Buffett on housing: Buy!

In this July 26, 2011 photo, a sale pending sign is set outside a house in Bath, Maine. The number of people who signed contracts to buy homes rose for a second month in June. But the gain was not enough to signal a rebound in the weak housing market.

After declaring that he was "dead wrong" about a housing recovery occurring last year, billionaire investor Warren Buffett said that if it were practical, he'd buy up "millions" of single family homes.

During an interview with CNBC, Buffett said that if held for the long-term at low interest rates, houses could be a better asset to hold than stocks.

Buffett hints at successor, shares wisdom
Warren Buffett interview on CBS "Person to Person"

Of course you're not going to buy just because the "Oracle of Omaha" says so, but with rents rising nationally, it may make better financial sense to buy than rent now. Before you take the plunge into the housing market, follow these 10 steps:

1. Run the numbers: Conduct a financial plan to determine whether you can really afford to buy. After all, just because it may be a good time to buy, doesn't mean it's a good time for YOU to buy. You should also know that the cost of owning a home is more than principal, mortgage interest, homeowners insurance and taxes. Pad your numbers for annual upkeep of your future dream house.

2. Save for the down payment: Make sure you have saved 20 percent for a down payment (I'm not a huge fan of putting down less than that amount, even though FHA will allow it).

3. Compare renting and buying: Check out this great rent vs. buy calculator from the New York Times -- renting might still be the better deal in some markets.

4. Be an informed buyer: You're not going to buy a house simply because there's a pretty photo posted online, but you can conduct a lot of price research. That said, there's nothing better than talking to people in the neighborhood for "on the ground" intelligence.

5. Obtain a copy of your credit report: If you have done so in a while, go to AnnualCreditReport.com and request your free copy. It's important that you correct any errors on the report before you start the mortgage process.

6. Get pre-approved for a mortgage: Pre-approval is a good gut check on your price range. Gone are the days that banks will fork over cash to anyone with a heart beat. Ask friends for referrals for mortgage brokers and shop around with banks and credit unions. Make sure to compare apples to apples and to understand the total costs to you at closing. Warning: The mortgage process is on the same pain level as a root canal, only it requires more patience and there's no Novocain. You'll need to dig up tons of paperwork and there will be multiple requests as you move towards closing.

7. Find an agent: As much as everyone complains about realtors, I still think that it's tough to go through the home buying process alone. In some markets, buyers' brokers are available, but the most important qualities in brokers are: Honesty, experience, good connections with other agents; and good referrals from buyers like you.

8. Hire a real estate attorney: This is a major transaction in your life, so don't try to save money when it comes to legal fees. Even if your mortgage company provides a lawyer, hire your own to help draft all documents and to ensure that your interests are being represented at every step of the process.

9. Schedule a home inspection: Think you've found your dream house? Maybe, but unless you have an engineer walk through the premises with you, you might be buying a new roof in a couple of years. Don't get freaked out if a problem arises during the inspection -- remember that it can often be solved with a simple adjustment in price. It's imperative to protect yourself, so don't blow off this important step.

10. Purchase homeowners insurance: If you have only been a renter, this can be an eye-opener in terms of cost. Make sure that you understand the difference between insuring the structure and the contents; and if you are buying property that is close to water, make sure that you have an agent who can help with flood insurance.

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    Jill Schlesinger, CFP®, is the Emmy-nominated, Business Analyst for CBS News. She covers the economy, markets, investing and anything else with a dollar sign on TV, radio (including her nationally syndicated radio show), the web and her blog, "Jill on Money." Prior to her second career at CBS, Jill spent 14 years as the co-owner and Chief Investment Officer for an independent investment advisory firm. She began her career as a self-employed options trader on the Commodities Exchange of New York, following her graduation from Brown University.