Getting ready to buy your first home? Before you take the plunge, you need to be sure that you’re ready to take this major step and that it is the right thing for you.

Spend some time planning your strategy and examining the mistakes other first time home buyers make to avoid being disappointed. You don’t want to find yourself living in the wrong house or saddled with a mortgage you can hardly afford.To begin with, lets examine the reasons for buying your own home.

Reasons To Own Your Home

• Tax breaks – deductions are made in accordance to the interest you pay on your mortgage, property taxes and some of the costs involved in acquiring  your home.
• Appreciation – as a result of a high demand for housing, real estate offers stable, long-term growth in value.
• Equity – payments you make on your mortgage allow you build equity ownership interest in your house.
• Predictability – compared to paying rent which can rise with demand, fixed-mortgage payments will stay the same, allowing you better control of your finances.
• Freedom – when you own a home, you’re free to do what you want, including redecorating it the way you want, which could increase the value of the home.
• Stability – staying in one place is good for stability especially if you have a family or plan on a family. When renting, sometimes you may have to move for one reason or another.

Here are some first time home buyer tips which can help smoothen the process for you:

 Pay Off Your Debt

If you have any credit card debt, pay it off or reduce it significantly before beginning your search for a mortgage or starting your house hunting. This isnt to say that saving up for a down payment is not equally important. However, consider that credit card debt is expensive and limits your ability to save. Furthermore, when deciding how much you can borrow, lenders will take into account your total monthy debt service, including payments on your credit card, and often this shouldn’t exceed 40% of your gross income.

How Much Can You Afford?

A general rule is that your mortgage payments, taxes and homeowners insurance shouldn’t exceed 28% of your gross income. Having a down payment can put you in a better position to pay repayments. But you also have to take into account closing costs and other expenses you may incur for your new home. All these things will determine how much you can afford to borrow and whether it fits into your budget.

Getting pre-approved will put you in a great position to make an offer for the house you find straight away whereas if you don’t have the finances in place already, you might end losing the house to someone who has. 

Poor Credit

If you have poor credit, you may yet still get approved for a loan from some flexible lenders. Sometimes it can help to obtain a copy of your credit history, which can have some things wrong which can be easily fixed.

If you still cant get approved, you may yet qualify for a loan insured by the FHA (Federal Housing Administration). These are government-insured loans which are targeted to help first time buyers and low-to-moderate income families. They tend to have a lenient credit criteria and require little down payments. Furthermore, theres no income limit to qualify, though theres a limit to how much you can borrow, which varies from state to state.

Down Payment Assistance Programs

States and municipalities receive money from the Housing and Urban Development department (HUD), most of which goes to down-payment assistance programs which are targeted to help first time buyers and low-to-moderate income families.

They offer grants or loans to go towards your down payment or closing costs. Usually these come up to about 3% to 5% (sometimes more) of the sale price. Those who qualify and stay in their new home for at least 3 years, may not have to pay back the loans.

You must earn no more than 80% of your state’s median income to qualify for a down payment assistance program.