investment, over stocks, gold, savings accounts/CDs, and bonds. Real estate leads with 31% of Americans choosing it, followed by stocks/mutual funds, at 25%. A cautionary note though — although home prices have recovered from their pre-2007 market slump and continue to rise, the price of your home can still fall. • Are you financially ready? Owning a home is a financial commitment that requires planning how homeownership will fit 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 homebuyers is comparing a month’s rent to a month’s mortgage payment. There are many additional fees necessary to include to make a fair comparison: principal interest, property taxes, property insurance, homeowners’ association fees, and 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). Down payments vary; 20% is preferred and gets the best rates. There are some loans that allow down payments as low as 3%. Sometimes, relatives contribute to the down payment. If you have an opportunity, 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. • Can you afford the monthly mortgage and its components? Generally, a mortgage includes loan principal and interest (both amortized over the life of the
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