Once you determine what you want and find a house you like, the next step is to determine how much you can afford. Don’t buy the most expensive house in the neighborhood—use wisdom in your purchases. Remember, statistics indicate that most people are likely to move within seven years.

It is critical that you understand all fees and expenses before you close on a house—there are many expenses. One of the largest expenses is your mortgage. With so many different options available for a mortgage, it is critical that you understand how to calculate a comparable rate on loans with different points and fee structures. Understanding the different expenses involved in buying a house and how to compare different loans with different points and fees will save you a lot of money overall. Critical to this ability to compare is an understanding of points, the effective interest rates, calculating effective interest rates, and prepayment.