Buying a first home is an exciting time with a lot of information coming at you and more choices than you probably ever thought possible.  Down payments, interest rates, house prices, type of loans, number of bedrooms . . . pretty soon your head is spinning.  Yet it is also a wonderful period in anyone’s life because you are looking for a place to call your own for the very first time.  Here are a few things to consider as you look for that perfect first home.

Affordability

While it may be very pleasant to dream about that five-bedroom Country Tudor style house on one acre of manicured lawns, a first-time house purchase is usually an exercise in compromise.  Also, consider the fact that the average person moves several times in his or her life, and you can see the importance of finding a home that fits your budget comfortably, to allow a move later without financial problems arising.  Outline your current take-home pay and any increases in income that you anticipate in the next two years.  Ideally, your mortgage payment should not exceed about 30% of your gross monthly income – that is your income before taxes.  Your mortgage amount plus other revolving and installment debt, like car loan re-payments and credit card payments should be less than about 40% of your gross monthly income.

Pre-qualification

With pre-qualification, a potential lender requests documentation regarding your credit history, income and monthly expenses.  The institution then determines the maximum monthly mortgage payment you qualify for and then calculates a target purchase price based on that figure.   The amount of cash you have for the down payment and any closing costs will also figure into this calculation.  This simplifies house shopping immensely, since it allows you to set the price that you can realistically afford.

Mortgage

There are literally hundreds of different mortgage options available.  However, consider mortgages with a fixed interest rate.  Although adjustable-rate mortgages, or ARMS, are available with a lower initial rate, they can be much more costly in the long run, especially if rates rise from their current low rates.

Searching

Use the Internet to begin your search.  You can search by price range, neighborhood, number of bedrooms, and other factors.  Make a “wish list” divided into must-haves and want-to-haves, and narrow down your choices based on that list.  Then, contact a real estate agent to actually walk through the houses on your short list.  Take a camera and take pictures to remind yourself of the finer points of each house.  After you have gone through several, they will begin to run together in your memory without pictures.

Closing

After your offer has been accepted, contact your chosen lender and start the closing process.  This may take place at the lender’s office, a title company, or some other location.  If you were pre-approved, your closing will happen more quickly than for someone who has to go through the approval process.  Begin packing and arranging movers, make sure your closing funds are readily available, and stay in contact with both your lender and your real estate agent.

Educating yourself about mortgage loans and the closing process will help ensure this exciting time has the best possible outcome for you.