So you’ve started the house hunting process, you want to buy a house. If you’re looking for Rockville Maryland Homes, or homes anywhere else for that matter, it’s very important that you consider your finances before you ever begin.
Unfortunately, the right home is not necessarily “your dream home.” For most people it is far from it. The first step to find the right home is to examine your finances and budget. Figure out what you can afford each month. It really doesn’t matter what your lender says you can afford, (at least on the high low end of mortgage qualification) what matters is what you are comfortable paying. You are the only one that actually knows your spending habits. You know what you can, or cannot control.
By examining your finances well before you ever begin the house hunt process, you position yourself to a state of satisfaction, and won’t end up getting let down when you realize you have looked at homes that you cannot afford.
Many first time buyers, and experienced buyers alike make the fatal error of thinking they can afford something because their lender said they can, even though the new mortgage payment will be double what their rent payment was.
The second important thing to consider when buying a home is your down payment. While it is still possible to buy real estate with no money down, from a monthly perspective, it is never the least expensive way.
When buying a home, the first 20% is the most expensive. If you don’t have at least a 20% down payment, you have to pay whats known as “mortgage insurance.” Mortgage insurance is essentially foreclosure insurance. It guarantees the lender that if you do default, they will get their money back.
Mortgage insurance has both an up front element, where part of it is paid in your closing costs, and a monthly portion. Every month you will be paying this mortgage insurance premium. This additional payment is added to your mortgage payment and monthly housing expense.
If mortgage insurance can be avoided with a twenty percent down payment, buying costs for new homes are much less expensive.
When people fail to examine their finances beforehand, foreclosures is all to often the inevitable outcome. Don’t be a victim. Do things right before you ever begin the house hunting process.