Five Tips for First-Time Home Buyers

In today's turbulent market prices are up one month and down the next. Rates are down from the Fed, but high for individuals. Banks require different information and credit scores -- not to mention down payments -- than ever before.

So how do you know if you're ready to buy a home? Here's what you do:

1.) Know how much house you can afford. A banker can tell you this, or websites such as Bankrate.com or Military.com, have mortgage calculators to help you out. Try to stick to a home that doesn't, including payment and insurance, exceed 35 percent - 45 percent of your gross income.

2.) If you have a lot of revolving debt, then consider pay it off with your down payment money and re-save the down. It will boost your credit score to get you a better rate, and will save you interest. Banks may require you pay off your debts through escrow to close the loan if you don?t. 

3.) Prioritize your debts before you buy. Come up with a six-month or one-year plan that pays down the debts with the highest interest rates first. Go into your new home as debt free as you can. A good goal is to have no debt that isn't securitized by collateral. Cars are okay, because you can sell the car. Credit cards aren't. Chances are you-re still paying off a dinner or impulse purchase from a few months ago.

4.) If you can stick to the conforming limits (check with your bank on what number they use), this means your loan can be sold to the government agencies. Your rate will be much less. Generally try to find a house under $260,000. Be sure you take VA loan options when you can; this is a benefit you deserve and should take.

5.) Shop around. If you buy a new home, ask outright if they offer incentives. I haven't had one say "no" in the past year, and I've tested more than 15. If you buy a resale home, do your homework on comps (Zillow.com has great info) so you know what the house is worth.


*Bonus tip: Remember that being represented by an agent seems to cost you nothing, but the seller wraps the commission up into their price. If you can find another owner to buy from owner-to-owner, this is the best deal. You may feel more comfortable having an agent, by all means do so. Make sure you take charge though. Agents, though not legally allowed to show only homes with high commissions, may have a tendency to do so anyway. Hand your agent a list of homes you want to see, including those for sale by owner. It doesn't hurt to ask for some of that commission back, too -- many will do that in today's market. This is a nice bonus after closing.

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