1 - Understand how much you can afford in a monthly payment

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I used to be surprised how many people would come to me wanting to buy a home, but when I would ask how much they could afford in a monthly payment, they wouldn’t know. My advice is to look back at the last 6 months – how much have you paid in rent each month? Was it comfortable? If you’re looking to pay more on a mortgage, do you have the availability to do so? If so, begin putting the additional amount into savings now. This will help you feel comfortable with that payment amount.

 

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2 - There is more to the monthly payment than just the mortgage

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Many people pull up online calculators and get excited when they think they can buy a $300,000 home for $1,200 per month (with 20% down, that is the principle & interest payment). But, in addition to the mortgage payment, you also have – property taxes, homeowner’s insurance, mortgage insurance (if you put less than 20% down) and may have a HOA if you are buying a condo or townhome.

 

                                                                                     

3 - A down payment may not save you as much as you think

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Many people believe you need 20% down to buy a home, but this is not true. There are zero down programs, FHA only requires 3.5% down and conventional programs are available for 3% or 5% down. Yes, you can save money by saving up the 20%, but I have watched borrowers wait a couple of years so they could save up the 20% down payment and yes, they saved $100 per month in mortgage insurance, but their home literally cost $50,000 more when they finally pulled the trigger and purchased a home.

 

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4 - Work with a good real estate agent

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A good real estate agent is invaluable. They are out in the market each day, they know the home values, they know how to put together a solid contract and they are watching your back, The best part, in general, a buyer’s agent costs the buyer nothing, they are compensated by the seller.

 

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5 - Understand your costs, deadlines, and timing when purchasing a home

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When buying a home, your first cost is the earnest money, typically $1,000 - $2,000 that you give your realtor (or title company) when you go under contract. (This earnest money can go toward your down payment and/or closing costs). Then you will have a home inspection, which if you choose to have one done, will cost between $300 and $500. Once you go under contract on the home, plan on it taking 3-6 weeks for closing.