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How much can I afford?

Your Down Payment

Today’s housing market has changed from recent years, and this affects home buyers in many ways. The requirement for a down payment is just one of those areas.

Historically, there have been programs to allow buyers to finance their down payment—which essentially meant you bought a house with no money down. While the programs today are different than these historical programs, there are other ways to redue the down payment on your home. If you are looking for a no-money-down option, a rural housing loan may be your best choice. With this loan, you are limited to where you buy a home, but but you can avoid a large down payment (i.e. if you are willing to commute, this may be a good option). However, you can often find a house just outside the city limits that will qualify.

Another low down payment option is an FHA loan. These requirements are typically much lower than what is needed for a loan with a bank or mortgage company. You will only need to save 3 1/2 percent of your home’s cost for a down payment. There are also qualifications for this program, like being a first-time home buyer, as well as buying a modest home.

While you will have to find out if you qualify for either option, the lower down payment can make this a much cheaper alternative to traditional loans. This way, you can buy your home much sooner than you would otherwise.


Interest

When considering the purchase of a new home, investment property or refinancing your existing home loan, it’s best to familiarize yourself with how financing changes things. Current mortgage interest rates have a major influence toward your overall purchasing power. It is important to obtain a mortgage with an interest rate that suits your circumstances. Options for financing your property depends on your personal financial situation and your unique desires.

Interest rate is the rate at which interest is paid to a lender by the borrower for use of loaned money such as a mortgage. Higher interest mortgage rates simply mean that your monthly mortgage payments will be greater than financing at a time when interest rates are lower.

An adjustable-rate mortgage differs from a fixed-rate mortgage in many ways. This interest rate changes periodically, typically in relation to other factors. Monthly payments may go up or down during the period of your ARM loan. You may consider refinancing when interest rates are low if you have a variable interest mortgage rate.

Shopping for a fixed interest rate mortgage may save you a substantial amount of money. Future interest rates will have no impact on your loan, meaning your home loan monthly payments for principal and interest will not increase. The fixed rate does not change during the period of your loan which is usually 15 to 30 years.

Many different types of mortgage interest rates are available. Choosing your mortgage and type of interest rate may be the most important financial decision you will make.


Closing Costs & Loose Ends

Because financing is such a significant part of the buying process, it is best to know everything you can about it. Sometimes, however, there are unexpected costs to buying a home that you should be aware of (if these costs are intentionally hidden, however, the seller may be breaking federal laws). Some examples of “loose ends” that should be tied before closing day include:

Property taxes are pro-rated to the time of closing, and the amount of taxes due at closing will depend on how the taxing authority collects property taxes.

There may be liens against the property that have been ignored and they must be settled before closing can occur.

The current owner may want the buyer to pay the balance of a current sidewalk assessment that was being paid yearly with the taxes.

The financing source may include costs that were not mentioned such as document fees, courier fees, and the funding of an escrow account which includes taxes and property insurance that will be due before the monthly payment builds up enough money in the escrow account to pay them.

The finance company should have disclosed their “points” for originating a mortgage long before closing, but the amount of points may go up before closing.

Homeowner association dues are sometimes payable two months in advance for new homeowners.

However experienced you are in purchasing a home, be aware of potentially hidden costs, so there’s no surprises for you at closing time.