Find out how much you can afford.
Your mortgage lender will look at a couple different numbers to find out. The first figure is your take-home pay. Banks like to follow the 28/36 rule: Your monthly mortgage payments should total no more than 28 percent of your net paycheck, and your total debts, including car payments and student loans, shouldn't inch over 36 percent.
Get preapproved for a loan.
For a small fee, a lender will contact your employer, bank, and others to verify your income, assets, debts, and credit history. You’ll then get a letter stating that your mortgage is approved for a certain amount (which will help you determine your price limit!) up until a certain date. This document is more for the home seller’s benefit to prove that you’re a serious buyer. There's no obligation on your part to actually get a mortgage.
Start searching for new digs.
A good way to start is to look at advertisements of homes located in neighborhoods you might want to check out. Then see who the listing agent is -- chances are that company does a decent amount of business in the neighborhoods you’re interested in. Also use our
finding a home tool.
Make an offer.
Do your own research in your local paper, office of public records, or
Zillow to find out what similar homes in the area have recently sold for. Choose a number for your initial offer. If it’s far below the asking price, be prepared to defend it with your research. Don’t let your real estate agent pressure you into making the first number any higher than you’re comfortable with.
Settle on a price.
The seller will respond in one of three ways: an acceptance, a counter-bid (giving you a number somewhere between your offer and the asking price), or declining by sticking to their original asking price. Find out why the sellers are digging in their heels. If you can agree on a number, you’ll sign a contract and be asked to put down a “binder” or “earnest money." Make sure the contract specifies that you can get this money back if you withdraw your offer.
Get an inspection.
Ask a realtor to recommend a certified inspector or check out the
American Society of Home Inspectors. Have our
home inspection checklist handy.
Close the deal.
Once the inspection is done, you’ll need to contact your lender and hire a lawyer to set up a closing date. Go buy some champagne and celebrate!
-- Betsy Wiesendanger
See More: Buying a Home , Real Estate
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vampgrrl04
Not only the mortgage, PMI and taxes do you need to consider. I'm a first time home buyer and both my fiance and myself both live at home still. We sat down with both sets of parents to determine to cost of house insurance, gas and electric, phone, internet, cable and all the other regular house hold bills. This was a big eye opener. I even satu down and figured out every monthly payment that would be at different percentage rates as well as different down payments and different house costs.
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nygrl4evr
this is so not even close to accurate! There is so much more that goes into buying a home. I'm with you LaurenC3 - keep looking at your finances and remember that there are a lot of hidden expenses.
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Jess61584
But also keep in mind that your property taxes and home insurance is 95% of the time included in your mortgage payment.
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LaurenC3
My best advice would be to take an honest look at your finances and determine exactly what you can afford (factoring in all house-related expenses—HOA dues, insurance, PMI, property taxes—and not just the mortgage itself). Comparing just your mortgage payment to your monthly rent won’t give you an accurate picture of how expensive owning a house will be.