Q. The news is full of stories of foreclosures and bad home loans. I really want to own my own house, but I'm scared! What should I do?
A. Remember when Mom wouldn't give you an advance on your allowance? She was protecting you from yourself. Now that you are an adult, in theory at least, you need to make sure you don't take on more debt than your "allowance" will cover. In other words, don't buy a house you can't afford. Take a realistic picture of your expenses, then figure out the percentage of your total income that is made up of your debts. What's left over will tell you what monthly payments you can afford, and therefore, what kind of house you can buy. Foreclosures come about when borrowers gamble that they will be able to pay debt later on that they couldn't today.
Q. I am so afraid of talking to mortgage lenders. I mean, they speak a different language. (And I failed math in 8th grade.)
A. It's okay, lenders are human. But you do need to arm yourself with some basics before you talk to them, such as mortgage types and rates, what fees to expect, and how lenders differ from each other. Either study up yourself, or get a friend to help you, and be sure to use Zillow's Mortgage Calculators. The most important thing is to get a lender you trust: Use Zillow community reviews and ratings, plus references from friends. And prepare a list of questions for potential lenders. If a lender says something you don't understand, don't be afraid to ask him to explain. If he can't, go elsewhere.
Q. I think I can afford monthly payments, but I don't have a lot saved for a down payment. Can I ever buy a house?
A. Yes, you can, but there is no free lunch. Most lenders like a down payment that is 20 percent of the purchase price, but there are loans that allow you to put as little as 5 percent down. (There are other ways to get affordable loans, such as zero-down mortgages, but these can be more financially risky.) You will have higher interest rates, and most likely have to buy private mortgage insurance (PMI) to secure those loans. Ask yourself if you can really afford a house with the high mortgage payments that come with a low down payment — do the debt-to-income exercise first.