Buying a Home

How to find a good real estate agent?
      Getting a recommendation from a friend or work colleague is an excellent way to find a good agent, whether you are a buyer or a seller. Be sure to ask if they would use the agent again.
      You also can call the managers of reputable real estate firms and ask them for recommendations of agents who have worked in your neighborhood.
      A good agent typically works full-time and has several years of experience at minimum.
      If you are a buyer, you don't usually pay for your agent's services (in the form of a commission, or percentage of the sales price of the home). All agents in a transaction usually are paid by the seller from the sales proceeds. In many states, this means that your agent legally is acting as a subagent of the seller. But in some states, it's legal for an agent to represent the buyers exclusively in the transaction and be paid a commission by the sellers. You also can hire and pay for your own agent, known as buyer's brokers, whose legal obligation is exclusively to you.
      If you are a seller, you should interview at least three agents, all of whom should make a sales presentation including a comparative market analysis of local home prices in your area. The best choice isn't always the agent with the highest asking price for your home. Be sure to evaluate all aspects of the agent's marketing plan and how well you think you can work with the individual.

When is the best time to buy?
      Here are some frequently cited reasons for buying a house:
      You need a tax break. The mortgage interest deduction can make home ownership very appealing.
      You are not counting on price appreciation in the short term.
      You can afford the monthly payments.
      You plan to stay in the house long enough for the appreciation to cover your transaction costs. The costs of buying and selling a home include real estate commissions, lender fees and closing costs that can amount to more than 10 percent of the sales price.
      You prefer to be an owner rather than a renter.
      You can handle the maintenance expenses and headaches.
      You are not greatly concerned by dips in home values.

What can you afford?
      Knowing what you can afford is the first rule of home buying, and that depends on how much income and how much debt you have. In general, lenders don't want borrowers to spend more than 28 percent of their gross income per month on a mortgage payment or more than 36 percent on debts.
      It pays to check with several lenders before you start searching for a home. Most will be happy to roughly calculate what you can afford and pre-qualify you for a loan.
      The price you can afford to pay for a home will depend on six factors:
      1. gross income
      2. The amount of cash you have available for the down payment, closing costs and cash reserves required by the lender
      3. Your outstanding debts
      4. Your credit history
      5. The type of mortgage you select
      6. Current interest rates
      Another number lenders use to evaluate how much you can afford is the housing expense-to-income ratio. It is determined by calculating your projected monthly housing expense, which consists of the principal and interest payment on your new home loan, property taxes and hazard insurance (or PITI as it is known). If you have to pay monthly homeowners association dues and/or private mortgage insurance, this also will be added to your PITI.
      This ratio should fall between 28 to 33 percent, although some lenders will go higher under certain circumstances. Your total debt-to-income ratio should be in the 34 to 38 percent range.