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  • The first-time homebuyer's basics

    Every prospective first-time homebuyer is aware that the process entails research, but knowing what resources to use in that research amounts to much of the battle.

    Educating yourself on the most accurate and efficient ways to gage rates and trends can go a long way toward saving time, paperwork and eventually money.Educating yourself on the most accurate and efficient ways to gauge rates and trends can go a long way toward saving time, paperwork and eventually money. Above all else, the customer needs to retain the mentality that the home is chief among all their investments, and will need to be consistently cared for and improved in order to develop equity.

    Below are some basic tenets of first-time homebuying. Having a real estate broker or enlisting the advice of a trusted financial planner are certainly wise ways to soften what can be an overwhelming experience. But there is still much that can be done on your own to get educated in advance and enhance your confidence as the process progresses.

    • Assess your monthly income and calculate affordable expenses accordingly. This should be near or at the top of the preliminary steps any prospective first-time buyer takes. There are some different schools of thought as to the ceiling for monthly expenditures, but it's generally accepted that no more than 30 percent of your total monthly income should go toward housing costs. Fannie Mae recommends a maximum output of 28 percent.

      Remember, the total figure should account for insurance costs and taxes, which vary depending on where you plan to own. Resources such as Bankrate's mortgage calculator can help facilitate the breakdown, but ultimately it's up to you as the buyer and any trusted financial advisors to determine a reasonable allocation.

    • Know a fair price. Value determination is largely in the hands of appraisers, whose jobs have become more complex as government regulations dictate that lenders place greater emphasis on risk assessment. But you can do your own research in advance by perusing sale prices of comparable homes in the area. Consulting real estate authorities such as Zillow or the National Association of Realtors can aid in this research and provide some insight into the direction a given market might be heading.

      Talking to representatives from a bank or credit union prior to beginning the process can also help give you a feel for mortgage rates and mortgage loan terms. Neighborhoods, especially in larger cities, are constantly transitioning, and buying in one that is experiencing a resurgence can lend itself to value appreciation on the property. It's worth knowing how a phenomenon like gentrification is affecting certain locations not only now, but five years from now.

    • Don't forget about closing costs. This is one of the most overlooked aspects of the homebuying process by new buyers. The impact of closing costs can present a harsh brush with reality for the unprepared. They typically include fees from the lender for origination plus title and settlement, as well as all applicable prepaid items like homeowner's insurance and any association fees. They're not recurring, but they certainly need to be factored in during the month in which the deal is consummated.

    • Always bear in mind the investment. Upon purchase, your home becomes an asset - likely your greatest one. Protecting that asset begins the day you are handed the keys. And in order to ensure that its value increases over the time spent in it, it's imperative to be aware of all the home's inner workings.

      Labor is a necessary element of owning a home, but you need to be educated in advance of just how much labor a given property will require, because all the expenses will be on you. Being unaware of imminent or even potential maintenance can seriously alter your monthly budget, not to mention detract from personal wealth through diminished home equity if left unattended.