How to Buy a House
Knowing how to buy a house is important for first time buyers.
Although most people believe that buying a house will save you from throwing money away on rent, this is only half true.
The money you save on rent will only help to offset the additional costs of home ownership like taxes, insurance, mortgage interest and maintenance.
The real reason why it’s great to buy instead of rent is that you will be locking in a monthly payment for a number of years.
For the next 15 to 30 years you’ll know exactly how much it costs to stay in your home, as opposed to renting which is constantly rising.
The only people who won’t benefit from buying are people with extremely low rent or people who don’t plan on staying in the same place for a number of years.
A mortgage will be essential to anyone who isn’t a millionaire when buying a house.
If there was no such thing as home loans, no one would be able to afford their own home except the wealthy.
Mortgages can vary greatly in terms including the length of the loan, monthly payment amounts and interest rates.
It’s important to understand the different types of mortgages, especially a mortgage you are being offered.
Once you sign on the dotted line you will be committed to the terms of the mortgage, good or bad.
A down payment is required for most mortgages, although some mortgages may be available with 0% down payment financing.
The more you are willing to put down on your new house, the lower your interest rate will be and the easier it will be to get the loan.
A lower interest rate will make your monthly payments lower and can save you tens of thousands of dollars or more over the lifetime of the mortgage.
If you’re wondering what kind of house you will be able to afford, you can determine this by multiplying your annual household income by 3.
If you make $60,000 a year between you and your partner, you could easily afford a $180,000 home.
If you are unable to afford a home by yourself, you can always purchase a home and rent out part of it.
If you are able to afford your home later in life you can get rid of the renters and enjoy the home all to yourself.
It’s important to decide if you will be able to afford your monthly payments, every single month.
Your monthly payment can be approximated by multiplying the total cost of the home by 1% interest rate.
For example, a $125,000 home will cost approximately $1250 a month, which includes taxes and insurance.
This is just an estimate though, as different places have much different property tax rates, which can skew this figure quite a bit.
It’s also important to remember that the more money you put down the lower your payments will be overall.
The very best time to pay for a house is with a down payment which eliminates part of the principal without accruing any interest.
Buying a house can be an expensive process, even if you don’t put down a large down payment.
There are other costs associated with a house such as closing costs, and other fees such as application fees, bank fees and professional service fees such as inspection and appraisal of the home.
Closing costs can be up to $12,000 for a $150,000 home, or as low as $0 if the seller is covering them.
Other fees can run from $300 to $1000. Combined with a down payment, this can really add up.
This turns wondering how to buy a house into trying to figure out how to afford a house quickly.