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Buying Your First Home

Home ownership is the cornerstone of Our Dream. But before you start looking, there are a number of things you need to consider. First, you should determine what your needs are and whether owning your own home will meet those needs. Do you picture yourself mowing the lawn on Saturday, or leaving your urban apartment for the beach? The best advice is to look at buying a home as a lifestyle investment, and only secondly as a financial investment.

Even if housing prices don't continue to increase at the torrid pace seen in recent years in many areas, buying a home can be a good financial investment. Making mortgage payments forces you to save, and after 15 to 30 years you will own a substantial asset that can be converted into cash to help fund retirement or a child's education. There are also tax benefits.

Like many other investments, however, real estate prices can fluctuate considerably. If you aren't ready to settle down in one spot for a few years, you probably should defer buying a home until you are. If you are ready to take the plunge, you'll need to determine how much you can spend and where you want to live.
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The housing expense ratio compares basic monthly housing costs to the buyers gross (before taxes and other deductions) monthly income. Basic costs include monthly mortgage, insurance, and taxes. Income includes any steady cash flow, including salary, self-employment income, pensions, or any other income. For a conventional loan, your monthly housing cost should not exceed 28% of your monthly gross income.

Many home buyers choose to arrange financing before shopping for a home and most lenders will prequalify you for a certain amount. Prequalification helps you focus on homes you can afford. It also makes you a more attractive buyer and can help you negotiate a lower purchase price. Nothing is more disheartening for buyers or sellers than a deal that falls through due to a lack of financing.

In addition to qualifying for a mortgage, you will probably need a down payment. The 28% to 36% debt ratios assume a 10% down payment. In practice, down payment requirements vary from more than 20% to as low as 0% for some loans. Down payments greater than 20% generally buy a better rate. Lowering the down payment increases leverage (the opportunity to make a profit using borrowed money) but also increases monthly payments. ">How Much Mortgage Can You Afford?

Choosing a Neighborhood

Before you start looking at homes, look at neighborhoods. Schools and other services play a large part in making a neighborhood attractive. Even if you don't have children, your future buyer may. Crime rates, transportation, and services are other things to look at. A new pizza shop next door might alter your property's future value. On the other hand, you may want to run a business out of your home.

Look for a neighborhood where prices are increasing. As the prices of the better homes increase, values of the lesser homes may rise as well. If you find a less expensive home in a good neighborhood, make sure you factor in the cost of repairs or upgrades that such a house may need.
Choosing a Neighborhood

* Buying a home can mean building significant value through the years.
* Think carefully about how much you can afford to spend and consider borrowing guidelines.
* Prequalifying with your lender is a good way to determine how much house you can afford.
* You will need cash for a down payment and legal fee costs. Generally speaking, the higher the down payment, the lower the interest rate and monthly mortgage payment.
* In addition to your mortgage payments, you will also need to consider the other costs of home ownership.
* Schools, services, crime rates, transportation, and facilities are important considerations when selecting a neighborhood.
* Real Estate Dealer usually represent the seller, but they can be valuable sources of information for buyers as well.
* Remember to consider re-sale when buying your home.