Friday, February 9, 2007

First Time Home Buyers; "How much home can I afford?"

Many first time home buyers don't understand all of the expenses associated with purchasing a home. Most people think "I'll just have to make a loan payment, that's all." Not true. You also have to pay taxes and insurance yearly, these are typically escrowed into your payments. I know as a first time home buyer I didn't understand any of this. The average home owners' monthly payments includes principle, interest, taxes, and insurance (PITI).

A good rule of thumb is this; the total of your PITI should be no more than 28% of your gross (before taxes) income. Many times on bank websites they will have calculators to help you "estimate" what your monthly payments will be. These estimates only include your principle and interests, not your taxes and insurance. And believe me, those two things can make your $800 dollar "estimated" payments become $1100 dollar, or more, actual payments. This doesn't include possible private mortgage insurance (PMI) that lenders require if your loan to value ratio is too high. Many first time home buyers have never heard of this.

Bottom line here is this first time home buyers; buying a home isn't rocket science but it does require some research and understanding of all the details associated with the transaction. My recommendation is to ask a Realtor for help. We don't just find you homes to look at, we educate you on the market, the procedures, the terms, and numerous other things in order to look out for your best interests. The real estate world is full of sharks who love to swallow up any new comers. As a first-time-home-buyer you should demand your Realtor educate you about the buying process and owning a home.

In summary, there are many things a first time home buyer needs to know when purchasing. You could waste countless days researching trying to figure out what it is you don't know or you could spend a few hours with a good Realtor and learn from a friend. I hope this helps you out.

If you would like more first time home buyer tips go to my website and click on "Contact Me," leave your contact info and I'll be in contact with you within 24 hours.
Blog done, Carry on!!

1 comment:

Jonathan Greene said...

Good post. Don't forget good-faith deposits and inspection costs as well. Even a "no money down" loan requires money down. Go figure.