Buying Your First Home

To buy or to rent, that is the question.  There are several factors leading to that decision. This is a quick introduction in how to proceed in yours decision making.

Before you start, grab your household budget, ask family and friends for recommendations and ask yourselves about how homeownership will affect your family.

After addressing the issues mentioned above and presumably you have come to the conclusion that buying your first home now is for you.  Below are a series of items you need to consider:

1) What are your needs, size, area, condition of house, storage space, etc.

2) What are you willing to maintain regularly on the property?

3) Where do you want to be located?

4) What can you afford?

In calculating how much you can afford, remember to be realistic.  The crisis we are in right now was affected heavily by the over reaching of the consumer and unrealistic income to debt ratios.  Remember, it is prudent to be more conservative when you are looking for your first home, to insure that it will be a rewarding experience.  Below are some of the pertinent points of calculating what you can afford:

1) What is your monthly income.  (The housing expense ratio uses your gross income) 

2) Take 28% of your total gross income and that is what your housing payment should not exceed.  One point ot remember is that 28% needs to include not only the principal and interest of the loan, but the taxes and insurance payments as well.  This will protect you in the long run.

3) Take your other debt ( monthly payments to loans, credit cards, etc.) add it your basic housing costs and divide it by your total gross income.  That percentage should not be more than 36%.

Once you have assessed this information, you should have a fairly good idea about whether you can afford to buy a home and what price range you should be focusing on in the market.  Your next step is to find a broker and get yourself pre-qualified for a loan.  Once these steps are done – happy house hunting!