Posted by:

CJ Harrington
Keller Williams Realty
www.cjharrington.com
cjharrington.crs@gmail.com
440.336.0612

Date: 08/21/08

When finding the right first home, you should consider a price range and a short list of desirable neighborhoods. Still, there are many other factors you'll need to consider before investing in your biggest asset.

Things to do before you start:

•·     Put together a household budget so you can consider your financial situation and your ability to make mortgage payments.

•·     Consider your lifestyle and how it might affect your choice of home and neighborhood.

•·     Check a few websites in order to do a little research on current home prices in the neighborhoods you plan to target.

First things to consider:

Home ownership is a dream for many Americans, but before you start, there are a number of things you need to consider.

First, you should determine what your needs are, and whether your next home will meet those needs. (ex. yard maintenance, location, your lifestyle, )

Even if housing prices are not increasing, buying a home can be a good financial investment. Mortgage payments force you to save, and after 15 to 30 years you will own a substantial asset that can be converted into cash.

Like many other investments, real estate prices can fluctuate considerably. If you are not ready to settle down in one spot for a few years, you probably should reconsider buying a home until you are. If you are ready, you'll need to determine how much you can spend and where you want to live.

So, How Much Can You Afford?

The Federal National Mortgage Association (Fannie Mae) is a government-sponsored organization that purchases mortgages from lenders and sells them to investors. Mortgages that conform to Fannie Mae's standards may carry lower interest rates or smaller down payments. To qualify, the you will need to meet two ratio requirements that are industry standards, the housing expanse ratio and the total obligations to income ratio.

The housing expense ratio compares basic monthly housing costs to the buyer's gross monthly income. Basic costs include monthly mortgage, insurance, and property taxes. Income includes any steady cash flow (salary, self-employment income, pensions, child support, or alimony payments). For a conventional loan, your monthly housing cost should not exceed 28 percent of your monthly gross income.

The total obligations to income ratio is the percentage of all income required to service your total monthly payments. Monthly payments (student loans, installment loans, and credit card balances older than 10 months) are added to basic housing costs and then divided by gross income. Your total monthly debt payments, including basic housing costs, should not exceed 36 percent.

It is important to arrange financing before shopping for a home, and most lenders will "pre-qualify" you for a certain amount. Prequalification helps you focus on homes you can afford, and also makes you a more attractive buyer. Nothing is more disheartening than a deal that falls through due to a lack of financing.

Furthermore, you will probably need a down payment. The 28 percent to 36 percent debt ratios assume a 10 percent down payment. Down payment requirements vary from more than 20 percent to as low as 0 percent for some Veterans Administration (VA) loans. Lowering the down payment increases leverage, but also increases monthly payments.

Additional Expenses of Buying a Home

Many home buyers are shocked to find that a down payment is not the only cash requirement. A home inspection can cost $200 or more. Closing costs may include loan origination fees, up-front "points", application fees, appraisal fee, survey, title search and title insurance, first month's homeowners insurance, recording fees and attorney's fees. Also, adjustments for heating oil or property taxes already paid by the sellers will be included in your final costs.

Future Expenses

Yes, there are other costs associated with home ownership. Utilities, heat, property taxes, repairs, insurance, services such as trash or snow removal, landscaping, assessments, and replacement of appliances are the major expenses incurred. Make sure you understand how much you are willing and able to spend.

Be aware! Condominiums and cluster homes may not have the same costs as a house, but they do have association fees. Older homes are often less expensive to purchase, but repairs may be greater than those in a newer home. When looking for a home, be sure to check the actual expenses of the previous owners, or expenses for a comparable homes.

How to Choose a Neighborhood

Before you start looking, make sure to understand the neighborhood you will be living in. Schools, security, taxes, transportation and other services play a large part in making a neighborhood attractive.

Alos, 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.

Finding a Realtor

If you are a first-time home buyer, you will probably want to work with a Realtor. Realtors know the market and can be a valuable source of information concerning the home buying process. Feel free to ask lots of questions, your next Realtor should be able to educate you so that you understand why this home is the best decision for you.

Also, a Realtor will have access to the Multiple Listing Service (MLS). This service lists all the properties listed by other Realtors. Home Buying Costs

What do I do once I know my price range and location?

Once you've determined a price range and location, you're ready to look at homes. Always remember that much of a home's value is derived from the values of those surrounding it. Also consider, the average home is owned for seven years, so always consider the qualities that will be attractive to future buyers as well as those attractive to you.

Always remember that you will probably want to sell this home someday. The more research you do today, the better your decision will look in the years to come.

For More Information!

Check Out Our Website:

www.cjharrington.com

For FREE Buyer AND Seller Reports!

Or call my cell phone at 440.336.0612.