Firstly, you will need to do some serious thinking about your housing needs.
What space do you need?
What kind of area do you want to live in – bustling, busy, vibrant or perhaps quiet, traffic free, slower pace?
Can you afford to live in these areas – how much can you afford for your monthly mortgage repayments?
Start by doing some simple research.
Talk to friends and relatives.
Drive through areas that you think you would like to live in.
Check out the 'Homes' section of the local newspaper.
Visit coffee shops and bars – talk to people who live locally. They will soon tell you what the neighborhood is like to live in.
Still think that you want to go ahead?
Have you thought about renting rather than purchasing? How do these two options compare?
The advantage of renting means you don’t have to worry about maintenance. This will normally be the responsibility of the owner but check out what responsibilities you will have in this are to be sure. There might be restrictions on decorating giving you no choices and you cant protect yourself against rent increases. You also do not have the opportunity to build an equity share in the property or take advantage of any tax benefits.
Whereas owning your own home has many benefits. Every time you make a mortgage payment, you are building equity in the property. You can consider this as an investment for the future. If you own your own home, that will qualify you for tax breaks that can help you with your new financial responsibilities- like home buildings insurance. Then there are real estate taxes, and you will be responsible for the maintenance and upkeep of the property. It is in your interest to do this as if you do not, you will suffer when you eventually want to sell up and move on. Upkeep can be a substantial expense. However, home ownership gives you freedom, stability, and security.
Before you begin in earnest, make up a wish list of all the things that you want your new home to be. Remember that this is a ‘wish list’ and you will probably need to compromise on some things. Your home ought to fit way you live with enough space and features to suit your whole family. Make a list of your priorities before you begin your search for your new home. When deciding on the type of community that you wish to live in, select a community that will allow you to best live your daily life.
Consider:
- How large should the house be?
- What type of lot would you prefer?
- The location and size of the property you think you will need.
- Do you need to be close to a certain school?
- How far do you want to travel to your job?
- What is the local public transportation like?
- What kinds of local amenities are you looking for?
You should establish a set of minimum requirements and a list of other things that you will be prepared to compromise on - things that you'd like to have but aren't essential.
When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable in.
Having got this far – can you afford the type of real estate that you want?
In working out the maximum advance (mortgage) that they will give you, the lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses.
Non-housing expenses will include such long-term debts as car or student loan payments, alimony, or child support.
Lender will work on the basis that your payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income.
The lender will also consider any cash you might have available for a down payment and closing costs. Your credit history will also be taken into account when determining your maximum loan amount.
