Tips For House Hunters

Buying a house is an emotional experience because people are not just buying a house, they are buying a home. They want to find a place that fits their needs and which they can imprint with their psycho-emotional pattern. This is a difficult process and can create a great deal of stress. To make it a bit easier, here are some helpful tips.

First, find a great real estate agent. He will not only help you find the right house for you, but also connect you with the other players in the purchase game, such as lenders and lawyers.

Second, get a pre-approved mortgage. This is not an actual mortgage; rather, it is your pre-qualification for a mortgage. Pre-approval will let you know how much of a mortgage you can carry and will also lock in an interest rate for a specified period of time (from 60 to 120 days, depending on the lender).

A pre-approval is not a guarantee of financing on any house you choose. The specific house must be approved by the lender, your income and employment must be confirmed, and your source of downpayment must be verified.

The basic guidelines for pre-approval are your GDS and TDS ratios. Firstly, your monthly housing costs (mortgage, heating costs and property taxes) cannot exceed 32% of your gross monthly income. This is the Gross Debt Service Ratio (GDS ratio). Secondly, your total debt load (this includes the housing costs and such things as car loans, credit card payments, student loans) cannot exceed 40% of your gross monthly income. This is the Total Debt Service Ratio (TDS ratio). Your maximum pre-approved mortgage is based on this information.

Third, focus on location. Choose a location that meets you and your families needs. Look at things like closeness to schools, work proximity, shopping, and those other important-to-you things. A great house that is situated in an area that makes the everyday aspects of your life more difficult is not the perfect house for you.

Fourth, separate needs from wants. If you determine what you must have as opposed to what you would like to have, then you will make your house hunting that much more productive.

If you need four bedrooms, then don't look at a two bedroom house unless it is economic to add on two bedrooms. My advice is that you make a list of what you want in a home and divide it up into two catagories: (1) A-list: those things you must have to meet your present and future family needs. This could include number of bedrooms, bathrooms, size of kitchen, and the like; (2) B-list: those things that would add a bit of icing to the home purchase cake. This could include a fenced yard, air conditioning, hot tub and the like.

You may find two homes that meet your A-list criteria, but only one of them has some B-list features. It makes your choice that much easier.

Fifth, factor in all your costs for buying a home.You can't just look at the price of the home and leave it at that. Other costs include lawyer fees, land transfer tax, home inspection fees, insurance premiums, mortgage application fee, mortgage insurance premiums, moving expenses and such. A ball park cost would be around 1.5% of the purchase price of the home.

The biggest purchase most people will ever make is that of a home. Be prepared.