Time to buy a house?

Are you ready to take the plunge and purchase your first home? Home ownership may seem scary, but it can also be an exciting new step in life – if it’s the right time for you.

Determining whether you are in the position to make this move is the first step in this process. You don’t want to rush into something that you might not be ready to do, so knowing what to expect is half the battle. Here are some questions you should ask yourself to see if you’re ready.

Can I afford a home? Most experts suggest that you can afford a home that costs about two and a half times your annual salary. However, it’s important that you don’t overestimate how much you can afford. You should first calculate the amount that you will pay per month, and this will depend on current interest rates, which change daily, and the amount of money that you’re able to put down. Don’t forget about taxes, insurance and the cost of upkeep (that’s right – when your dishwasher breaks, there’s no calling the landlord to fix it anymore).

There are many real estate and personal finance Web sites to help you with the calculations. Check out one like Interest.com to find out how much home you can afford, what type of mortgage is best for you and what it will likely cost you when all is said and done.

How do I find the right mortgage lender? It will likely take some shopping around locate the best lender for you. A good goal is to find a balance in the amount of money you pay each month and over the shortest loan period. Getting the lowest interest rate possible is a must – a small difference in one bank or lender to another can mean of dollars over the course of the mortgage term, says The Mortgage Resource Center.com. Don’t forget to take closing costs and mortgage fees into account when making your decision; these can add up to anywhere from 3 to 7% of your mortgage.

Some people make the mistake of applying before they figure out how much home they can afford. Don’t rely on the lender to tell you what your price range is. Though less likely in today’s real estate environment, lenders sometimes tend to offer more money than you can comfortably pay back. During the application process, be ready to provide employment verification, current pay stubs, W2s, federal tax returns, bank statements, asset statements and a driver’s license. About.com offers specific details about each of these requirements.

Should I work with a realtor? While you don’t need a realtor, it’s recommended that you use one when making your first purchase. A realtor’s duty is to make home buying less stressful for you by explaining parts of the process you might be unfamiliar with. AICPA’s 360 Degrees of Financial Literacy Web site lists items your realtor does for you:

• Help you determine your housing needs
• Locate properties and neighborhoods in your price range
• Suggest sources and techniques for financing
• Prepare and present an offer to purchase
• Act as an intermediary in negotiations
• Recommend professionals whose services you may need (e.g., lawyers, mortgage brokers, title professionals, inspectors)
• Provide insight into neighborhoods and market activity
• Disclose positive and negative aspects of properties you're considering

Do I know anything about the neighborhood? You should always talk to neighbors before you make a purchase. They will be able to give you some information about the area, and tell you if they are happy with their home. They will also be able to tell you what they like and dislike about the neighborhood, whether they feel safe, etc. Ask as many questions as possible – and also observe the area. Does it look well-maintained? Are people friendly?  How are the schools? Remember this will be your new home, and you should feel at home and at ease while in the neighborhood. 

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