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Before You Look at Your First House
Experienced home buyers know that one of the first-steps in beginning a successful search for a new house is taking a hard, objective look at finances. Determining how much money you can dedicate to the purchase of your new house affects almost every aspect of buying a new home - including how we write the offer, which mortgage programs you will qualify for, shopping for the best mortgage loan and which homes are truly in your price range.
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Here are the questions that each home buyer should ask:
- How much cash is available for a down payment? The amount you have available for a down payment will affect what types of loans for which you can qualify and what your monthly payment will be. Remember, you don't have to have money for a down payment to buy a home. There are 100% financing options available!
- Am I ready to write a check for the earnest money? Earnest money is a cash deposit made to a home seller to secure an offer to buy the property. This money will go towards your closing costs at settlement.
- How much additional cash will be available to pay for closing costs? There are certain standard costs associated with closing the sale of a house, such as taxes, lender fees, settlement fees, etc. Many of these fees are split between the buyer and the seller, as spelled out in the sales contract. Along with your lender, we can provide you with an estimate of closing costs so you know exactly what to expect.
- What is the maximum monthly mortgage payment that I can afford? Most lenders will use the 28/36 rule to determine the maximum mortgage payment you can afford.
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The 28/36 Rule
No more than 28% of your gross income can be applied to your mortgage, real estate taxes and insurance. And no more than 36% of your gross income can be applied to your mortgage expenses plus your regular debt expenses (car payments, credit cards, other loans, etc.).
We ask that all our buyers be pre-approved before we start looking at homes. That way we can make sure we are looking at homes that you can afford and if you fall in love with a home you are ready to write an offer. We can provide you with the contact information for lenders that our clients have worked with in the past and whom we trust. Just let us know!
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