Is Time for a New Home
Some tips for people looking for a new home

When you're looking at new homes, you may wonder, "What can I afford to spend?" As a general rule, multiply your gross income by 2.5%. For instance, if your annual household income is $50,000, then you can afford to search for homes around $125,000. To be more precise, mortgage lenders look at your "housing expense ratio," which says that your monthly mortgage payment should not be more than 28% of your monthly gross income. Your utilities, taxes and mortgage payment should not be larger than 33% of your income. Also, they look at your "debt-to-income ratio," which says your total debt (including credit cards, alimony, housing and student loans) should be no more than 30% to 40% of your gross income.

There are many myths that people believe, which stymie their search for new homes. For example, some people hold off, thinking that they need perfect credit or a 20% down payment saved up. In reality, you may still be able to search for homes with blemished credit. Over time, your credit will improve and you may be eligible for refinancing your loan. You can also find a rent-to-own property, which will buy you another 3 years to get your credit up to par if you need it.

There are still realty options that allow you to buy a home with little to no money down. Some organizations like HUD help first time home owners with down payment assistance, rent-to-own real estate puts aside a portion of your rent toward the down payment and there is a first-time home buyers' credit of $7,500 this year.

When you start looking at new homes, you'll find the process is very emotional, fun and exciting. When you find your dream home, you'll know it instantly. You'll envision your personal belongings and furniture in the rooms and you'll feel an overwhelming sense of joy. However, it's important that you remain grounded, have a set budget and stick to it.

Avoid looking at homes above what you can afford even if it's "just ten thousand more." In your search for homes, bring a camera, a note pad and someone close to you. Ask about utility and maintenance costs, consider your commute and focus your efforts on a few key neighborhoods. With the help of a trusty real estate agent, you'll have access to the MLS where there are numerous listings you couldn't have discovered on your own.

New homes have their rewards, but they're also a lot of work. Each year, you'll be responsible for maintaining and keeping your property attractive. This means lawn mowing, shoveling snow, raking, painting, gardening and roofing, to name a few tasks. You may even need to remodel to increase the value and your enjoyment of the home. Often kitchens and bathrooms are renovated and improved. To get better mortgage rates, many people decide to refinance later on down the road too. Last but not least, don't forget about home owner's insurance, which will protect your home from catastrophic disasters.

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