Is it time to buy?

“I can’t buy yet, I can’t afford the payments.”  If this is what’s preventing you from owning your first place, you may be in for a pleasant surprise.  From tax deductions through building valuable equity, owning can really give you short- and long-term security over renting if you've got the salary, some deposit and a pre-approval in your pocket. Working through these three simple steps and you may be owning where you live faster than you expected.

Check the couch for change--get a down payment

Savings, family, retirement funds, selling unused valuables, your couch cushions—finding the money for even a downpayment of 5% of your home’s cost will reduce your interest rate.  This is what will just start the ball rolling.  It’s great to get a sizeable downpayment, but it’s better to take advantage of the current low interest rates now with whatever amount you have now.    You may be qualified to receive a flexible FHA loan for your downpayment or closing costs and remember, first time home buyers now get an $8,000 tax credit.

Work out how much in payments you can afford

Using a simple mortgage payment calculator (I loved People’s United here http://calculators.peoples.com/tools/peoplesbank/home02/tool.fcs) where you can plug in the cost of the property, your downpayment amount, guestimated interest and term of loan. You can then play with figures--20 years at 5% vs. 30 years at 4.5%--and see how much of a difference it makes to your monthly payments and your income’s budget.

I suggest you look at paying back your mortgage bi-weekly—not only does this make monthly payments more palpable to your budget but it also takes more of a bite out of your mortgage principal over time.

Get prequalified

After you’ve found your dream home, the last thing you want to hear is that you’re not approved.  Get approved for the outside figure you can afford, then you’ll know you can bid on anything up to that amount.  Because of the market upset, some banks may ask you to be approved for a more stringent terms--so if you're looking for a variable 20 year term, you may have to qualify for a fixed 10 year term.  If you qualify, this step takes you at least one ahead of unapproved potential buyers.  Bank of America mortgage agrees, “A mortgage prequalification can also give you additional leverage with a seller in negotiating the best possible terms of the sale.” Clearly, it pays to be pre-approved.

Try your bank first.  Working with a mortgage broker may seem appealing, but your bank may actually be more motivated to give you a better deal based on your overall financial relationship with them.  Save, work it out and say it with me, “I’m a condo/homeowner!”