First Time Home Buyer Considerations

Your first step is figuring out how to make that first step

Posted: June 20, 2012 at 11:15 AM by Brian Beezley

Two weeks ago my wife suggested that I pick up a new set of tires for my Jeep. These two weeks have been a nightmare. If you haven’t priced tires lately, especially big ones, you should know that this isn’t some $100 per tire type of adventure. The tires I priced ranged from $200 to $500 a piece. It’s hard to put $1500-$2000 into a set of tires that you’re going to have to love for the next three or four years without getting all the information possible. I’ve talked to 20 different tire guys, some Jeep guys, and even the co-worker who shares an office with me – much to his chagrin. Do I want to go taller? What can I fit under my Jeep? If I go much bigger, I’ll have to trim the body or get a bigger lift. Can my tire carrier handle the extra weight or will I need to replace my rear bumper? Will my axles handle the extra weight? If I do go larger, I’ll have to buy new rims. Black rims or silver? Machined or polished? If I stick to a slightly smaller tire I’ll spend less money and can use my same rims, but am I going to regret that decision later?

Obviously I put way too much thought into tires; but before I spend that money, I want to make sure that it’s what I want and what I can afford.

Can you imagine me buying a new home?

For some, buying a first home is exciting and thrilling, but for others, it’s a terrifying experience. I just spent two weeks stressing over a $2000 purchase, but when you figure that a new house, even for a first time buyer, can easily be over $200,000 you have to figure that you’re going to want to really think about it for more than a couple weeks.

Buying a home isn’t just about price: location, your needs and wants, future resale and many more choices are going to be considerations for your first home. So what should you be thinking about as you plan on dropping 10-Toyota-Corolla’s worth of dough on a pile of brick and wood?

Over the next few days, we’ll talk about some considerations you may want to think about before you take the plunge.

How much can you afford?

When you get pre-qualified for a loan, your bank looks at your income and your debt service ratio to determine what they believe you can afford. I’m not going to go into details because I’m not a mortgage professional, but even if the bank tells you that you are pre-qualified for a $200,000 mortgage it doesn’t mean that that is what you can afford. Maybe you like to go on a cruise every year, see 10 movies a week (with extra butter on your popcorn, naturally) or have an eBay habit that you haven’t quite been able to kick but has been instrumental in meeting that nice guy in the big brown truck.

You know better than the bank does how much you’re spending on your Blue Ray collection, iPad Aps or collection of novelty key chains. Just because your mortgage professional approves you for a certain amount of money, it doesn’t mean that’s what you can afford. Look at your budget and determine how much you can afford per month. When I say afford, I’m not talking about the as-long-as-nothing-goes-wrong-and-we-never-have-to-buy-anything-other- than-gas-and-food-and-plan-on-working-4-jobs-each sort of afford. I’m talking about the ‘We can make this work, still save a little for emergencies and still live the life we’d like to live’ sort of afford.   Work with your mortgage professional to determine what the mortgage would be with that monthly payment and then stick to that total. Be honest with yourself. Nothing would be worse than getting six months into your shiny new 20 year mortgage and realize that there is no way you can afford it.

This is why talking with a professional, even when you’re just starting to think about buying a home, is so important. Make sure, before you start your search and end up falling in love with a property, that you are in a position where you can afford to buy your new home and that your lender agrees.