Buying Your First Home – 5 Questions to Ask before Starting Your Search

J0442456 Buying your first home is one of those dual experiences… both exciting and scary at the same time! Even though right now is a great time to be a first-time home buyer… with good prices, low mortgage interest rates, and an $8,000 tax credit from Uncle Sam… what really matters is whether this is the right time for you to buy a home. Here are five questions to ask before starting your search.

1) Can you afford to buy a home?

A rule of thumb is that you can afford a home that costs about 2 1/2 times your yearly income. Other factors also enter in, such as how much money you need for other bills and how much you have for a down payment.

Unless you are veteran qualifying for a federal zero money down VA home loan you will likely need a minimum of 3.5%-5% of the purchase price in cash for your down payment.

Your total debt including your mortgage payment and other monthly payments such as car loans, school loans, credit card payments, etc. usually must be no higher than 41% of your monthly income… sometimes a little higher if you have a high credit score.

2) How big a mortgage (and what purchase price) do you qualify for?

Even before you start looking for a home, talk to a lender to determine how much you qualify for. While your income and available cash are important factors in qualifying, your credit score is also more important than ever and will help determine your interest rate.

Most mortgages require a credit score of at least 620, some even higher depending on the property and the amount of your down payment.

3) Will you be financing your closing costs?

While zero down financing is no longer available except for veterans, it is still possible to finance part of your closing costs to minimize the amount of cash you will need to close. Talk to your lender and Realtor about your options.

4) What if you have a high enough income and credit score to qualify for the payments but don't have enough cash for the down payment?

You can no longer purchase with no money down, but it may be possible to pull money from your 401K or an insurance policy for a down payment. Another frequent source of down payment money is a gift from family or friends, which is allowed but must be documented as gift money.

5) Do you qualify for the first-time home buyer tax credit?

If you haven't owned a home for at least 3 years… earn less than $125K as a single taxpayer or $225K as a married couple… and buy a home for less than $800,000 from someone who isn't an immediate family member you will likely qualify for the tax credit. You have a short timeline, however… you must have a signed purchase agreement by April 30, 2010 and close by June 30, 2010.

If you decide the time is right for you, select a Realtor to be your guide and have fun with the process… you will only buy your first home once!

Sharlene Hensrud, RE/MAX Results - EmailRealtor for First Time Homebuyers


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I love what I do! Highly insightful, analytical and creative, there is nothing I love more than helping you find the right solution for your real estate transition. My mission is to serve my clients with honesty and integrity, exceeding their expectations in service and support… and to help others by donating a portion of every transaction to Habitat for Humanity.

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