THINKING ABOUT BUYING YOUR FIRST HOME?
Youíve probably wondered many times if you can afford to buy a home. Did you know
that continuing to make rental payments may be more expensive in the long-run?
When you make rental payments, the money is gone forever. When you make mortgage
payments, however, you build equity in your home. The longer you own your own home,
the larger your equity becomes. Your home may also appreciate in value, usually at a rate
faster than the rate of inflation. In addition, property taxes and mortgage interest paid on
your personal residence are usually 100% tax deductible. There are numerous advantages
to owning a home. Here are some things to consider when buying your first home.
Obtain Your Credit Report
Get a copy of your credit report from the three major credit bureaus (Experian, Equifax,
Trans Union) and review the information. Most lenders will get a credit report for you
and review it with you as part of their pre-approval process. The sooner you do this the
better. If your credit report contain items which need correcting, itís easier to attend to
them well before you make an offer.
Don't assume you can't buy a home because your credit isn't perfect. There are numerous
lenders and loan programs designed for people with less-than-perfect credit. Contact
several lenders to discuss your options. In the unlikely event you don't qualify for a loan,
determine what steps to take to improve your credit standing and qualify in the future.
Determine How Much Home You Can Afford
Many web sites offer calculators that help you determine how much home you can
afford. A good calculator will give you a range of affordability. Many of these calculators
use standard debt ratios of 28/36. This means that your housing payments cannot exceed
28 percent of your gross income and that your total debt cannot exceed 36 percent of your
gross income. However, there are a wide range of programs. Depending on your assets,
credit history and earning potential, you may be able to qualify for more than what the
standard debt ratio calculations would indicate. Contact a lender to determine of how
much you can afford.
Understand The Cost Of Home Ownership
In addition to your mortgage payment, you will also pay for property taxes and home
owners insurance. If you buy a condominium or townhouse you'll likely pay a monthly
homeowner's association fee. It is important that you understand the full cost of owning a
home in addition to the tax benefits. Many real estate agents and lenders can help you
analyze the cost of owning a home. You may also want to consult with an accountant or a
financial planner to determine how purchasing a home will help meet your financial