Are you Ready to Buy a Home?

By: Martin Lukac

The idea of buying a new home can seem very nice, but deciding if you are really ready can be a little stressful.

How do you know if you are ready?

First, you need to be familiar with the market in your area. You have a realistic idea of what a house will cost you. If you have no idea, you might want to spend some time flipping threw the classifieds and looking at a few real estate pamplets. Spend the time to become familiar with what houses are going for in your area.

You will need to have saved up enough money for a down payment and closing costs. The down payment is often determined by the type of mortgage you choose. Traditionally, the down payment is 20% of the purchase price. But there are many options available today for borrowers. Most lenders recognize that it is difficult to save up enough for a down payment of that level. You can find down payments as low as 3%. But you need to put as much as possible in order to start out with some equity in the home. The more you put down, the lower your interest rate will be.

You will also need to have enough money to pay for closing costs. These include points, taxes, title insurance, financing fees and other items that must be escrowed. The closing costs will range between two and seven percent of the property's purchase price. Borrowers should receive an estimate from the lender when applying for a mortgage in the form of a good faith estimate.

Your down payment savings and your monthly income will help you determine how much you can afford. Most people say that the mortgage payment should be less than 25% of your gross monthly income. I say that the only way you can establish how much you can truly afford is to look at your budget. If you are struggling to pay a rent of $1,000, it would be foolish to take on a mortgage of $1,200.

You need to remember that you are purchasing a home and all the things that come with it. You will find that there are many expenses in owning a home. They include maintenance costs, utilities, homeowners' insurance, roofing, repairs and other responsibilites.

Your credit must be in good shape if you want to get the best rates possible. Take the time to check your credit report to make sure it is accurate. If it isn't, you need to correct it before you apply for a loan. Taking the time now can save you a lot of money in interest over the years of your mortgage.

If you are ready, you will know it. There are many advantages to owning your own home.

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