Seven Tips For Buying Your First Home

One of the most important decisions a couple will make is the choice of a first home. Choosing well can ensure safe schools for the kids, stability in family and other relationships and opportunity. Choosing poorly can result in financial disaster. Financing the home purchase properly is almost as important as being paid for the right home. Here are some tips to help you make the right choices:

1.  Select a home in a neighborhood where people generally earn what you earn or a little bit less. By doing so, you’ll find your neighbors drive cars like yours, struggle with the same budget questions you do, vacation where you do, etc. If you move to a neighborhood where everyone has a bit more money, you and your kids are likely to feel poorer not richer, constantly struggling to buy a car as nice as the neighbor’s car or to vacation like they do. Save yourself the drama.

2.  Select a home with convenient access to public transportation. You may not think you like to take it now, but if gas prices spike or your income changes, using public transportation may become the solution to an otherwise big budget problem.

3.  Select a home where you can walk to some of your most routine destinations, school, grocery store, and other conveniences. Being given the opportunity to walk for those errands could save you money, keep you fit and contribute to the protection of the environment.

4.  Select a home that will be appropriate for your family for a long time, perhaps forever. The secret weapon in finding a home that will last a long time is often an unfinished basement. That open space makes great storage today and in the future—when resources permit—you can transform it into beautiful finished space for more kids and/or more luxury.

5.  Don’t borrow more than you believe that we can afford just because the bank says you can afford more. You know your spending habits and your needs. Don’t fudge with the bank so you can borrow more than they would otherwise allow; the bank’s underwriting guidelines are generous enough. Banks are situated in the business of making loans; they like you to qualify. Fit your home to the existing financing.

6.  Ride the largest down payment you can. Applying to a down payment of less than 20% of the purchase price will increase the cost of going through the balance, so save and prepare well so that you can make the largest down payment possible. If you can comfortably put more than 20% down, do it. The smaller your mortgage, the better.

7.  With mortgage rates at all-time lows in 2012, consider a shorter term mortgage. It wasn’t too long ago that folks thought that 8% was a reasonable mortgage rate. The payment on a 2012 mortgage at 3.75% for 15 years is the same as the 8% mortgage spread over 3By putting yourself in a position to be mortgage free in fifteen years instead of 30, you create possibilities for your family that may far outweigh an extra 600 square feet of living space.

The happiness you will experience in your home will have much less to do with of the house than the people in it. If you buy a home that stretches you financially, you’ll add stress and anxiety to your home. If you buy a home, you can easily afford and have virtually no risk of losing, you’ll invite peace, tranquility and stability into your home.