But naturally, there are numerous advantages to owning your very own home. You are able to deduct from your federal income taxes the interest you pay on your home mortgage (you can also do the same with the property taxes you shell out on your home).

Knowing that your monthly payments are contributing to equity on your property is comforting – the fact that a house is considered an investment signifies that the worth of your home will likely increase. Despite the fact that housing values for a few have gone down since they purchased their properties, other buyers who hold onto their homes long enough will often see their home values appreciate considerably.

Do your Homework

You will find many books and websites on the topic of buying your first home. As with anything you are learning for the very first time, the information can at first be overwhelming and you may wonder how you will ever get it all straight. But wrapping your head around the terms used in the real estate market is a must – and with time, it will all begin to make sense. Keep reading, researching, and asking questions.

Work on Building a Down Payment

Obviously, you must consider the down payment. There are programs that are out there that help first time buyers get into a home with a low down payment. But remember that typically the smaller the downpayment, the higher the monthly mortgage payment.

And for a first-time home buyer who is used to a lower rent payment, a high mortgage payment can be a fiscal shock to their systems. Getting your fiscal house in order and starting to build a down payment should be the priority of any first-time buyer.

Work with a Financial Professional

A lot of first-time buyers feel that they can make a larger mortgage payment than realistically possible. This is where it helps to bring in a financial professional who can look at your monthly salary and allotments and can make an unbiased assessment of what you can actually afford. Obviously the mortgage lenders have their own formulas for qualifying a home buyer, but it is important not to overextend yourself when trying to get into the housing market. Don’t forget that even though you end up getting a fixed mortgage payment, property taxes can rise dramatically especially if your town decides to put in a new high school or middle school. Leaving yourself some breathing room for such a circumstance is good prior planning.

Know your Credit Score.

Your past history paying bills is paramount when it comes to qualifying for a home mortgage. If you have a history of being delinquent on car or credit card payments then this will hurt you when it comes to asking for a loan for a house. You can get your credit report for free at www.annualcreditreport.com. It is an official government site. You will be able to receive your credit report but you will have to pay roughly $20 for your credit score. If your score is low then you should work hard to raise it to acceptable levels before applying for a mortgage.

Buying a home for the first time can be a daunting task. By doing your homework, building a solid down payment, knowing what you can pay each month, and building good credit, you’ll be well on your way to the satisfaction and gratification of home ownership.

Let’s take a look at what you will need.

• The very first thing you should do is request a copy of your credit report.  Make sure there are no outstanding problems or errors that may prevent you from taking out a mortgage.  It could take some time for discrepancies to be cleared up, so get this process going immediately.  Along the same lines, be mindful of activity that is happening with your accounts during the home buying process.  Avoid transferring large sums of money or taking out new debt.

• Now it is time to create a file of your financial records.  Here is what you will need:
  • W-2’s and tax returns for the last two years
  • Pay stubs for the last two months
  • If self employed, two years of tax returns plus a current profit and loss statement (i.e. income statement).  If your income has been irregular you may need to produce account information from the last three years.
  • Two months of checking account statements
  • Two months of statements from other accounts (IRA, savings, money market, etc.)
  • Documentation of other assets such as stocks, bonds, and CD’s
  • Records proving that derogatory credit report items are paid off
  • Social security numbers for those buying the home
  • Two years of employment history; preferably steady work in the same industry
  • Balances of other debt including car loans, store charge cards, credit cards, etc.
  • Current landlord’s contact information, monthly rental payment amount, and previous landlords for the last two years
  • If you currently own a home, have ready the address, mortgage lender, account number, payment amount, balance, and current market value of your home.
• The following are particular circumstances that may or may not apply to you:
  • If you are separated or divorced, you will need your divorce decree or separation agreement.  Include also child support payment amounts to be included in your income.
  • If public assistance is part of your income, you will need to provide the amount you receive.
  • If you have declared bankruptcy or have gone through a foreclosure or any other credit-related judgments against you in the last seven years, produce documentation of the proceedings.

The thought of gathering these items may seem tedious to you but is a critical step in the home buying process.  Make copies of all documentation or better yet scan each piece and store it on your computer to be printed or forwarded electronically as needed.  Stay organized by purchasing a portable accordion-style folder to store the originals and hard copies.

An example “do not” from the resource: “Do not start to spend for the new house until you are in it. Charging up your credit card on all those new furnishings could throw your debt to income ratios outside the boundary where you qualify for the mortgage.”

Source: Gold Beach Homes

View more home buying tips and mistakes at Newbuyer.com.

An example of how much you can save from the resource: “The amount of money that a home buyer can save depends on the share of the real estate commission, which is negotiable with the agent, and the sales price of the home. For example, buying a new home with a sales price of $500,000, with a 1 1/2% share, would save the buyer $7,500.”

Source: Real Estate Investing Blog

Read more home buying money saving tips at Newbuyer.com.

From the resource: “Before researching the market or analyzing housing options, homebuyers may want to start by prioritizing their family’s needs, determining what are “must-haves” versus what are “nice-to-haves.”

Source: Coldwell Banker

Read More About Finding the Right Home for You at Newbuyer.com

How Much You Can Borrow is Different from How Much You Can Afford

A mortgage lender will use a standard calculation to determine how much he is willing to lend you.  He will gather from your application, information about your income, debts, credit, and available down payment.  By calculating what is called a debt-to-income ratio, your lender will determine how much he can safely (an extremely subjective term) lend you.

However, you must know the following about the lender’s calculation:

• Only recurring debt is included, such as home equity loans, car payments, minimum credit card payments, student loans, furniture store loans, alimony, child support, etc.
• Other miscellaneous debts and obligations such as informal personal loans are not included
• Other household and living expenses are not considered
• Expenses associated with your personal life style are not considered
• Future financial demands and plans with regards to career and family are not considered
• The ratio is based on your gross income, not after-tax income

As you can see, with the many debts and obligations that are excluded in the lender’s calculation, the amount of money he can offer will most likely be higher than you would have thought it to be.  This is where the trouble begins for many home buyers.

Awaken the Responsible Home Buyer Within

By the nature of the many debts and obligations excluded from the debt-to-income ratio;  it should be obvious that the lender’s number simply isn’t going to work for you.  This is where personal responsibility comes into play.  Do not ignore the discrepancy between the lender’s numbers and what you can truly afford.  And don’t be discouraged.  This is your reality; embrace it and adjust.  Look a little harder for a suitable home that fits your budget or perhaps rent until you remove other debts or save for a larger down payment.  Do whatever it takes to avoid becoming house poor or worse yet, foreclosing on your new home.

When to Do Your Own Calculations

You can see the importance of running your own numbers before you talk with a lender.  Walk into a lender’s office telling them what you can afford and what you are comfortable paying.  It is so easy to become “wowed” by your overinflated buying power.  As they say “don’t even go there!”

From the resource about knowing your credit: “As the mortgage world goes back to basics, good deals require high credit scores. Until recently, it took a credit score of 720 or higher to get the best combination of fees and points. Now the best homebuying deals go to borrowers with credit scores of 740 or higher.”
Source: Bankrate

See more mortgage news at Newbuyer.com.

From the resource: “I just wish someone would have told me before I bought my home how expensive it really was going to be.”

Source: Kiplinger.com

Read More About Home Affordability at Newbuyer.com

An example from the resource about the increased cost of utilities: “Of course, renters generally also pay their own heating and electricity bills. But in buildings with common walls such as townhouses and condominiums, heating costs tend to be much cheaper than in a single-family home of the same square footage.

Source: RateMarketplace

Read More About Home Buying at Newbuyer.com

From the resource: “Looking to buy your first home? Along with the excitement of owning your own place, you may also be thinking about how to pay for what is likely the single biggest investment in your lifetime. Fortunately, there are some steps you can take to ease your mind, and save you money.”

Source: LendingTree

Read More About Home Buying Savings at Newbuyer.com