Tips for First Time Home Buyers: How to Choose the Perfect Starter Home

Buying your first home is an exciting experience, and for many people exemplifies the American dream. With a new tax credit for first-time home buyers, the current buyers’ market and historically low interest rates, now is the time to buy.

Buying your first home is one of the most important decisions you will make in your life and may be your largest investment. As a first time home buyer, you will need to consider many factors before signing those mortgage papers, such as overall expenses, location, desired features and finding a realtor who will help you to discover the perfect starter home.

Expenses for your first home
Before you begin looking at homes, you need a good understanding of how much you can afford for your first home. On average, you should expect to qualify for a loan with monthly payments that are between 28 percent and 36 percent of your gross monthly income. For example, let’s say your annual income is $50,000. Your gross monthly income would be $4,166. You are likely to qualify for a loan with monthly payments totaling between $1,166 and $1,499.

Your down payment and closing costs also need to be considered. A good rule of thumb for your down payment is 10 percent to 20 percent of your starter home’s purchase price. While this range for your down payment may not be required, it will be helpful in lowering your monthly payments. According to Yahoo! Finance, closing costs - such as application and attorney fees, first month’s homeowners insurance and adjustments for property taxes - can add up to 3 percent to 8 percent of your home’s purchase price.

Also, you should be aware of your credit history. The better your credit score, the better the interest rate you will be eligible to receive on your mortgage. A good interest rate means more money in your pocket.

As a first-time home buyer, you also need to remember that there will be ongoing costs associated with home ownership that you probably didn’t have when you were renting. Such costs include property taxes, homeowners insurance, landscaping and house or appliance repairs.

Finally, hire a professional inspector to examine your starter home so you can understand its current condition. Will it need any repairs? Do any appliances need to be upgraded? If so, be sure to factor in these costs before committing to buy.

Location of your first home
Location, location, location! A big part of this decision is going to depend on your lifestyle. You may want to consider the following:

How important is it that you have a short commute to work?
Do you prefer the city, suburbs or rural areas?
Does the neighborhood seem friendly? Are the surrounding houses well-kept?
How close are grocery stores, gas stations, drug stores, etc.?
If you have children, are there good schools nearby?
What is the crime rate for the area?

Features of your first home
How do you want to use your new space? It’s vital to know how many bedrooms and bathrooms you’ll need, along with the importance of closet space, a basement, garage space, etc. When analyzing the features of your new home, remember to take into account any future changes to your lifestyle that may have an effect on how you use the space in your starter home, such as getting married or having children.

Working with a realtor to find your first home
As a first-time home buyer, the key to finding the perfect starter home is a good realtor. You want to choose a realtor that keeps your best interest in mind and doesn’t pressure you. Your realtor should make the time to research homes that meet your criteria, return your calls and answer your questions. If you find that your current realtor is lacking in any of these areas, it is within your rights to get a new realtor. Buying your first home is a big investment and can be an overwhelming experience. You deserve to have a knowledgeable and helpful realtor that will guide you through the process. A great way to find such a realtor is to get referrals through family, friends or coworkers.

By taking these factors into consideration, you are well on your way to finding your perfect first home. Protect your new investment with affordable homeowners insurance coverage from a company you can trust, and learn more about the home insurance discounts for which you may qualify. Nationwide offers free, no-obligation home insurance quotes for your convenience.