How much house should I buy or how much can I afford?
The answer to this has a lot to do with your income and the amount of your debt load. As a rough rule of thumb, most home buyers purchase houses that cost between 1 1/2 and 2 1/2 times their annual income. For example, a home buyer earning $40,000 per year would buy houses costing between $60,000 and $100,000. There is, however, a degree of variation due to the individual market prices of the area in which you are interested. In some areas, there may not be houses available within that range, so you may need to spend a bit more. In general, however, your monthly mortgage payment cannot exceed approximately 28%-29% of your gross monthly income. Your total debt payments (car payments, credit card payments, etc. plus the monthly mortgage amount) cannot exceed approximately 36%-40% of your gross monthly income. These ratios will depend on the type of mortgage for which you are applying. For more information on mortgages and to begin the application process, see the section devoted to finding a mortgage.
Do I really need to use an Agent to buy a house?
No. Should you use an Agent to buy a house? Probably, for two reasons. First, in virtually all situations, the buyer does not pay a commission, so the services of an Agent working for you are paid for by the seller. Second, without an Agent, you may be missing valuable representation of your interests.
How do I know if I am getting a good deal on a mortgage?
In a word: Compare. There is a good deal of variation in the mortgage market, not only from week to week, but from lender to lender. Many newspapers list current mortgage rates for your local area in their Real Estate sections, often on Saturday or Sunday. Check them.
What First Time Buyer Programs are available?
There are literally hundreds of different programs available, depending on your location (city, state, or province) and the mortgage source that you use. They vary greatly from program to program. Consult your Agent or your local housing authority for more information.
How much will my closing costs be?
The amount of closing costs will depend on what items are customary for buyers and sellers to pay for in your area. Traditions vary greatly from one area of the country to another. In some areas, for example, the buyer pays for title insurance. In other areas, it is the responsibility of the seller. In still other areas, the cost is split between buyer and seller. Your Agent can give you specific information on the items that are customarily paid for by buyers in your area. In addition, the amount of closing costs will depend on the amount of points you will be paying with your mortgage loan, since these are generally paid for up-front. (A point is 1% of your mortgage loan amount).