Don't Shop with a Blindfold On!                                                                            

The purchase of your first home is one of the most important decisions you will make in your lifetime. It will quite likely be the best investment you every make as well.

The primary advantage of becoming a homeowner is the opportunity to build equity. You can expect the value of your home to appreciate steadily during the time in which you live in it because of your own property improvement measures, the strength of the state’s economy, and other factors.

As a homeowner you also will realize substantial savings through federal income tax deductions on property taxes and mortgage interest. These tax savings are not available to you if you rent an apartment or other property.

Finally, through homeownership you will gain a special sense of independence, privacy, and security. The satisfaction of “settling down” and establishing your roots is difficult to put a value on, but is just one of the many benefits you receive the moment you purchase a home.

How Much Can I Afford?

Although housing affordability is becoming increasingly difficult for many, it is important for you to carefully study your total net worth vs. your fixed expenses before you determine the size and type of home you can afford. You may be surprised to discover that you have a greater amount of disposable income available to you than you first thought. As a result, you should complete the mortgage pre-qualification process as soon as possible to learn how much home you may be able to purchase.

Typically, the amount you will be able to afford for housing costs (principal, interest, taxes, and insurance) per month is equal to about 28-33 percent of your gross monthly income. These ratios are the guidelines used by many, but not all, banks and mortgage companies. Your REALTOR® can help you find a bank that may have higher qualifying ratios.

In addition, when estimating your actual purchasing power, most banks will require that approximately 36% of your gross monthly income be greater than the total of your monthly debt payment.

A number of financing options, including low-interest mortgage funds, also are readily available to you as a first-time homebuyer. Such programs have only minor restrictions and will increase the opportunities you have to purchase your first residence. When calculating the maximum price of a home you can afford, don’t forget to include the down payment you expect to make as well. The larger your down payment, the lower your monthly mortgage cost.

 Follow These Steps To Purchase Your First Home

• Prepare a list of your needs and then a list of your wants. Be sure to distinguish between them. You should be able to meet your needs, but may have to compromise on your wants.
• Have a REALTOR® or a bank pre-qualify you to determine how much you can afford to spend on a home.
• Allow your REALTOR® to show you the properties that will most closely meet your needs and wants.
• As a prospective home buyer you should consider retaining an attorney to represent you in the transaction.
• Once the decision is made to purchase the property of your choice, contact your REALTOR® to assist you in completing an offer which will be accompanied by your deposit.
• Your REALTOR® will assist you in reaching an agreement on the price and terms of sale. Remember, your REALTOR® must disclose whether s/he represents you, the seller, or both in the transaction. Disclosure should occur at the first personal meeting to discuss a specific property.
• Once your offer has been accepted by the seller, you are ready to satisfy the contingencies included in your offer, such as financing and inspections. Your REALTOR® can provide the names of local businesses from which you can select people to perform these services, and arrange an appointment with one or more lending institutions. When any requested inspections have been completed and any required mortgage applications have been made, just relax and wait for your mortgage approval.
• Once your mortgage loan has been approved, it is time to arrange for a closing date for transfer of title, homeowners’ insurance, the movers, ordering of electric and telephone services, and making any transfer of funds for a bank or certified check for closing day.
• On closing day, arrive promptly with your bank or certified check and insurance policy or binder. Then relax and enjoy. In an hour or so you will have become a new homeowner.
• Congratulations!

You have made the best investment of your life - A home of your own!