Home Buying Tips

[PaulaM]

Put down the largest down payment you can.

There are lots of 1st time buyer programs that will allow you to put down as little as 3% on a home. It sounds great at first, but it can really cost you in the long run. Down payments that are less than 20% will require private mortgage insurance.  This is added to your principal and interest payments for a higher mortgage payment each month. In addition, the larger loan value means you will be paying more interest over the mortgage length.

Determine How much Home you can Afford.

Know how much home you can afford before you start looking. Lenders use different ratios to calculate the amount of debt that a person can carry for their income (around 30%). If you have been pre-approved for a specific dollar amount, it does not mean you have to purchase at the top of that amount. Lenders want to maximize their profits, but only you know for sure how comfortable you are with a payment amount.

Get your credit in shape.

Your credit rating is one of the factors that will determine your mortgage interest rate offer. The lower the interest rate offer, the greater the home purchase price you can afford. Now is not the time, to open new cards or apply for any other debt. These inquiries will mark your credit score slightly. Months before a home purchase, consider asking for an increase in your credit limit from the cards you have. This increase will lower your debt utilization ratio painlessly and increase your credit score.

Budget for closing costs and move-in costs.

There will be costs to purchase the home and loan costs, in addition to your purchase price. Realtors and lenders should be able to give you estimates of these costs prior to closing. Move-in costs are often overlooked, but it can take a significant sum to begin a new household. Factor in the costs of new services, furnishings that may be required (window coverings are an example) appliances, tools and other household items that you may not possess if this is a 1st home purchase.

Take advantage of calculator tools to plan your purchase.

Listed below are a few calculators that may assist you in your home purchase. There are many others available at various financial websites.

Bankrate.com

Calculator.net

Financialcalculators.com

[PatriciaV]

For a more pain-free financial transition, calculate what your new home will cost every month. This includes mortgage, insurance, property taxes, increased utilities, etc.

Then put into savings the difference between what you spend now and what the new home will cost. Do this for six months. If you can handle the additional costs with your current income, then you'll know you can afford all that comes with buying a new house.

There will always be unexpected repairs and regular maintenance. But knowing you have the monthly costs covered, you'll have more confidence shopping for a home that you know you can afford.