Can you Afford to Buy a Home
63When you are paying rent each month, the idea of paying a mortgage each month sounds appealing since the mortgage goes towards you eventually owning the home. The only drawback to making this dream come true is whether or not you can afford to buy a home. When you are figuring how much it would cost to buy a home, you need to figure in the down payment, home insurance, closing costs, moving, the possibility of having to purchasing major appliances if they are not left in the home, and many other expenses you did not have when you were just renting.
You will also have to consider that any repairs, lawn mowing, and other things that the landlord took care of will not be your responsibility. This means repairing leaky faucets, plumbing, appliances that may go out, repairing or replacing the furnace or air conditioning, etc. If the home is an older home, there may be other costly repairs.
When you find a home that does interest you, determine the property value of the home by comparing it with the prices of the homes that have recently sold in the neighborhood that is similar to the one you are interested in.
The big thing that you need to do is review the different mortgage loan types. Look at the down payments that they require with the money that you have saved up and is available to use for the down payment. Make sure that you save enough for any of the other expenses you are going to have,
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The down payment that you need is based on a percentage of the value of the property plus it is also determined in part by the type of mortgage that you have selected. A down payment can range from three to twenty percent of the value of the property. You also need to figure in the cost of private mortgage insurance.
The next step is to get an estimate of how much your closing costs are going to be. These closing costs include taxes, title recording, the inspections, title insurance, prepaid loan interest, and finance costs. All this will add up to two to seven percent of the value of the property. After you apply for a mortgage, you can get an estimate of these costs from the lender. The money you will need up from is the down payment and closing costs, although these are estimates.
Once you have all these costs in mind, then you will be able to know if you can afford to move.
