Without almost any exceptions, dealing in real estate simply takes experience. Therefore, buying a first home is almost guaranteed to be a new, exciting, and challenging journey. It is difficult to create a numbered list for buying a first home because there are so many different things to consider. Here are some simple guidelines geared to first time home buyers that will help keep the more important points in focus.

First, owning real estate can bring significant value to one’s life. The long history of real estate demonstrates patterns of continual, consistent growth in prices. Homes have long been considered the number one personal investment for the average citizen. Although recent trends have seemed otherwise, the secret beauty of owning a home is that no matter what is happening with the market for home prices, the monthly mortgage payments can be considered the same as being compelled monthly to save for the future. The down side is that if one does not intend to stay in a home for an extended period of time and the market for prices does not increase significantly, the combination of interest and closing costs will not make the home a good investment.

Second, taking spending guidelines seriously is paramount. A great example of guidance come from Freddie Mac’s guidelines. Freddie Mac is in short a government sponsored investment organization that helps investors buy homes that they themselves purchased from lenders. To be considered for a Freddie Mac mortgage, two standards need to be met. First is the housing expense ratio. This ratio compares monthly house expenses such as the mortgage payment, taxes, and insurance with the monthly gross income of the buyer. The ratio should be roughly around 28%. The second ratio is the total obligations like student loans, credit cards, etc. to gross income ratio meaning income before taxes. This ratio should not be more than 36%.

As an example, let’s say John was just promoted at work and now makes $60,000.00 a year and wants to stay with the company and feels its time to settle down and buy a home. His monthly income will be 60,000/12 which equals $5,000.00 a month. Using the home expense ratio, multiply 5,000 by 28 or 28% which would give him roughly $1400.00 a month that he could spend on his mortgage. The total obligations ratio gives us a 36% debt ceiling which is .36x 5,000= $1800.00 a month. If John wants the largest mortgage he can afford using the Freddie Mac standards, then all other debt obligations must come to no more than $400.00 a month.

Always remember when buying a home that the agent lending the money wants to earn money and compensate for risk. The lower the down payment, the higher the interest on the loan will be to make up for the added risk of less up front costs. Saving up for a larger down payment in the long run could save the buyer thousands of dollars.

The high amount of closing costs can easily be unforeseen by many inexperienced home buyers. Closing costs include fees such as survey fee, original loan fee, prepaid interest, the appraisal fee, insurance on the title, first month’s homeowners insurance, recorder’s fees, and possibly the attorney’s fees. All the closing costs could be as much as 3 and 8 percent of the purchasing price.

In review, a home can be a great long term investment. Home prices should be carefully decided on to insure the monthly payments can be made without causing a overwhelming monthly burden. Finally, a home buyer should have money saved for a down payment and keep in mind that closing costs can be relatively extremely high.

Author Bio: Our Best Real Estate is a qualified real estate website dedicated to Gilbert AZ homes for sale and Chandler Arizona real estate. If you are interested in finding a home in any major AZ city, please feel free to browse our website and choose from any of the thousands of featured homes.

Category: Real Estate
Keywords: homes, real estate, buying a home, selling a home, realtor, realtors, loan, mortgage, foreclosure