Purchasing a home is not only a big decision, but a big expense.  It is important to consider what you can afford and your options available if supplements are needed. As you begin to search for the perfect home, it is important to answer the following questions:

Affordability Considerations

1. How much house can I afford?

Many people find mortgage calculators a fast, easy, and convenient way to find out how much house they can afford. Many real estate sites have mortgage calculators on line that will give you an idea of what you afford without stretching your budget to its limits. If you prefer to do a rough calculation yourself, then the affordability formula is recommended. The formula is calculated by multiplying your annual income by 2 to 3 (2 being the most conservative choice). However, as the formula is a rough estimation, it fails to take into consideration your savings, down payment affordability, and loan approval needs.

2. Are there any other expenses besides the mortgage?

Not only will you have a mortgage payment, but also fixed expenses. One of the three big fixed expenses is the property tax. Varying from state to state,  the tax is calculated by multiplying the state percentage rate by your prospective mortgage payment (monthly payment x12). The tax generally ranges from 1 to 3%. Other important expenses property insurance and utilities expenses. The latter depends on the size and insulation of your home and both expenses are not proportional to the value of your home. 

3. Am I entitled to any tax reductions?

Relief in the form of interest expenses (those on your mortgage) can be written off as a deductible expense on your federal tax return. Additionally, first-time buyers will receive an $8,000 credit according to recent legislation.


For those who are considering loan options:

1. What is my credit score?

In order to be approved for a loan, you need to calculate your credit score. The following sites will calculate your rating:

• myFICOscore.com
• freecreditscore2009.com
• nationalcreditreport.com

2. Based on my credit score, will I be pre-approved for a loan?

As each bank’s criteria differs, it is recommended that you discuss this with your respective bank/lender for further details.

Other considerations:

1. What are my housing preferences (what am I looking for in a home)?

The Internet provides you with many sites (like Craigslist.com)  to search for homes within a particular area and with specific features. After formulating a rough draft of preferences (I.e. price range, number of bedrooms, square footage, etc.), you can contact an agent with your housing criteria, browse the web to find properties that meet your specific needs, or visit www.findbuyers.com. Findbuyers.com matches your preferences with seller offerings and allows you to directly communicate and transact with the seller for free.

2. Do I need an agent?

Findbuyers.com allows you to directly transact with the buyer and seller. However, as a  first time buyer you may find an agent useful for the negotiation stages, or closing procedure, etc.

While there are many things to consider before purchasing a home, the above answers some of the most important questions you might have as a first-time buyer. It is therefore recommended that you make sure you can afford your prospective mortgage payment, take into consideration other expenses, and utilize the internet in assisting you to find the perfect home.