How to Get the Best Price for Your Home As A First Time Homebuyer

Your offer to purchase a home is one of the most important parts in the whole homebuying process. Experts suggest that you set up your own reservation price, the ceiling or highest price you are prepared to pay for a home, by researching home prices in an area. A reservation price will help you in negotiating with the seller while staying within your budget.

It is customary for homebuyers to discount their initial offering price to create some room for negotiations, according to Barron's 'Smart Consumer Guide to Home Buying'. There is however, no rule on how much a homebuyer can discount the offer. It largely depends on your level of desire for the home and on market conditions.

Below is the basic process for calculating reservation price to help you in making your offer and negotiating for the home you are eyeing.

1. Write down your monthly budget for housing costs. Just write down the amount you can afford to pay every month. The amount may be close to your current housing costs or it can be an amount you are comfortable to pay for monthly.

2. Compute for tax and insurance costs. Barron's 'Smart Consumer Guide to Home Buying' gives these suggestions for computing tax and insurance costs: Use a factor of .68 for regions with high tax and insurance rates; .85 for areas with inexpensive tax and insurance rates; or use the typical factor of .75 to get a rough estimate. Your loan P&I payment that you can afford can be computed by multiplying the factors above to the amount in Step 1.

3. Calculate your loan term and interest rate. Record your loan term and interest rate in years. Use the loan payment tables to locate the payment applicable to each loan term and interest rate.

4. Know your total loan amount. This information can also be found in the loan payment table, or you can simply ask your mortgage lender.

5. Add your cash on hand for the down payment. This will give you a final calculation of the total amount available to you for purchasing a home.

Compare the amount you got in Step 5 with the amount in Step 1 and compute for their difference. The difference in the amount will determine your negotiating options when making your offer. If the amount in Step 1 is lower than the amount in Step 5, you would need to bargain with the seller to bring down the final price into a level you can afford. If the amount in the first step is higher than in the last step, then you might consider submitting a higher bid than what the seller is offering to secure the deal.

Figuring out your reservation price will help you in identifying your negotiation options to obtain best possible deal. Use the above calculations for each home you consider buying so that you can negotiate with the confidence that you are dealing within your budget.

Homebuyers looking for houses for sale in Minnesota for sale can go on the internet and search for homes by price, location and neighborhood by using the Minnesota MLS listings to find properties throughout the state.