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.
- Browse through real estate advertisements in the newspaper and Homes
magazines. This will give you a good feel for the types of homes that are on the
market and what they cost.
- In many communities, Realtors may have television programs or interactive
phone systems which will allow you to find out information.
- Visit open houses on the weekend. It doesn't cost anything to look, and
looking at a few different homes might give you some ideas for things you'd like
in a house but haven't considered.
- Start saving money - you'll need to have cash on hand for a down payment and
- 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.
- Contact a Realtor. Your Realtor can help you determine how much you can
afford, and they can provide you with information on homes that may interest
you. The Realtor will also help you complete all of the necessary forms when it
comes time to make an offer.
How much house can you
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
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
Working with a professional Realtor to buy your
home is a good idea for several reasons:
- They'll analyze your financial situation to help you determine how much you
- They're familiar with the process of buying a home and can explain things to
- 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'll help you complete all the necessary paperwork when it comes time to
make an offer.
- They'll help you arrange financing.
- They'll be there at closing to answer your questions and make sure
everything runs smooth.
Searching for your dream home can be a time
consuming experience. Working with a professional Realtor will make the process
much more efficient.
Since most people spend a fair amount of time with their Realtor, it's
important to choose a Realtor you feel comfortable with, and one who is
responsive to your needs. The following questions will help you decide if a
particular Realtor is right for you:
If the answer to
most of these questions is "Yes" - you've found yourself a great Realtor.
- Do they return your phone calls?
- Do they ask you questions to determine what you want/need in a house?
- Do they perform a financial analysis to help you determine how much you can
- Do they explain things clearly?
- Do they suggest financing methods?
- Do they seem knowledgable about the community?
- Do you feel comfortable spending time with them?
If you find yourself answering "no" to many of these questions, or to any
individual questions that are important to you, you should keep looking until
you find a Realtor you feel comfortable with.