When you are a a First Time Buyer, it is important to be "open" to other areas or neighborhoods, that may not be your first choice; or flexible in a homes ammenites. I encourage home buyers to play with Mortgage Calculators to become familiar with home much a home costs (including taxes, insurance and PMI). I recently had a potential client contact me who is currently renting a home in the CSULB area, it was discouraging for them to learn that they could not afford to buy in the neighborhood that they have rented for several years (the average home price is $500,000, which is approximately a mortgage of o $3200 per month; depending upon the down payment).
Gail Robinson's blog "Why you shouldn't look at homes outside your price range" summarizes her clients experience.
I'm working with a lovely young couple. They did what most buyers do before they sign up with a real estate agent. They did their research on the Internet and then they went to Open Houses. They even got a pre-approval letter before coming to me. They did everything right, except one thing. They went to an Open House outside their price range. And, they fell in love with the home. They asked me to go see it with them today.
The husband said, this is exactly what we are looking for, except in a different price range. Uh oh! The wife is very specific about the location she wants. It's an excellent location with good resale value. It has the school system they want. This ideal home is in that area. So if we can't go to a less expensive area, how can I help them find a home just like this one for less? I explained the dilemma to them.
To complicate things, it is a home of amazing quality, craftmanship, and unique charm. A high end builder built this custom home using the touches he uses on homes twice as expensive.
I feel bad for them, because they have really fallen in love and now they will feel like they are settling when they purchase their first home, instead of feeling excited about it. They don't want a starter home and don't plan to move again, so this makes it particularly frustrating.
The lesson learned from this is to figure out your price range early. Not just what you qualify for in terms of a mortgage (they could qualify for a loan for this home), but what you should spend on housing given your lifestyle and plans.