Advice for First-Time Homebuyers

Today's housing market is witnessing unprecedented drops in home values across the nation.

As a result, many loyal renters are considering purchasing a home for the first time.

However, buying a home can seem like a daunting task to anyone who has never gone through the process.

Fortunately, there are steps that consumers can take to get them started down the path to homeownership.

Steps Toward Homeownership

Step 1: Determine how much home you can afford.

Probably the most important step, determining how much home your budget can handle is essential. One of the causes behind the current housing slump was too many people purchasing homes that they could not feasibly afford.

To figure out how much home you can afford to buy, you will need to add up all of your monthly expenses, such as your car payment, credit card payments and other necessities like food, gas and utilities. A reputable lender then should be able to tell you what you can afford by comparing your expenses to your gross monthly income.

Your best bet is then to aim for an amount a little lower in order to ensure that you are not "house poor" following the purchase. You will need to have money left over each month to take care of any unexpected expenses that might pop up, a common occurrence that comes with homeownership.

Step 2: Shop around for the best mortgage rates.

When it comes to selecting a lender, you can save thousands of dollars with just a little research. By shopping around, you will discover that not all mortgages are created equal.

From interest rates to closing costs, the total amount you can end up paying for a home can vary significantly depending on the lender you choose. Important data to compare are the lenders' loan interest rates; points that are tied to the loan; any fees associated with the loan, such as loan origination fees and closing costs; and the minimum down payment required.

Step 3: Finding for the right home.

Your home is probably going to be your largest single purchase. As such, searching for that perfect home will require some diligence on your part.

The first step in finding the right house is determining what you want in a home. Take some time to create a "wish list" for your home purchase. How many bedrooms do you need? Is an attached garage important? How about a backyard for the family dog? Then, prioritize the list, making note of those items that are "must-haves" versus "nice-to-haves."

Once you have your list in order, take that list with you on your home search. As your tour several homes, check off items from your "wish list" that each home has. Additionally, you should make notes at each house, comparing those factors that are most important to you.

You also might want to consider consulting a Realtor when searching for a home. Realtors will have knowledge of homes that are about to go on the market, whereas you might not find a potential home until it has already sold. Realtors also can represent you in negotiations with the seller to ensure that you get the best deal possible.