• 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 mortgages that allow down payments as low as 5%. Sometimes, relatives contribute to the down payment. If you have an opportunity, take a gift rather than a mortgage 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 mortgage. • Can you afford the monthly mortgage and its components? Generally, a mortgage includes mortgage principal and interest (both amortized over the life of the mortgage). You must also consider the cost of homeowner’s insurance and property taxes. These items can affect the monthly payment by several hundred dollars. • Are you emotionally ready? Can you handle the stress? A big factor to consider when buying a home is stress. The
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