Buying your first home can be an exciting experience, but if you’re not careful, you could fall victim to the extreme plunge in the real estate market, like too many homeowners have already witnessed.

According to The New York Times, seven rules should be followed when shopping for your first home:

1. Start with the basics – Put 20 percent down so you have less of a chance of owing more than you house is worth if real estate prices drop again. Also try to get a fixed-rate mortgage, so your biggest housing bill remains stable, and try not to spend more than 35 percent of your pretax income on mortgage, property tax and homeowner’s insurance payments.
2. Consider your income – First-time home buyers in their 20s and 30s will probably see their incomes grow more quickly than older people buying their second or third home. Harvey S. Rosen, a Princeton economics professor says, “People can, on average, make reasonably good predictions of their future incomes and act on them in sensible ways by buying bigger houses.”
3. Bow to unknowns – Plan ahead, such as considering if and when you’ll have children. Bobbie D. Munroe, a financial planner with Fraser Financial in Atlanta, encourages younger clients in this situation to model out their budget, including any proposed mortgage, three ways – with both spouses working full time, one working part time and one staying at home for a few years. She also suggests imagining or even practicing living on one income, to see if it’s truly realistic.
4. Map out expenses – Consider the amount you are willing to stretch for a house and if that amount will affect how much you spend on maintaining it. According to financial planner, Dennis G. Stearns, if you buy a newer home, you’ll probably spend around 3.6 percent in upkeep and 4.5 percent if you buy an older home.
5. Buy best (or cheapest) – If you can’t afford your dream home right now, don’t buy the next best thing. It’s better to buy a smaller starter home if you can’t afford the big house you really want. A middle of the road house will end up costing you a lot and still not live up to your standards. By purchasing the smaller home, you’ll be able to save more for your dream house when you’re in a better financial state.
6. Stretch the house – Consider paying less for a home that you can upgrade periodically when your income is stable and your savings or available credit make it possible. This will help you avoid paying unnecessary moving costs.
7. The eight hour rule – Make sure you can sleep soundly through the night without having any financial nightmares.

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