Expert: Jessica Bryan - 7/19/2007

Question
Hello I am hoping to buy my first home in the next 2-3 years. I am a fairly low income individual with my Monthly income ranging from $1100-$1400 Hundred. I figure I could get my parent's to come live with me and help out with the morage and property taxes at lest for a few years as i'm sure they would since they too do Not own a home. I was wondering after I've got a fair bit for a down payment put together(around 10'000 or 15'000 thousand) how do I go about buying a home? I really am a blank page when it comes to this subject and I would really like to know the basics to buying my first home(it would be an older house not a brand new one).

What is a morage and what are property taxes for?  

how is a house paid for? I give the downpayment sign paperwork(?) and how much do they then get per month? or how does that work? I'm sure people Don't wait 20 years for the balance owing on the house they sell?

The house I intend to buy will range from 300'000-500'000 , three to five hundred thousand...I plan to buy one house my whole life so want to get a fairly good one and one that is at lest bungalo sized. If you could please inform me on the subjects mentioned I would be very thankful as I cant find the info anywhere else and am not sure how this prosess works. I am in canada if that helps.

Answer
Dear Tara;
When you buy a house the first thing to do is to visit with a mortgage lender who will discuss the options for you.  A lender usually pre-qualifies you for a certain amount of money which the lending institution will loan.  The rule of thumb is to loan no more than what a person can afford in monthly payments over a 30 year period that the loan is made.  Regardless of how long you plan to live in the home the average loan is amortized (divided up) over a 30-year period and the payments are calculated for the life of the loan and include the interest rate as well.  So, for example, if you looked at a home that was $300,000 with 20 percent used as a down payment, you would need $60,000 of your own savings.  If you put down only $10,000 your loan would be for $290,000 and would have very strict requirements including a payment for mortgage insurance which is required on all loans above 80 percent of the full price of the home. Therefore, based on today's lowest interest plans, your payment of the loan would be $1833 per month just for principal and interest.  I think that you will need to rethink how much you can afford to pay in a monthly payment.  Talk to a lender and see what they say about having help (your parents) and how much they will allow to qualify you.

Once it is determined how much you can afford based upon how much the bank will lend, then you can begin looking at homes in that price range.

Good luck and best wishes.

Sincerely,
Jessica Bryan