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Five Tips for First-Time Home Buyers

by Danielle Babb

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 mortgage professional can tell you this, or websites such as Bankrate.com or Military.com, have mortgage calculators to help you out, but don't rely on this information.  Talk to your mortgage professional. 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 paying 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.   Talk to your mortgage professional first.

3.) Prioritize your debts before you buy. If you need to, 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 little or 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.  Talk to your mortgage professional for their insight.

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 $417,000. 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.

All in all, deals abound. Rates are historically low. If you can afford a home, you will get a great mortgage interest deduction. I say, go for it.

© 2008 Danielle Babb.

 Call Rick Sandon, for your free mortgage consultation (813)319-6500