Here are four basic (very basic) tips for someone looking to buy his or her first home.
1) Assess your credit: request your credit report to see where you stand; if you plan on buying soon, you need to clear up any errors or problems.
2) Figure out how much you should borrow: your bank will probably want to lend you more money than you should borrow; don’t buy into it – keep your monthly loan amount to less than 33% of your gross income, under 25% if possible (it won’t be …), and remember to factor in property taxes and condo fees.
3) Factor in on-going costs: you’re going to own a property that may need repairs; how are you going to pay for this if all your money is going to pay your mortgage loan?
4) Save money: sure, you should put down as much as you can, at closing, but remember, you’ll also have closing costs, which can run you up to 5% of your purchase price (usually, it’s more like 3%, in my experience); plus, leave yourself some money for new furniture, paint, etc. – you don’t want to be “house poor”. Part of the fun of owning a new home is being able to enjoy living there!
More: A Guide for First Timers Making That First Big Home Purchase – By Marshall Loeb, MarketWatch, by way of The Wall Street Journal