Reply To: I've been reading you every week since last year!
Good luck with purchasing your new house! The best advice I have for buying your first house is:
1. get rid of all other debt first, especially big ones like college or vehicle debt. If you use credit cards, pay ’em off in full every month.
2. save like an obsessed squirrel until you have 3-6 months of living expenses. Put this where you are not tempted to dip in, like a money market account with limited check-writing privileges
3. go to a bank or credit union, and find out what, based on your income, credit score, how much you would be pre-approved for based on your credit score and income. Only consider mortgages that are fixed rate, 15 year or less mortgages with 20% down (this avoids private mortgage insurance). You will still be surprised at the huge amount they are willing to loan you.
4. Save, in addition to your emergency fund, 20% of that house amount as a down payment. NOW you are ready to look at houses.
5. THIS IS THE MOST IMPORTANT PART, listen closely: do not even consider a house that is priced above 80% of what the bank is willing to approve you for. You need to convince yourself, and the realtor, that this is all you can afford. The realtor will be looking for houses that maximize his or her profit, and will try to shoe-horn you into as much house as you could conceivable afford. Any house will need repairs, and you will want to renovate and decorate to your own taste. You also need to consider, if your circumstances change, that having to sell the house should not cripple you financially even if you needed to take a modest loss on the house.
yes, I know, this sounds lengthy and morose, and you may have “house fever” to buy as quickly as you can, but one thing I have learned in forty years of buying and selling property is, there is always another deal. Don’t jump in and then figure out how to pay for it.