That depends on a number of factors, including the purchase price of the home and the type of mortgage you get. In general, you need to come up with enough money to cover three costs:

  1. Earnest money—the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house
  2. Down payment—a percentage of the purchase price of the home that you must pay when you go to settlement.
  3. Closing costs—the costs associated with processing the paperwork to buy a home.

When you make an offer on a home, your real estate broker will put your earnest money into an escrow account. If the offer is accepted, your earnest money will be applied to the down payment or closing costs. If your offer is not accepted, your money will be returned to you. The amount of your earnest money varies.

If you buy a HUD home, for example, your deposit generally will range from $500 – $2,000. The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That’s why many first-time homebuyers turn to HUD’s FHA for help. FHA loans require only 3.5% down, and sometimes less.

Closing costs—which you will pay at settlement—average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won’t be caught by surprise.

In addition to your mortgage payment, you will need to pay property taxes (which may include special assessments), insurance and monthly utility bills; if you live in a condo or gated community, you may have to pay monthly condo or HOA fees.
You can find out by asking yourself, these questions:

  • Do I have a steady source of income?
  • Have I had a stable job for the last 2-3 years?
  • Do I have a good record of paying my bills?
  • Do I have outstanding long term debt (like automobiles and school loans)?
  • Do I have money saved for a down payment?
  • Do I have the ability to pay a mortgage each month, plus additional expenses?
Your lender will need to assess your employment, assets, liabilities, and credit to determine the loan amount that you qualify for. If you are applying with a co-signer, lender will need to review his/her information as well.

Most loans have 4 parts:

  1. Principal: The repayment of the amount you actually borrowed
  2. Interest: payment to the lender for the money you’ve borrowed homeowners
  3. Insurance: a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders
  4. Property taxes: the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year

During the life of the loan, you’ll pay far more in interest than you will in principal – sometimes two or three times more! Because of the way loans are structured, in the first years you’ll be paying mostly interest in your monthly payments. In the final years, you’ll be paying mostly principal.

A lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to FHA, monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.
Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your desires such as price, size, location, school district, location, availability of public transportation, and amenities offered. Establish a set of “minimum requirements” and a “wish list.” “Minimum requirements” are things a property must have for you to consider it, while the “wish list” covers things that you’d like to have but are not essential.

In addition to your own wish list, you can use the HUD Home Scorecard and consider the following:

  • Is there enough room for both the present and the future?
  • Are there enough bedrooms and bathrooms?
  • Is the house structurally sound?
  • Do the mechanical systems and appliances work?
  • Is the yard big enough?
  • Do you like the floor plan?
  • Will your furniture fit in the space?
  • Is there enough storage space? (Bring a tape measure to better answer these questions.)
  • Does anything need to repaired or replaced?
  • Will the seller repair or replace the items?
  • Imagine the house in good weather and bad, and in each season. Will you be happy with it year-round?
Many of your questions should focus on potential problems and maintenance issues. Does anything need to be replaced? What things require ongoing maintenance (e.g., paint, roof, HVAC, appliances, carpet)? Also ask about the house and neighborhood, focusing on quality of life issues. Be sure the seller’s or real estate agent’s answers are clear and complete.
If possible, take photographs of each house: the outside, the major rooms, the yard, and extra features that you like or ones you see as potential problems. And don’t hesitate to return for a second look.
There aren’t a set number of houses you should see before you decide. Visit as many as it takes to find the one you want. On average, homebuyers see 15 houses before choosing one.
There isn’t a definitive answer to this question. You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, offer more ambiance, and have lower property tax rates. People who buy older homes, however, shouldn’t mind maintaining their home and making some repairs. Newer homes tend to use more modern architecture and systems, are more energy efficient, and are usually easier to maintain.
The two don’t really compare at all. The one advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. In addition, you may not be free to decorate without permission and may be at the mercy of the landlord to approve you as a tenant. Even though homeownership has many benefits, the main ones are equity building and tax breaks provided by the government.
We can give you a ballpark figure by showing you comparable current listings and recently sold homes. We can provide this information during our free consultations.

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