mortgage

Getting the right first mortgage

For homebuyers getting their first mortgage, life can be stressful. We've all heard the horror stories about eager, new buyers who bite off more house than they can chew.

How can you make sure you don't wind up among the "house poor?"

For starters, have a clear idea of how much house you can realistically afford. Take a hard look at your income and other expenses (e.g., car payment, health insurance, school loans).

Fannie Mae recommends homebuyers allocate no more than 28 percent of their monthly budget toward housing costs. Once you start spending 30 percent or more of a monthly paycheck on house payments, you risk overextending.

After crunching the numbers, use Bankrate's mortgage calculator to help determine how much your first mortgage will cost each month.

Next, check out the inventory of homes for sale and take a look at recent sale prices of comparable homes in your area. Search websites for local real estate listings.

Because this is your first mortgage, you may benefit from the expertise of a seasoned and reputable real estate agent. To find a reliable agent in your area, ask a trusted friend or family member for a referral, or visit the National Association of Realtors website.

Another important step in budgeting for a new home is accounting for additional expenses that typically accompany a first mortgage. Your agent and/or lender can provide an estimate of how much extra money you'll need to bring to the closing table for expenses such as taxes, homeowner's insurance and closing costs.

Finally, it's always a good idea to have a little money left over after the sale for all those extra expenses of homeownership. Remember, if the air conditioner breaks or the roof springs a leak, you have to pay for the repair or replacement -- the days of dialing the landlord are over after you secure that first mortgage and become a homeowner.

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