Are you financially ready? Owning a home is a financial commitment that requires planning how home ownership fits into where your life is headed. Ask yourself what your budget is and if either buying or renting would require you to stretch your finances. Crunch all the numbers. A frequent mistake of first-time home buyers is comparing a month’s rent to a month’s mortgage payment. Many people don’t have all the numbers. There are many additional fees necessary to include to make a fair comparison: principal interest, property taxes, property insurance, homeowners’ association (HOA) fees, and ongoing maintenance. Are you prepared for the down payment? This is the lump sum payment that funds your equity in the property (how much of the property you actually own). Of course, down payments vary ranging from a VA loan at 0% to a conventional loan at 20%. There are also loans that allow down payments as low as 3%. Sometimes relatives help with the down payment. If you have a choice, take a gift rather than a loan, because lenders will add that debt to other monthly obligations and potential mortgage payments to determine your debt-to-income ratio, which generally can’t top 43% to qualify for a home loan. Your mortgage broker will guide and advise you on what's best for your financial situation. Can you afford the monthly mortgage and its components? Generally, a mortgage includes loan principal and interest (both amortized over the life of the loan) plus homeowner’s insurance and property taxes (pro-rated). These items can affect the monthly loan-only payment by several hundred dollars. For loans with less than 20% down, you may also be required to carry mortgage insurance. Again, your mortgage broker can provide the best insights here as well.
Are you emotionally ready? Can you handle the stress? A big
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