equity

A New Home And Your Responsibilities

People who are looking to buy a home for the first time need to consider a number of factors. Most private mortgage lenders require a down payment of 10% to 20% of the purchase price of the home. Depending on the price of the home you are considering, this could be between $5000 and $20,000 dollars. There may be some first time buyer programs that will lower the down payment.

First time home buyers may qualify for government insured loan programs which may waive or reduce the required down payment. Since the government wants to encourage home ownership, their credit score requirements may not be as strict as those of banks and mortgage companies. You still may qualify for a lower interest rate. Try to find a mortgage payment that won’t strain your budget. Paying a mortgage is an investment in your future, paying rent is not.

Calculate how much you can comfortably afford to spend on your mortgage each month. Deduct your down payment from the amount of the purchase price of the home and determine whether the payments on the home you are considering will be manageable. You need to set a strict limit and stick to it, no matter how tempting it may be to spend more. Tell your realtor your top price and advise him you don’t want to look at homes that cost more. Realtors make money on commissions and the more expensive the house they sell, the high their commission. Don’t let your realtor talk you into a house you can’t afford.

Don’t sign a contract on a house without knowing all the facts. If you put down a deposit and there is a problem with the home inspection or the title search, you deposit will be refunded and the contract canceled. Take the time to get the home inspection before turning over your full down payment.

Some young buyers may receive help with their down payment from family members. It may be better to try for a government program that waives that down payment. Some state governments also offer first time buyer incentives, so you may want to look into the programs available. A good credit rating will still qualify you for a lower interest rate. Remember that in addition to your down payment, you will need to pay closing costs at the time of sale. Closing costs can be several thousand dollars.

Closing costs include the points that buyers and sellers pay on the mortgage, the cost of title searches and home inspections and any unpaid property taxes. If the home requires repairs, the lender may also require that either the buyer or seller put money in an escrow account to cover the costs. Putting an offer in on a home doesn’t insure the sale will go through. Your lender may find a problem with the home and refuse the loan. You can try again with another lender if the problem isn’t too serious.

So how do you compare lenders? Check out the APR or Annual Percentage Rate which will reflect the total cost of the loan and calculate the Annual Percentage Yield which will show how the compounding interest makes the loan worth the trouble. Ask the lender to disclose both APR and APY. They are bound by law to give this information.

After you have done your own personal financial analysis and decided how much you can afford to spend on a house, it is time to start looking around. Don’t put in an offer on the first house you see, check several properties before you make a decision. Chances are you’ll be living there a long time.

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