Whether you're searching for your first home, moving up, or downsizing, the purchase of a home is a major financial commitment. Don't let the excitement of looking for your dream home prevent you from following these tips:

Set an upper limit for your home's purchase price and don't exceed it. Before you start looking, carefully analyze your expenses and decide how much you can afford to pay for a home. An often-cited guideline indicates that your mortgage payment, insurance, and property taxes shouldn't exceed 28 percent of your gross income. These days, however, some lenders allow up to 40 percent of gross income to be spent on housing costs.


Don't Forget Taxes

The interest you pay on a qualified home mortgage is deductible. You generally cannot deduct the full amount of points in the year paid. Because they are prepaid interest, you generally must deduct them over the life (term) of the mortagage.

Rather than letting your lender dictate what you can afford, you should decide what a comfortable mortgage payment is. Don't raise that limit as you look for houses, thinking you can reduce your living expenses to cover the difference. It can be very difficult to change your spending habits.

 

Consider all your financing options. Down payments are hard to come by.  However, most military service members qualify for a VA loan that does not require a down payment.  Not a military service memeber?  There are other financing options that do not require down payments.  Financing programs such as FHA and Conventional loans will require approximately 3.5% down and you will pay private mortgage insurance, which typically runs from .25 to 1.25 percent of the total mortgage amount.  Remember your insurance, property taxes, and any private mortgage insurance are all included in your monthly mortgage payments.

Familiarize yourself with housing prices in the area. A Realtor can provide complete information to you on homes in the area, especially in the price range you are comfortable with.  Al is a great resource for this!  Just let him know what you are looking for in a home and he will provide you a tremendous amount of information and help you narrow your search.   

Consider resale value while you are purchasing.

 

 Get a professional inspection.  While the home may look like it is in great shape to you, a home inspector will check things like the basic operation of heating and air conditioning systems, plumbing and electrical, walls, roof, foundation, drainage, and garage.  A Septic Inspection is also strongly recommended by a certified inspector. 

Review your options before selecting a mortgage. Fixed-rate mortgages are typically a good option for homeowners who plan to stay in their home for many years. The fixed rate results in a fixed mortgage payment, making it easier to budget for other expenses. Adjustable-rate mortgages (ARMs) are popular with homeowners with rising incomes, those planning to move in a short time, and those who want the short-term cash flow benefits of lower interest rates.  A mortgage company will discuss these options with you and let you know the best financial outcome.