The Basics of Buying a Home Today

NEW YORK — Buying a home is one of the most significant financial commitments a person can make. Individuals may wonder when is the right time to jump into the real estate market. The answer may boil down to affordability.

The housing market is continually evolving. Buying a home now is a little bit different than it was even a few years ago, as inventory is starting to recover from a lengthy period with limited offerings, according to Realtor.com. But even though inventory may have increased, home prices have not come down. The median home price now sits at around $410,000 in the United States and approximately $676,335 in Canada, and interest rates hover around 6% for a 30-year fixed rate.

Before it's time to sign a contract and get the keys, potential buyers can follow this guide as they navigate buying a home for the first time.

Know your buying power. Before browsing home listings, buyers should conduct a financial audit to see how they stack up. It's worthwhile to sit down with a mortgage broker who can run your numbers. Credit score is a significant variable that will be checked during such consultations. If necessary, identify ways to boost that score in the months before applying for a mortgage.

Follow the 30% rule. Rocket Mortgage says the 30% rule dictates that total monthly housing costs, including principal, interest, taxes, and insurance (PITI) should not exceed 30% of a borrower's gross monthly income to maintain financial stability.

Budget for the extra costs. Buyers should concern themselves with all of the costs that go into buying a home. In addition to the down payment, closing costs can come in at around 2 to 5% of the home's price. An inspection and appraisal can run around $1,000. Additional costs may include termite inspection, and other out-of-pocket costs to get the home up to code.

Lower your costs. A rising trend in home buying is a surge in down payment assistance (DPA). Bankrate says DPAs provide eligible individuals, typically first-time or low-to-moderate-income buyers, with assistance that covers costs like down payments and closing fees. These programs may be offered by the government, non-profits or private lenders.

Utilize a reputable inspector. A home may seem like a dream until a person pulls back the curtain on some hidden red flags. It's always worth the expense to have a housing inspector or a trusted contractor walk through the property prior to making an offer to ensure that the home is in good condition.

Choose a value market. First-time home buyers may want to select metro areas that offer the best balance of earnings versus home prices..

First-time home buyers must consider a range of variables as they inch closer to making their homeownership dreams a reality.

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