With a raise from his company, Seyed Abdallah, 31, is inspired to look for a new home as a first-time homebuyer. Financially he is fairly secure, but is also very risk adverse. His salary is $63,000 per year, but he does not know how much he should spend on housing.

His current housing expenditures include rent of $900 per month and renter's insurance premiums totaling $400 per year. His monthly credit service payments include a $450 per month auto lease payment and a $150 per month student loan payment. He pays his credit card to $0 each month. Of course, he has typical utilities and wi-fi expenses, and bills such as a cell phone payment.

Seyed has researched the recurring costs of homeownership. He has found that the real estate tax rate is $0.55 per $100 of assessed value and homeowner's insurance policies cost approximately $400 per year for each $100,000 in coverage. He is unsure of the maintenance costs of owning a home, but estimates them at $2,500 per year.

He likes the idea of owning his own home because as the real estate values increase, the value of his home instead of his rent payment will increase. Local property values have been increasing at 5% per year over the last 7 years.

One concern about buying a home is the immediate cost of down payment and closing costs, which average about $2,000 for a first-time homebuyer. He also knows that he would make a 20% down payment to avoid private mortgage insurance or related costs.

What types of housing would generally be available for Seyed? What sources of information applicable to any real estate purchase might be helpful to Seyed in making a decision? Should he consider prequalifying? Given his risk tolerance, what type of mortgage would you recommend to Seyed? Should he consider an interest only mortgage?