If you’re in the market for a new home, now is the perfect time to buy.  Not only did the government extend the tax credit until April 30, 2009, but they also opened it up to current home owners who are looking to purchase a new house. Home prices are low and buyers have thousands of houses in their area from which to choose. With the downturn in the economy, many of the houses available are foreclosures or short-sales. So how do you know how much and what type of house you should buy?

How Much House Can You Afford?

Buying your dream home will only be a dream unless you can actually afford it. While your affordable price range depends on many different factors, one way to get in the ballpark is estimating two to two and a half times your annual gross salary. If you make $38,000 a year, you may be limited to borrowing only $80,000. While you may be able to borrow $80,000, a good conservative rule of thumb is to make sure your house payment (including loan payment, property taxes, and insurance) does not exceed 28 percent of your gross monthly salary. If you make $38,000 a year, technically you could afford a monthly house payment of $886.

There are also free online tools to help you estimate how much home you can afford, like the Home Affordability Calculator at Quizzle.com.

Keep in mind, lenders take into consideration a variety of factors when making a decision whether to lend you money, such as your income, assets, credit history and debt-to-income ratio. While there are several good guides to help you when shopping for your dream home, you should always consult with a trusted mortgage professional to know exactly how much you’re qualified to borrow.

What Type of House Should You Buy?

If you’re unsure about what kind of house to buy, HGTV has a short 10 question quiz to help you figure out what sort of house fits you.  Things to consider when buying a home are: How long do you plan to live in the home? Will you be having a baby in the near future? Do you mind the up keep of the outside of the home? Do you have pets that need a backyard? Do you enjoy entertaining large groups of people in your home?  Types of housing include single family homes, townhouses/condos and manufactured housing.

What is The Best Way to Purchase a Home?

With the downturn of the economy, thousands of homes are available for you to purchase. But, how do you know what kind of sale you should work with? Many homes in your areas will be sold as a short-sale, foreclosure or an REO (Real Estate Owned Property). Of these three options, buying a foreclosure tends to come with the most risk, whereas REO often carries the least risk. So what exactly do these types of sales mean for you?

Short Sale

A short sale occurs when a lender agrees to take less than the full loan payoff for an owner’s property. Homeowners will often sell their house for less than what they owe to avoid foreclosure. Short sales are very complicated and the outcome is not guaranteed. Many buyers, who start the short sale purchase process, wait three months or more for a decision from the lender. In some cases the lender will not accept the short sale offer and the seller is unable to sell the home. Short Sales are a great way to get a house for less than its true value. You can view Short Sale homes at HomePath.

Foreclosure

A foreclosed home is the process where the lender takes possession of a property due to non-payment. These properties are sold at auctions, most likely at your nearest court house. Most foreclosed home must be paid for in full and often involve various problems. While the price of the house may seem like a great deal, the title to the house could have a lien on it, the house may have back taxes that are due or the house may need to be renovated due to structural problems. While a foreclosure is very risky, it’s one of the best options to get a great deal.  You can view foreclosed homes at In House Realty or MCB Real Estate.

REO (Real Estate Owned Property)

After the property has gone into foreclosure and no one purchased the property at an auction, the home will then become an REO property. The bank that owns the property will hire a Realtor to sell it. To sell the house as quickly as possible, the lender will likely clear all issues on the property, such as back taxes and liens on the title. This is one of the best opportunities to get a good deal.  Fannie Mae, a government-sponsored enterprise owns most of the REO homes currently listed. You can view REO homes at the HomePath website.

Choosing a new home will depend on how much money, risk and time you want to invest. If you’re looking for a safe option, you can purchase a home that’s not listed as a risk, however you may pay more than you’d like. If you’re in the market for a good deal and don’t mind a fixer-upper, then a bank-owned property might be the perfect option.

For more helpful home buying tips, check out the Quizzle Blog:

• How to Save for a Down Payment on a Home
• Senate and House Approve Home Buyers Credit
• 55 Money Saving Tips (Your Wallet Will Thank You)
• Protect Your Credit during the Holidays with these 7 Tips

For other free tools and information about your home, money and credit, visit Quizzle.com. You’ll get a free credit report and free credit score, home value estimate, home loan recommendations, personal budget tool and more.

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