Do you think home ownership is in your future? If so, it’s time to start considering home financing options. Buying a home and securing a home loan can be one of the biggest financial decisions in your life. Knowing all the details and steps involved will help ensure that home purchasing dream becomes a reality for you and your family.
How much can I afford?
Before you get too far along with home shopping, get an idea of how much house you know you can afford. Use online calculators or work with a lender to come up with a purchase price limit based on monthly housing costs (including mortgage, taxes, insurance) plus everyday expenses like food, utilities and transportation. Don’t forget about non-monthly expenses such as closing costs and home improvement projects.
What home loan programs are available?
There’s more than one home financing option to choose from: conventional loans, government loans, seller assistance and special home financing programs available only in certain areas. Your income, savings and credit score will all be factors in determining which home loan is best for you. You can also learn about your options by talking with a mortgage specialist. And if you’re buying a home near retirement age, prepare for potential changes to the home financing landscape brought on by new GSE (government-sponsored enterprise) rules—changes that may affect how much property you can afford or whether or not your lender even offers reverse mortgages anymore.
Can I afford closing costs?
You should expect to pay closing costs when you purchase a home. On a $200,000 home loan with an interest rate of 5%, those costs would be approximately $4,500. Factor that into your home financing budget and look for loans that include all or at least some of those charges as part of their monthly payment to help keep things simple.
Can I avoid paying private mortgage insurance (PMI)?
It depends on the program, but most home loans require you to pay PMI until you’ve paid down enough principal equity in the home so that the combined loan-to-value ratio is 80% or less. For example: If your home cost $150,000 and you took out a $120,000 mortgage at 90% LTV, you would have to pay PMI because the home’s value is only $90,000 (90% of $120,000).
What other home financing costs do I need to consider?
Property taxes and homeowners insurance are usually paid monthly along with your home loan. You should also budget for home maintenance and improvements. Factor in estimated monthly expenses like gardening, home security or pest control when coming up with your home financing price limit. This way you can keep your home ownership dream alive without breaking the bank.
For more home financing information, talk to your preferred home loan specialist. And don’t forget to check with organizations in your community that offer low-interest home improvement loans. Some municipalities and home builders also provide incentives for qualified buyers who purchase homes in new construction projects in their communities. Meanwhile, if you’re purchasing a home through the FHA program, an up-front MIP (mortgage insurance premium) fee will be added to your closing costs—but you can choose to have it included as part of your monthly payment instead.
You can contact Vision Mortgage Group for more details.