Guide For First Time Home Buyers - Step 2

By
Real Estate Broker/Owner with Phoenix Property Shoppe AZ Broker BR030809000
https://activerain.com/droplet/bSm

 

Guide For First Time Home Buyers - Step 2

 

 

Step 2: Determine what you can afford.

 

Now that you've found a REALTOR, your REALTOR can guide you throughGuide For First Time Home Buyers - Step 2 deciding what you want or need and what you can afford. However, there are some crucial things to know before committing to owning a home.

 

When buying a home, a first time home buyer must have:

-a guaranteed income and proof of that: when trying to get a loan, a lender will want proof that you are capable of paying back the loan. You will need to show copies of your pay stubs and proof that you receive a steady income.


-established credit history: A record of an individual's past borrowing and repaying behavior, listing personal information, credit lines currently in the person's name, and risk factors such as late payments or a recent bankruptcy.

-a good credit bureau score: A number representing the possibility that a borrower may default (miss a mortgage payment); it is based upon the borrower's credit history and is used to determine his/her ability to qualify for a mortgage. An average, good credit score number typically lies around a 670.

 

 

Term to know:

Debt-to-income ratio: A figure that calculates how much of a person's income is spent paying his/her debts. The higher one's debt-to-income ratio, the more of their monthly income that is solely devoted to repaying debts. DTI is often considered by institutions in evaluating loan creditworthiness; institutions conclude that if a person's DTI is too high, they might not be able to repay their debts very easily, so the institution will be less inclined to make the loan.

 

To qualify for an FHA loan (A loan guaranteed by the Federal Housing Administration), the monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and total debts, including the mortgage payment, should not exceed 41% of income.

 

The debt-to-income ratio is the easiest and most effective way to determine what you can afford when buying a home. Remember, no matter how "dreamy" a home may be, you don't want to over-extend yourself when trying to pay for a home. Once you determine this number, you can now determine what you'd like from a home within that price range (bedrooms, bathrooms, pool, etc).

 

My advice: Be realistic in determining how much you can afford.

 

 

If you missed the first post on step 1 of the first time home buyer process:


Guide For First Time Home Buyers - Step 1

 

 

Guide For First Time Home Buyers - Step 2

 

Posted by

 

Phoenix Property Shoppe
  

 

 

Anna "Banana" Kruchten
Designated Broker & Owner
CRB, CRS, GRI, CNE, SFR, CDPE, WLS


Phoenix Homes For Sale

 

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Andrea Swiedler
Berkshire Hathaway HomeServices New England Properties - New Milford, CT
Realtor, Southern Litchfield County CT

Anna Banana, this is a great series! And the ebook is wonderful too!!!

Jun 04, 2011 02:54 PM #1
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Hannah Williams
Re/Max Eastern inc. - Philadelphia, PA
Expertise NE Philadelphia & Bucks 215-953-8818

Anna.. Great information.. It is a wonderful series

Hannah

Jun 05, 2011 06:24 AM #2
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Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

Thanks Andrea! So many first time home buyers have no idea of where to start.  This should help them get going in the right direction.

Thanks Hannah!

Jun 05, 2011 12:36 PM #3
Rainer
380,214
Laura S. Baker
First Weber Inc - Lake Mills, WI
Realtor (920) 728-4118, First Weber Inc

Oh now this is GOOD information Anna, I am going to have to go back and find part 1 now!  Thank you so much for this!

Jun 05, 2011 12:50 PM #4
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Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

Laura - thanks!  Check out the ebook as welll. Packed full of good info for first time home buyers.

Jun 07, 2011 01:38 PM #5
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Praful Thakkar
LAER Realty Partners - Andover, MA
Andover, MA: Andover Luxury Homes For Sale

Anna, I am going to use some of these ideas for my seminar for First Time Home Buyers....

So many 'basics' that we forget to tell them!

Jun 07, 2011 03:29 PM #6
Rainmaker
806,889
Lanre-"THE REAL ESTATE FARMER" Folayan
Keller Williams Select Realtors-Buy a home in Washington DC. Sell a home in Washington DC - Bowie, MD
I don't make promises.I deliver results.SOLD HOMES

Anna this is a must read for not just Phoenix Arizona first time home buyers. But home buyers all across the country. Thanks for sharing. Great post.

Jun 07, 2011 07:16 PM #7
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Dick and Dixie Sells
Sells Real Estate, LLC - Trinity, FL
Realtors, Tampa Bay Florida Homes For Sale

Excellent advice. Knowing what price range is realistic is soooooo important, plust that pre approval letter goes a long way when making an offer.

Jun 08, 2011 12:45 AM #8
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Belinda Spillman
Aspen Lane Real Estate Colorful Colorado - Aurora, CO
Colorado Living!

Hi Anna,  What a great idea.  I bet you go through lots of books.  I mentioned your name in my latest blog btw.

Jun 08, 2011 02:53 AM #9
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Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

Praful - there is so much that's why I did the ebook.  Saves time and energy and young folks like it.

Lanre - yes I think it is as well.  Best to be as prepared and educated as possible when buying your first home.

Dick & Dixie - yes price range is so important. Sometimes buyers look on their own way over their price range and are so bummed when they learn their eyes were too big and pocket book to small.

Belinda - we do have many requests for the book.  It's been out a year or two and I like to bring it up every once in awhile to get the word.  Thatnks for the shout out. I must go check it out next!

Jun 08, 2011 11:39 AM #10
Rainmaker
806,889
Lanre-"THE REAL ESTATE FARMER" Folayan
Keller Williams Select Realtors-Buy a home in Washington DC. Sell a home in Washington DC - Bowie, MD
I don't make promises.I deliver results.SOLD HOMES

Just went back to read the first one.  This is a good series so far. People who don't have good credit cards can always get a Secured credit line by using your own money. It will also help you increase your FICO Score. Great post.

Jun 12, 2011 04:13 PM #12
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Anna Banana Kruchten CRB, CRS 602-380-4886
Phoenix Property Shoppe - Phoenix, AZ
Arizona's Top Banana!

Tagrid - yes FHA is a great way for first time home buyers to get into their first home - and anybody who wants a home and isn't flush with a lot of cash.

Lanre - yes credit repair is important part of teaching first time home buyers!

Jun 13, 2011 05:21 AM #13
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