Homeownership is becoming a reality for more and more Americans. During 2000, the US homeownership rate reached 67.7 percent, the highest rate ever. Yet many Americans don’t realize that homeownership is within their grasp.

A home is a financial asset and more: it’s a place to live and raise children; it’s a plan for the future; it’s an investment in your community. That’s why the U.S. Department of Housing and Urban Development wants all Americans to have an opportunity to enjoy the benefits of owning a home. And HUD is especially proud of its work to help first-time homebuyers: thanks to special programs, more than 81% of FHA-insured loans went to first-time homebuyers during 2000.

Knowledge is said to open doors. This is literally true when it comes to buying a home. To become a first-time homebuyer, you need to know where and how to begin the homebuying process. The following questions and answers have been carefully selected to give you a foundation of basic knowledge. In addition to helping you begin, this article will give you some of the tools necessary to navigate the entire process - from deciding whether you’re ready to buy, all the way to that final proud step, getting the keys to your new home.

Use this information to determine if you’re ready to buy a home. if you are ready, contact a real estate agent, lender, or a housing counseling agency. They can help you decide your next step.

• How do I know if I’m ready to buy a home? You can find out by asking yourself some questions:

~ Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years?

~ Is my current income reliable?

~ Do I have a good record of paying bills?

~ Do I have few outstanding long-term debts, like car payments?

~ Do I have money saved for a down payment?

~ Do I have the ability to pay a mortgage every month, plus additional costs?

If you can answer “yes” to these questions, you are probably ready to buy your own home.

• How do I begin the process of buying a home? Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment? How much space do you need? What areas of town do you like? After you answer these questions, make a “To Do” list and start doing casual research. Talk to friends and family, drive through neighborhoods, and look in the “Homes” section of the newspaper.

• How does purchasing a home compare with renting? The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate without permission and may be at the mercy of the landlord for housing.

Owning a home has many benefits. When you make a mortgage payment, you are building equity. And that’s an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities—like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.

• How does the lender decide the maximum loan amount that you can afford?

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 include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA,monthly mortgage payments should be no more than 29 percent of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41 percent of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.

• How do I select the right real estate agent? Start by asking family and friends if they can recommend an agent. Compile a list of several agents and talk to each before choosing one. Look for an agent who listens well, understands your needs, and whose judgment you trust. The ideal agent knows the local area well and has resources and contacts to help you in your search. Overall, you want to choose an agent that makes you feel comfortable and can provide all the knowledge and services you need.

• How can I determine my housing needs before I begin the search? Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities—things like location and size. Should the house be close to certain schools? your job? to public transportation? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a “wish list.” Minimum requirements are things that a house must have for you to consider it, while a wish list covers things that you’d like to have but aren’t essential.

• What should I look for when deciding on a community? Select a community that will allow you to best live your daily life. Many people choose communities based on schools. Do you want access to shopping and public transportation? Is access to local facilities like libraries and museums important to you? Or do you prefer the peace and quiet of a rural community? 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 you feel comfortable in.

• How can I find out about local schools? You can get information about school systems by contacting the city or county school board or the local schools. Your real estate agent may also be knowledgeable about schools in the area.

• How can I find out about community resources? Contact the local chamber of commerce for promotional literature or talk to your real estate agent about welcome kits, maps, and other information. You may also want to visit the local library. It can be an excellent source for information on local events and resources, and the librarians will probably be able to answer many of the questions you have.

• How can I find out how much homes are selling for in certain neighborhoods? Your real estate agent can give you a ballpark figure by showing you comparable listings. If you are working with a real estate professional, they may have access to comparable sales maintained on a database.

• How can I find information on the property tax liability? The total amount of the previous year’s property taxes is usually included in the listing information. If it’s not, ask the seller for a tax receipt or contact the local assessor’s off ice. Tax rates can change from year to year, so these figures may be approximate.

• What other tax issues should I take into consideration? Keep in mind that your mortgage interest and real estate taxes will be deductible. A qualified real estate professional can give you more details on other tax benefits and liabilities,

• What should I look for when walking through a home? Use the HUD Home Scorecard and consider the following:

~ Is there enough room for both the present and the future?

~ Are there enough bedrooms and bathrooms?

~ Is the house structurally sound?

~ Do the mechanical systems and appliances work?

~ Is the yard big enough?

~ Do you like the floor plan?

~ Will your furniture fit in the space? Is there enough storage space?

~ Does anything need to be repaired or replaced?

~ Imagine the house in good weather and bad, and in each season. Will you be happy with it year-round?

Take your time and think carefully about each house you see. Ask your real estate agent to point out the pros and cons of each home from a professional standpoint. 

Source: HUD