A home is often the biggest financial investment you’ll make in your lifetime. In fact, a recent Zillow analysis reports that the typical American homeowner has 40% of their wealth tied up in their home.

Several years ago, I wrote a complete guide to financial planning on one index card, which went viral and later became a book: “The Index Card: Why Personal Finance Doesn’t Have to Be Complicated” (co-written with Helaine Olen).

Now, following up on my original index card, I’ve written a guide on buying a house. Below is the housing index card — a handy resource to print and take with you as you look at houses or think about buying one — plus some additional advice as you contemplate making the big decision.

1. Buy for the long run

A home is a significant investment, not to mention a linchpin of stability. According to the Zillow Group Consumer Housing Trends Report 2017, the majority of Americans who sold their homes last year had lived in their home for at least a decade before selling.

Some are even staying for the long haul. Almost half (46%) of all homeowners are like me — living in the first home we ever purchased. In short: Buy a home you want to live in for at least five years — one equipped (or ready to be equipped) with the features and space you need, both now and in the future.

2. Buy to improve your life, not speculate with money

Your home is more than a financial investment; it’s where you sleep, eat, host friends, raise your children — it’s where your life happens.

The housing market is too unpredictable to buy a (primary) home purely because you think it will net a big short-term financial return. You will most likely be living in this home for several years, regardless of how it appreciates, so your first priority should be finding a home that will meet your needs and help you build the life you want.

3. Focus on what’s important to you

Today’s housing market is short on inventory, with 10% fewer homes on the market in November 2017 than November 2016.

So, focus on finding a home you can afford that meets your needs — but don’t get distracted by shiny features that might break your budget. Nice-to-have features often drive up the price tag for things you don’t particularly value once the initial enjoyment wears off.

Make a list of your basic needs, both for your desired home and for your desired neighborhood. Stick to finding a home that meets these needs, without buying extra stuff that adds up.

4. Set a budget and stick to it

It’s important to set a budget early — ideally before you even start looking at homes. In today’s market, especially in the more competitive markets, it’s incredibly easy to go over budget — 29% of buyers who purchased last year did.

The most common culprit? Location. Zillow’s data indicates that urban buyers are significantly more likely to go over budget (42%) than suburban (25%) or rural (20%) buyers.

There’s nothing inherently wrong with that. Local schools matter, and psychologists tell us that a short commute improves your life. But be realistic about your local market and about yourself. Know what you’re willing to compromise on — be it less square footage, home repairs or a different neighborhood.

5. Aim for a 20% down payment

If you can afford it, a 20% down payment is ideal for three reasons:

• Buyers who don’t put a full 20% down pay a premium, most commonly in the form of private mortgage insurance (PMI). This is less financially punishing than it used to be, given today’s low mortgage rates. A monthly mortgage payment (with PMI) may be lower than a monthly rental payment in many markets — but still.
• Buyers who put more down upfront typically make fewer offers and buy faster than those who put less down. Zillow research found that buyers with higher down payments make 1.9 offers on average, compared to 2.4 offers for buyers with lower down payments (after controlling for market conditions).
• A higher down payment reduces your financial risk. You don’t want to owe more money than your house is worth if local markets dip when you need to sell.

6. Keep a six-month strategic reserve

While a down payment is a significant expense, it’s also important to build up a strategic reserve and keep it separate from your normal bank account.

This reserve should cover six months of living expenses in case you get sick, face an unexpected expense or lose your job. A strategic reserve will not only save you from financial hardship in an emergency but also provide peace of mind.

When we accumulated a strategic reserve, my wife and I finally felt ready to build for our future. Without it, we were living from paycheck to paycheck, anxiously managing our cash flow rather than saving or budgeting.

7. Get pre-approved, and stick with a fixed-rate mortgage

The pre-approval process requires organizing all your paperwork; documenting your income, debt and credit; and understanding all the loan options available to you. It’s a bit of a pain, but it saves time later. Getting pre-approved also shows sellers that you’re a reliable buyer with a strong financial footing. Most importantly, it helps you understand what you can afford.

There are a variety of mortgage types, and it’s important to evaluate all of them to see which is best for your family and financial situation. Those boring 30- and 15-year mortgages offer big advantages.

The biggest is locking in your mortgage rate. In short: A 30-year fixed mortgage has a specific fixed rate of interest that doesn’t change for 30 years. A 15-year fixed mortgage does the same.

These typically have lower rates but higher monthly payments, since you must pay it off in half the time. Conventional fixed-rate mortgages help you manage your household budgeting because you know precisely how much you’ll be paying every month for many years. They’re simple to understand, and current rates are low.

One final advantage is that they don’t tempt you with a low initial payment to buy more house than you can afford.

8. Comparison shop to get the best mortgage

Though a home is the biggest purchase many of us will ever make, most home buyers don’t shop around for a mortgage (52% consider only a single lender).

I certainly didn’t. This did save me some annoying calls and hassle, but it cost me $40 or $50 every month, for years. The difference of half a percentage point in your mortgage rate can add up to thousands of dollars over the lifetime of the loan. It’s important to evaluate all the available options to make sure you’re going with the lender who meets your needs — not just the first one you contact.

The three most important factors are that the lender offers a loan program that caters to their specific needs (76%), has the most competitive rates (74%) and has a history of closing on time (63%).

What Is the Fair Housing Act?

The Fair Housing Act is a law that was created to put an end to discriminatory practices involving any activities related to housing. The Act was created with the belief that every person has the right to rent a home, purchase a home, or get a mortgage on a home without being afraid of discrimination due to their membership in a certain class of people.

When Was the Fair Housing Law Created?

Attempts at fair housing in America have been around since the mid-1800s, but it was not until the Civil Rights movement of the 1960s that any real change took place. The Rumford Fair Housing Act of 1963 and the Civil Rights Act of 1964 were two of the first attempts to address discrimination. The real groundbreaking legislation, however, was the Fair Housing Act of 1968 which was established one week after the assassination of Martin Luther King Jr.

What Classes Are Protected Under the Fair Housing Act?

The seven classes protected under the Federal Fair Housing Act are:

1. Color
2. Disability
3. Familial Status (i.e., having children under 18 in a household, including pregnant women) 
4. National Origin
5. Race
6. Religion
7. Sex

What Is the Three-Part Goal of the Fair Housing Act?

The Fair Housing Act has a three-part goal: 

1. Home Renting and Selling

To end discrimination against the protected classes in any of the following ways:

• Refusing to rent housing, sell housing, or negotiate for housing
• Making housing unavailable or lying about the availability of housing
• Denying housing
• Establishing different terms or conditions in home selling or renting
• Providing different housing accommodations or amenities
• Blockbusting
• Denying participation in housing-related services such as a multiple listing service

2. Mortgage Lending

To end discrimination against the protected classes in any of the following ways:

• Refusing to make or purchase a mortgage loan
• Setting different terms or conditions on the loan, such as interest rates or fees
• Setting different requirements for purchasing a loan
• Refusing to make information about the loan available
• Discriminatory practices in property appraising

3. Other Illegal Activities

To end discrimination against the protected classes in either of these ways:

• Make discriminatory statements or advertise your property indicating a preference for a person with a certain background or excluding a protected class. This applies to those who are otherwise exempt from the Fair Housing Act, such as owner-occupied four-unit homes.
• Threaten or interfere with anyone’s fair housing rights.

Does Everyone Have to Follow the Fair Housing Act?

In certain cases, the following groups may be exempt from following the Act:

• Single-family homes that are rented or sold without using a broker;
• Owner-occupied homes with no more than four units; and
• Members-only private clubs or organizations.

Who Enforces the Fair Housing Act?

The Department of Housing and Urban Development (HUD) is responsible for enforcing the Fair Housing Act.

HUD enforces the Act in two ways:

1. Fair Housing Testers: HUD hires people to pose as renters or home buyers to see if discriminatory practices are being used. As a landlord, you need to be careful what you say in person, on the phone, and in rental ads.
2. Investigate Discrimination Claims: Individuals who feel their fair housing rights have been violated under the Fair Housing Act can file a discrimination claim with HUD. HUD will investigate the claim, determine if there is any merit to it, and decide if further legal action is necessary.

Tips for Avoiding Accusations of Discrimination

To ensure you remain compliant with the Fair Housing Act, assume everyone works for HUD or is trying to accuse you of discrimination. Be extremely careful with what you say in person, on the phone, and in your rental ads.

You must adhere to the terms of the Fair Housing Act, but you can rule out tenants based on other criteria. You can legally deny a tenant housing based on poor credit, inability to pay rent, or other information found when you run a credit check on them.

Be consistent in screening tenants, and have the same qualifying standards for every tenant. Go through the exact same practices for each prospective tenant who applies to rent your property. Require the same information, documents, referrals, and fees.

Treat everyone with respect and dignity.

Many states have additional protected classes, such as sexual orientation, age, and student status. Check your local and state fair housing laws to make sure you are following them in addition to the federal law.

Home buyers today face tough challenges — housing prices have soared, a dollar doesn’t go as far as it once did and rent is more expensive than the past.

How are people today making such a large purchase despite these hurdles? With more flexibility and a bit of financing creativity, today’s buyers are finding ways to achieve homeownership.

Know your options (and credit score)

The first step to knowing if you can afford a home is figuring out what financing options are available to you, including what mortgages you’re eligible for and how much you need (and can afford) to put down upfront.

Learning the minimum FICO score required by lenders and understanding your own credit score are important starting points.

Many home shoppers aren’t sure how much they have to put down on a home, what the lender-required minimum down payment will be (it’s not always 20%), or what programs are available to help with down payments, like FHA loans.

Before buyers even start thinking about saving for a home, they should know what their financial resources are and if they’re eligible to buy.

Make enough money to save

With fewer resources to pull from than their older, wealthier counterparts, renters wanting to buy face tough financial headwinds.

According to the Zillow Group Consumer Housing Trends Report 2019, renter households typically earn a median income of $37,500 annually, which is nearly $40,000 less than the median household income netted by households who recently bought a home (of whom the median household income is $75,000 annually).

While there are ways to enter into homeownership without making $75,000 in household income, it’s hard to afford to buy if you make significantly less. “If you’re making $37,500 per year, it’s probably not feasible for you to buy in almost any market,” says Zillow Chief Economist Dr. Svenja Gudell.

While households purchasing homes are more likely to have two incomes than renter households (and thus a higher median household income combined), even two-income households struggle to afford to buy in competitive markets.

Save enough cash (but not as much as you think)

One of the most daunting parts of home buying? The down payment. In fact, two-thirds of renters cite saving for a down payment as the biggest hurdle to buying a home, according to the Zillow Housing Aspirations Report.

For people buying the national median home valued at $229,000, with the traditional 20% down payment, that’s $45,800 upfront — just to move in.

“The down payment remains a hurdle for a lot of people,” says Gudell. “But they should know they don’t have to put 20% down.”

Although putting down less than 20% means additional considerations, such as the cost for private mortgage insurance (PMI), some find it worth the hassle. In fact, according to the Zillow Group Consumer Housing Trends Report 2019, only one-fifth of recent buyers (20%) put 20% down, and just over half of buyers (56%) put less than the traditional 20% down.

Buyers are also getting creative about piecing together a down payment from multiple sources. According to the report findings, 34% of buyers who get a mortgage also get help in the form of gifts or loans from friends and family to come up with a down payment. 

Know your deal breakers, but be flexible

To get into a home — even if it’s not the home of their dreams — some of today’s buyers are considering homes and locations outside of their initial wish list and getting increasingly flexible when it comes to neighborhood, house condition and even home type.

“I do think people get discouraged when they look in their target neighborhood and they see homes around $170,000 when they’re looking for a $110,000 home,” Gudell says.

Affordably priced homes do, in fact, exist. But in popular areas, where people most often want to live, it’s going to be harder to find that cheaper home, Gudell says.

“If you’re willing to take a longer commute and make a couple trade-offs, you might be able to find a home that is farther out that might be cheaper,” Gudell explains. “You have to leave the paved path before you can find cheaper choices.”

The placement of your furniture and accessories can make or break a room and potentially even
a sale.

Why it matter?

The look and feel of a space is created by the way the various items in that room are positioned. If you put them in the wrong place you can instantly diminish the overall appearance of the area, regardless of whether the items individually are stylish and on-trend.

Good placement, however, will have the opposite effect, to the point where even less attractive furniture located correctly around the room can produce amazing results.

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