Tips for First-Time Homebuyers

Renters who have been watching home prices tumble probably have mixed feelings: on the one hand, this means that buying a home is more affordable than in recent years. On the other, renters may be more frightened than ever that they will make a mistake and buy property that could drop in value.

While no one can predict exactly when home prices will reach bottom, individuals interested in buying a home can work with a local real estate agent and do research on websites such as Zillow.com and Trulia.com to evaluate how their local market is doing. Real estate prices vary widely even within a particular zip code, so just because you’ve heard that prices have dropped in your state or city doesn’t mean that they haven’t already started to climb again in the community where you want to live.

Taking advantage of low interest rates and low home prices could be a valuable investment in your financial future, but buying real estate requires preparation. Novice buyers in particular should get recommendations from friends and colleagues and interview lenders and real estate agents before assembling the team they need to make an informed decision.

Here are some steps to take to get started:

Check Your Credit Report

Pull your credit report for free from www.annualcreditreport.com. No one should start the home search without first become financially ready with a real understanding of the budget and credit qualifications you need to buy a home. Your credit report will show you how you look in lender’s eyes.

Evaluate Your Finances

Evaluate your finances before visiting a lender. · Do you have a steady job with a strong indication that you will keep it for years to come? · Do you have savings? Even with low down payment loans and closing cost assistance, you are likely to need at least 6.5% of the home price in cash – 3.5% for a down payment and 3% for closing costs with an FHA-insured loan. You also need some cash in the bank to cover unexpected maintenance or repair problems. · How’s your debt situation? Lenders will typically allow a maximum debt-to-income ratio of about 40%, including all housing payments. (Debt-to-income compares all your minimum monthly payments with your gross monthly income.) · Determine a housing budget that makes you comfortable. A lender will tell you how much you can qualify for, but first you should think about how much you pay in rent and how much more you can comfortably spend on a mortgage.

Visit a Lender

Visit a lender. Bring along pay stubs and bank statements and be prepared to reveal all your financial information. Ask questions to make sure you understand your options. Most buyers today opt for a 30-Year Fixed-Rate mortgage since rates are low and this is the safest way to know what your payments will be.

Check Available Programs

See if you qualify for any first-time homebuyer programs. In addition to the federal tax credit, which expires April 30, 2010, state and local governments have incentive programs for low down payment loans and closing cost assistance.

Choose an Agent

Interview several real estate agents and choose one to represent your interests.

Set Reach and Limits

Work with your agent to narrow your priorities and estimate what you can comfortably afford to buy. Sometimes your wishes may be bigger than your budget, but a good agent can help you decide what’s most important to you and perhaps find a similar neighborhood to the one you love that is more affordable.

Check Resell Value

Make sure to consider resale value when you are buying because that’s what will make your investment worthwhile.

Se Before Your Buy

Have a home inspection. Go on the inspection to learn as much as you can about the property you will soon own.

While buying a home can seem like a daunting prospect, it can be a much smoother process if you work with a team of professionals who have the experience you lack.