How much home can you afford
First, you will have to come up with a down payment — the amount
you must pay up front before a lender is willing to give you a
mortgage to finance the rest of the cost of a home.
Generally, lenders want to see a down payment of 5% to 20% of the
purchase price. The higher your down payment, the lower your monthly
mortgage payments and closing costs will be. If you qualify as a
veteran of the armed forces, you may be eligible for a Veteran's
Affairs loan, which has the lowest down payment requirements.
Likewise, a first-time home buyer may qualify for special terms.
Contact your local Housing and Urban Development (HUD) office, as
well as local city, county and state housing bureaus, for
information about first-time buyer programs in your area. Sometimes
a seller is willing to finance a mortgage with little or no down
payment. But be aware of potential problems in seller-financed
arrangements and have an attorney check over your written
agreements.
Once you know how much of a down payment you can afford, you'll need
to calculate the monthly mortgage payment you can handle. Lenders
generally want your monthly payments (which include principal plus
interest, property taxes and home insurance premiums) to equal no
more than 28% of your gross income. They also figure you can handle
total debt (mortgage payments plus car payments, credit card
payments, etc.) up to a maximum of 36% of your gross income.
Do it alone or find an agent?
A real estate agent
may be very helpful in the search for your new home. Agents are
familiar with local neighborhoods, schools, shopping and
recreational facilities, and even traffic volume. Real estate agents
may also help you figure out how much you can spend on your new home
and can assist with other details associated with your purchase.
Generally, the seller pays the real estate agent a percentage of the
proceeds of the sale, so there is no cost to the buyer.
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