How much do you have for a down payment?
Most new homebuyers put down 20% or more toward the purchase of their new home.
Some lenders may accept a lower down payment, but you may be asked to purchase private mortgage insurance (PMI*). This will add to your closing costs and monthly payments.
But whether your lender requires borrowers to purchase PMI or not, there will be other costs associated with purchasing your home in addition to the down payment. So some of the money you have available will need to be earmarked for these secondary or closing costs. What's left over is what you will be able to use toward a down payment.
What are those other costs?
Those secondary costs usually include: Closing costs-These are the expenses associated with the transfer of property ownership. As a rule of thumb, these costs can range from about 4% to 8% of the cost of the home, depending on your lender and area of the country. They can include attorney fees, lender fees (or points), escrow fees and recording charges. Your broker or agent can explain any of these costs in greater detail.
Zero in on the features you are looking for
Buying a home has been compared to falling in love-with similar risks and rewards. It's very easy to become charmed and infatuated with a house and see only the things you like. Especially if you're a first-time homebuyer.
So have a good idea of what you're looking for before you go looking. It will be the best insurance you have to make sure you "marry the right one." It should be a house that fits your personality, your everyday living needs, and your future goals.
What kind of house is right for you? Start pinpointing the specifics of your new home by taking an inventory of your basic day-to-day needs. For example, if you entertain frequently, you might need a party/recreation room-maybe extra baths.
Next, think about the future. Will you start or add to a family? Will an elder family member come to live with you? Your new house should be able to accommodate such possibilities.
Last, think about the personality you want for your new home. Should it be open, airy and casual? Or more formal, classic and manicured? Ideally it should reflect you.
As you mull over the above considerations, remember that your financial resources will determine which cutbacks or extras might be in line.
What's most important at this point, however, is to nail down details about the house you hope to find.
The sections that follow are designed to help you consider other important issues as well. Complete the Ideal House Description at the end of the chapter and share it with your broker.
Old House? New House? Fixer-Upper? Older houses have great charm with design flourishes of the period. And greenery that has filled in over the years.
Most older homes are closer in to the city so they're ideal for the commuter.
What should you be paying monthly for a mortgage? Starting with your down payment, you've begun to get an idea of what maximum amount you may want to pay for a house.
But will your monthly payments be affordable? Using these two simple charts, you can figure your estimated monthly affordable housing expense and also see whether your monthly income will meet all your other monthly expenses. According to financial analysts, a good rule of thumb is that your monthly housing expense, including taxes and home insurance payments, should not be more than approximately 1/3 of your gross monthly income. (See chart below).
Of course, you should adjust this figure for extraordinary monthly expenses, such as special schooling, unusual health care expenses, and so forth. (The chart below is a double-check for that purpose.)
Figure your estimated Monthly Housing Expense: Your monthly gross income is $_____ Now..divide that figure by 3. The result is $_____
This figure represents your estimated affordable monthly housing expense, and includes your monthly real estate tax and home insurance payments in addition to your monthly loan payment (both principal and interest). This formula is the one used by many financial analysts and lending institutions.
How To Figure If Your Monthly Income Will Meet Your Total Monthly Expenses. 1. Your monthly net income is (include take-home pay, dividends, alimony, etc.) $__________ 2. Your estimated monthly housing expense is (refer to chart above) $__________
Line 2 subtracted from Line 1 is $__________
This is how much you'll have to meet your other monthly expenses.
Moving expenses are another up front cost. You may also want to hire a building inspector to evaluate the home. And you may want to make a few immediate repairs prior to moving day. Don't hesitate to discuss any of these costs with your broker. The sooner you know how much you'll need, the sooner you'll be able to determine a more accurate down-payment figure.
How high should you go on your monthly payment? The answer will depend on how much you require for other living expenses. One thing you certainly don't want to do is to make yourself so "payment poor" that you cannot afford the quality of life you've envisioned in your new home.
You can begin to get an idea now of what your monthly mortgage payment might be by listing some of those expenses, and estimating what you think you'll be paying for them in future years. Living expenses include food, clothing, transportation, utilities, medical and dental care and installment payments-to name a few.
Understandably, you may not have all this information at hand, let alone the time to compile it.
Let your Weichert, Realtors - Castles Unlimited Realtor be your guide
Working with a Weichert, Realtors - Castles Unlimited real estate professional will save you endless amounts of time, money and frustration.
Your Weichert, Realors - Castles Unlimited Realtor knows the housing market inside out-and will help you avoid a wild goose chase. He or she can help you with any house even if it's listed elsewhere, or is being sold by the owner directly.
