, who don’t want to manage a private system. Check to see if the electric services are buried or above ground. Buried services are less likely to be damaged in storms.

• Deciding whether to rehab or buy modern
• Choosing a home that suits your lifestyle
• Finding the best location for yourself
• Considering resale value

Are you a rehabber or do you love modern dwellings with all the amenities? Do you enjoy tearing down old wallpaper and painting 16 foot-high living room ceilings? Is your passion designing and installing a new kitchen?

The truth is, first time home buyers tend to underestimate the time and money needed for large remodeling projects. Adding a new bathroom, den or even sleek lighting fixtures not only costs a lot of money but can take you a while to complete. If you don’t have time to update an older home, look for new construction springing up around the city and suburbs.

This old house

An older home might be cozy and charming, but managing its deficiencies can be frustrating. You’re sure to inherit some unknown problems that may end up costing you an arm and a leg. Instead, you may opt for a newer home that features updated construction techniques and was built according to new building code requirements. Since 1978, all newly constructed or remodeled homes must be free of lead hazards, so don’t forget to check this out, especially if you have young children. If you’re buying a for sale by owner home, be sure to have inspections done, just as you would do in any normal home buying process.

What suits you best?

Do you prefer a downtown high-rise condo, or a secluded abode near the woods? Are you looking for that quaint Victorian with the picket fence or the midcentury ranch that perfectly showcases your 1950s retro furniture? Do you want a bungalow, so your elderly father can move in with you? Or do you need a two-story family home with a two-car garage and multiple bedrooms to accommodate the different schedules and lifestyles of all your family members? If possible, choose a home that reflects your needs and personality.

Is your new home your first? There’s nothing wrong with settling for a more modest dwelling that satisfies your immediate needs, before taking the plunge and spending more for your permanent dream home. The average home buyer stays in his or her home for a little more than six years, so allow yourself a chance for transition when the time is right.

Location, location, location

If the thought of sitting in traffic or switching buses and trains to complete a daily, two-hour commute to and from work makes you nauseous, you had better follow the paradigm of “location is everything.” If you love walking to coffee shops and boutiques, don’t move into a new suburb construction just because you’ll be able to afford a two story mansion. Your lifestyle and how your prospective home fits into it, should be the main consideration in your decision to buy a home. Many couples with young children now choose their home according to which school district it’s located in to ensure a good education for their kids.

What about Fido?

It’s heartbreaking to learn that you have to give up your dog or cat, because the homeowner association rules don’t allow pets in your new building. Some condominium buildings have restrictions on pets, or place limits on the size and number of pets you can have, so make sure you find out before you sign the contract. If you’re looking for a single-family home, check to see if the backyard is fenced to safely allow your dog to go outside. Will it be easy to walk your dog through your urban neighborhood streets on sidewalks and away from busy roadways?

Consider resale value

Stay grounded in reality. Your wish list should always include the potential resale value of your new home. Buying the only ranch home in a neighborhood of two-story houses, or the only 1-bedroom condo in a building full of three-bedroom units, might hamper your chances to sell your home one day. Also, find out if any major construction or infrastructure projects are planned in your area. No one wants to buy a house facing a brand new warehouse.

• Figuring a maximum monthly payment
• Getting prequalified vs. preapproved
• Checking your credit score

When you are shopping for a home, it makes sense to know your price range. Often the first step a real estate agent will take is prequalify you for a loan. This might be a ballpark figure or estimate based on typical loan setups, or you may formally apply for a loan and become preapproved. When you are preapproved, you need to submit various documents that specify your income and expenses. The lender then gives you a letter specifying the loan amount you qualify for based on your specific financial situation. Sellers prefer preapproved buyers because they know that the buyer will not have problems securing a loan for the home.

What to know how much you can afford? To start, you need to total all of your income. Next, separately total all of your debt obligations: car payment, credit card balance, and so on. You can then use this information to get a rough estimate or a formal preapproval.

Getting a ballpark figure

Roughly, you can afford two to two-and-a-half times your gross income (your income before any debts or taxes have been deducted). So if you earn $70,000 a year, you can afford a house in the $140,000 to $175,000 for your home. But that doesn’t really paint an accurate picture. Consider someone who earns $70,000, has paid off her car, and doesn’t owe any balance on her credit cards to someone who makes the same amount, but has a car lease of $300 a month, a large credit card debt and a student loan to pay off. You can see that one person is a bigger credit risk than the other. That’s where your expenses come in.

Lenders like to look at the complete picture, and they use ratios of what you earn, what you can pay on a house, and what you owe. The most common debt to income ratios is 28/36. These ratios are based on monthly amounts. Like the ballpark estimate, you can figure your maximum monthly housing payment by totaling your monthly gross income and multiplying it by .28:

Gross monthly income X .28 (lender front-end ratio) = Maximum monthly house payment

The other figure in the debt to income ratio takes into account your expenses and is calculated like this:

Gross monthly income X .36 (overall debt or backend ratio) = Maximum monthly debt – Your current monthly debts = Amount left for monthly house payment

Getting prequalified vs. preapproved

You might go a step further to ensure you are looking at houses in a range you can afford. The simplest way to get an idea of your price range is to talk with a lender, provide them with income and debt information, and get an estimate of what you can afford. This is like the do-it-yourself method only you talk to a lender, and they may ask questions and require additional information. Getting prequalified doesn’t require a lot of time or money. That’s the advantage. The disadvantage is that you are not formally approved.

To get preapproved, you formally apply for a loan and provide documentation to the lender such as tax forms, monthly pay stubs, a credit check, and other certifiable information on your earnings and debt. The lender then provides you with a formal commitment for a specific date range (the next 60 days, for instance).

You’ll find pluses and minuses for both methods. You don’t need to spend a lot of time or money with prequalifying. On the downside, it’s not guaranteed that you can actually get the loan. For preapproval, you have to provide all the documentation and perhaps pay a loan application fee, but you don’t have to worry about getting approved for a loan. As mentioned, sellers like buyers that are preapproved because they know you can get financing for the home.

Checking your credit score

As part of the loan process, you will need to get a credit check. This lists all the debt you owe as well as credit available to you. If you have always paid your bills on time, you shouldn’t have much to worry about. If you are routinely late or owe huge amounts on your credit cards, you may have a problem. It’s best to know beforehand what your credit check will reveal. You can then clean up any problems — pay off credit debt or clear up any misunderstandings or mistakes on your report — before the lender looks at the credit check.