Homebuyers who want to be sure they can afford their purchase should consider the costs that come with homeownership. Even if you can get a great mortgage rate and qualify for the lowest down payment, there is still the cost of financing homeownership. Here are the major costs to think about when saving for a new home:
Down payment: The amount of money you pay for your home will be affected by what type of mortgage you take out and how much of an interest rate you agree to. Some standard loans aimed at high-qualified first-time direct home buyers usually require no down payment at all. Lenders will also offer you a break on closing costs for up to three months after you've sold your home. Be sure to shop around to find the best deal; rates can vary quite a bit between lenders.
Closing cost: You may pay anywhere from one to four percent of your mortgage down just for closing. Lenders require that you pay this fee regardless of whether or not you pass the qualifying Expected Sales price test. Be sure to shop around to find the best rates; some first-time homebuyers mistakenly believe that they have to meet the lowest loan amount to qualify for the break on closing costs. But that's not necessarily true. Any amount over your closing can be applied toward your down payment.
Emergency fund: One of the primary reasons that first home buyers fail to close is because they have a large amount of debt-free equity built up in their home. It is easy for that equity to go into debt when interest charges add up and you can no longer make timely payments. Homebuyers who have established a savings or emergency fund can use that emergency fund to smooth out those rough financial spots and help them avoid falling into debt again. Saving and investing in a high interest-free emergency fund is an excellent way for first as is property buyers to get out of the hole faster and avoid sinking.
Get preapproved: Many first-time homebuyers are surprised to learn that many lenders actually require borrowers to get preapproved before they will offer to finance. This can take several weeks, sometimes even a few months, but it certainly can be done. Simply stop by at the office of your local lender and talk to them about your credit and debt-free situation. Ask if you can get preapproved so that you won't have to pay extra fees on your loan. Depending on your lender, you may have to pay nothing upfront, or only be required to pay a minimal fee to get preapproved.
Buyers need to look carefully at all of the details that they discover in a home inspection report. For example, one major mistake is to think that just because a home features two bathrooms and two levels that these are the average cost of living. Sure, two bathrooms and a large kitchen are nice, but they don't mean much if the building is outdated. Buyers should also avoid properties that feature "extras" like hot tubs and outdoor sauna decks, as these will be more expensive than standard features. Look for more facts about real estate at https://www.encyclopedia.com/social-sciences-and-law/economics-business-and-labor/economics-terms-and-concepts/real-estate.
