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So You Want to Buy a Home? Guest Experts on First Time Home Buying

Sept. 15, 2012
Personal Finance
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Meet Seth, one of our contestants on NerdWallet’s personal finance contest. He is a 25 year old newly wed currently living in an apartment with his wife. Within the next five years, he wants to buy a home.  So we asked experts in the housing industry how Seth could start the process of planning to buy a home.

Expert Recommendations

Brad Malow, Agent with Rutenberg Realty and the founder of, had this advice:

“Seth should be sure to continue to pay all of his bills on time.  The last thing a first time home buyer wants is a scenario where their credit becomes tarnished due to late payments or lack of paying bills. Keep that credit score in good standing as lenders are going to be extremely diligent when it comes to approving you for a mortgage.”

Deb Tomaro, Realtor with RE/MAX and creator of “First Time Home Buyer Seminars”, had this advice:

“Decide on your criteria on when to buy a house with your wife. Have thoughtful discussion and figure out what needs to be in place in order to minimize the stress that can come with that big of a commitment. How much cash reserves do we want so we don’t stress if the furnace goes out? How secure in our careers do we need to feel? How much of a down payment do we want to save up? Are we going to be looking for a 5 year starter home or a 30 year forever home, or something in between?”

Gloria Shulman, founder of Centek Capital Group, had this advice:

“Student loan debt can kill a loan application, so if you can pay it off in 5 years, that’s great. But remember, lenders look at your monthly payment – not the total loan amount. Refinancing lower student loan payments per month might make sense, and you will have more options in case your loan isn’t paid off in five years.”

Jason Jones, co-founder of Cap Equity Realty and Cap Equity Locations, has this advice:

“It’s important to remember that it’s better to get a low interest rate on your loan, than save a few thousand on the purchase price.  A 0.5% over 30 years is a lot more than a few thousand dollars today.”

Neil Glick, Realtor with Coldwell Banker Residential Brokerage in Washington, DC, has this advice:

“The earlier in life you a buy a property you can afford, the better. This will lock you in to a low monthly payment that you can afford today and can pay off over the next 30 years.  The home you buy, if it is in a desirable location (this does not only refer to city, but how close you are to public transportation, shopping, walkability, etc.) it will retain and gain in value. Then in 5 years, you can keep that first home with a low monthly payment, and you and your wife, after increasing your salary, could rent out this first home for an amount above the mortgage, thus making a profit.”

NerdWallet Recommendation

Buying your first home does not happen overnight. If you want to become a first time homeowner in the next five years, you should start planning for it now. First, focus on paying off your debt and not incurring more debt. To determine your mortgage amounts, lenders will review your debt-to-income ratio. The ratio to qualify for a mortgage is within the 31-43% range – so work towards a debt-to-income ratio that is under that range.

As part of the planning process, consider saving up for a down payment. The greater the down payment, the lower your mortgage payments will be in the future. Many first time homebuyers use a Federal Housing Administration (FHA) loan, which currently requires only 3.5% down – so keep this percentage in mind when saving for your future home.