Thinking about buying a house? Want to know if youíre ready and have the income to secure a loan?

We asked the U.S. Department of Housing and Urban Development for advice about what it takes to buy your first home.


We Know: First Time Home Buyer Advice

What do I need in order to buy a home?

In general, you need the following to get a loan to buy your first home:

  • A steady, reliable source of income, such as a job where you have been employed on a regular basis for 2-3 years.
  • A good record of paying bills.
  • A limited number of outstanding long-term debts, such as car payments and other loans.
  • Money saved for a down payment.
  • The ability to make a mortgage payment every month, along with your regular bills and the new costs associated with home ownership.

What are the advantages of purchasing a home rather than renting?

The advantage of renting is that you are usually free of maintenance responsibilities. When you buy, some of the advantages are:

  1. You build equity in the home and, sometimes, you earn appreciation if housing prices rise.
  2. There are tax advantages that allow you, for example, to deduct interest you pay on your mortgage.
  3. You protect yourself from rent increases.
  4. You can often use your home as a way to borrow money after you have established equity in the home.
  5. You are usually free to decorate the way you want.

How do I know what price house I can afford?

It usually depends on how much a bank or lender will loan you to pay for the home. In general, the lender considers your debt-to-income ratio. That means the lenders compares your pretax income to your 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 government recommendations, monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income.

How do I start?

Most people find a real estate agent to represent them. Although this is not always necessary, itís usually very helpful.


Shop around. Make sure you agent knows the community and understands your needs and taste. The agent works for you and is being paid, usually a commission, so never work with someone you donít trust, who doesnít seem to care, or you are not comfortable with. Ask questions, expect answers and if you donít get them, find someone else.


Remember, if you deal only with the real estate agent who is selling the house you want to buy, that person is representing the seller. If you want that person to represent you, too, be sure your interests are balanced with the sellerís.



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