Home Buying Tips

Getting Started

Before you start looking for a home you should ask yourself a few questions.
Where do you want to live?
Do you want to be close to schools, shopping, or work?
What kind of house would you like and/or need?
Are you looking for a particular style?
How many bedrooms and bathrooms do you want?
Do you want a yard?
How much house can you afford?
Have you consulted a mortgage lender to determine the size of the mortgage you would qualify for?

Here are a few tips to help you get organized.

Pull a credit report on yourself and make sure the information is accurate. If you find any errors, take steps to correct them immediately.
Start saving money - you'll need to have cash on hand for a down payment and closing costs.
Don't incure any additional debt. Pay down your credit cards - and don't apply for any new ones.
Don't make any major purchases on credit - buy the furniture or car later.

How much house can you afford?

Simply put, you can afford a house that costs as much as the largest monthly mortgage payment you qualify for. A quick way to estimate the size of mortgage you qualify for is to take your gross monthly income (that's before taxes and other deductions) and multiply it by .28. This works out to just over 1/4 of your gross income.
Mortgage companies use something called qualifying ratios to determine how much they'll lend you. Most mortgage companies use either a 28/36 ratio or a 25/33 ratio. The first number in each pair is the percentage of your gross income that the lender would consider acceptable as a monthly mortgage payment (i.e. if you make $3,000 per month, 28% of that is $840 per month).
The second number in each pair is used when all debt payments are considered, not just the mortgage. (i.e. if you make $3,000 per month, but also have a $250 a month car payment, 36% of $3,000 is $1,080, minus the $250 car payment equals $830).
As you can see, in this example the numbers work out to be almost the same. Obviously if you have more debt you would qualify for less.

Why you should work with a Realtor

Working with a professional Realtor to buy your home is a good idea for several reasons:
They will analyze your financial situation to help you determine how much you can afford.

They are familiar with the process of buying a home and can explain things to you.
They can easily access information on all properties listed for sale by Realtors in your area.
They can set up appointments for you to see homes that interest you.
They will help you complete all the necessary paperwork when it comes time to make an offer.
They will help you arrange financing.
They will be there at closing to answer your questions and make sure everything runs smooth.