House Match: Starting Out, This is the most important purchase you're likely to make. You want to get it right.



Regardless of how ideal the market may seem, it's still a good idea to sit down with your real estate agent and think about how you see your life in three or five years and ask yourself some pointed questions.

Can I afford it?

Buying a house will have a significant impact on your finances, so make sure you can handle it.

Housing is more affordable than ever and incentives like low interest rates and the new expanded tax credit are enticing buyers to enter the market. But purchasing property involves a lot of upfront costs: closing costs, down payment, new furniture, moving expenses. Do you have enough cash?

Create a budget for the monthly mortgage payment and homeownership costs, such as general maintenance if you buy a single-family home or homeowners association fees if you buy a condo.

Am I mortgage-worthy?

Say you saved enough cash, but what about your credit? It's not a secret that getting a mortgage these days is harder than it used to be. Lenders are looking closely at all documentation of your income, debts, assets and liabilities, to make sure you don't exceed the maximum debt-to-income ratio. And when it comes to credit scores, the most competitive interest rates (the 5 percent you may have heard about) only go to buyers with credit scores above 700.

The key is to review your financial situation before you check out open houses. Use our affordability calculator to see what kind of monthly mortgage payment you can comfortably afford.

Do I plan to live here for at least five years?

Most personal finance experts say that unless you plan to live in a home for at least five years, you likely won't recoup any of the expenses associated with buying and later selling the house.

Plus, your first few years of mortgage payments primarily pay off interest, not your principal, so you will not have built up a lot of equity in your home. You may be better off renting if you expect to move in the next couple of years. Just because you live in a buyer's market doesn't mean the time is right for you to buy.

If I buy with another person, how will this affect me?

Buying real estate with another person has its perks, if you both have stable financial situations. By combining cash and resources, you're likely to get a bigger, better place than you each would as individual buyers. Plus, when you're starting out, it helps to share the financial burden with someone else.

But before you start house hunting together, sit down, lay all your cards on the table and get the answers to these important questions. Whether you're buying with a spouse, domestic partner, relative or friend, setting the ground rules first will save you both a lot of headaches in the future.

Is it worth the money?

Frey admits that she's spending slightly more than she wanted to, but, in the end, she decided it was worth it because "the appliances stay, the kitchen is remodeled and it's a house that I won't outgrow in a few years."

In other words, the place in which you live is an investment and the money will always be relevant, but that old-fashioned moniker "home sweet home" is decidedly modern these days. People aren't buying houses anymore; they're buying homes.


By Geoff Williams and Annalisa Burgos, | Published: 10/07/2009



Geoff Archambault

Geoff Archambault

Sales Representative
CENTURY 21 Advanced Realty
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