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The last time you mailed your monthly rent check, did you find yourself wishing that you could put that money toward investing in a home? Ownership does offer certain advantages and fulfills many peoples' dreams. But before you buy, you'll want to ask yourself if ownership suits you, whether it's the right step right now, and whether you can afford it.
Does ownership suit you?
Ask yourself these lifestyle questions:
Q. Will career advancement require you to move?
Answer: Although home ownership won't completely tie you down, it adds obvious complications if you must move to take a new job.
Q. Will you miss the benefits of renting, and are you ready to take on the obligations of ownership?
Answer: Maintaining a home and a yard take time out of every week. Fixing the dripping faucet and the clattering furnace become yours to manage. Would you rather rent and be able to call the landlord? Will you miss apartment amenities such as a workout room or hot tub? How about apartment security features including locking mailboxes, secure parking, and a secure entry system?
Purchase costs
Q. How much should you save in order to cover a down payment and closing costs?
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Down Payment. The amount you need for a down payment varies depending on how much money you have to contribute and the type of financing you obtain. Some lenders want you to put down as much as 20%. On the other hand, you may qualify for 0% down financing, requiring you to cover only closing costs and incidentals. 5% down (the minimum many lenders will accept) on a $100,000 house is $5,000. Don't have that much saved? You could consider borrowing the down payment from a relative or another lender, but that means more money to pay back and greater overall cost because you pay interest on the down payment too. You may be better off waiting until you have enough tucked away for a down payment.
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Closing Costs typically range from 3 to 6% of the home sale price. On a $100,000 house, that's $3,000 to $6,000.
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Private Mortgage Insurance (PMI). If you put down a minimum down payment, the lender considers it a risk to give you a loan. But they're more willing to loan you money if you pay for insurance that covers the lender against your default on the loan. The monthly PMI fee depends on how much coverage the lender requires and what the PMI issuer charges. If you get a conventional loan, you can eventually get rid of PMI.
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Property Taxes. This amount depends on local property tax rates. Check with the local tax assessor or your real estate agent.
Homeowners Insurance. The amount varies depending on a number of factors including the amount of coverage, deductible, and so on. An agent will be able to give you a rate quote.
Q. Should I use a real estate agent? How do I find one?
Answer: Using a real estate agent is a very good idea. All the details involved in home buying, particularly the financial ones, can be mind-boggling.
A good real estate professional can guide you through the entire process and make the experience much easier. A real estate agent will be well-acquainted with all the important things you'll want to know about a neighborhood you may be considering...the quality of schools, the number of children in the area, the safety of the neighborhood, traffic volume, and more. He or she will help you figure the price range you can afford and search the classified ads and multiple listing services for homes you'll want to see. With immediate access to homes as soon as they're put on the market, the agent can save you hours of wasted driving-around time. When it's time to make an offer on a home, the agent can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and be there to hold your hand and answer last-minute questions when you sign the final papers at closing. And you don't have to pay the agent anything! The payment comes from the home seller - not from the buyer. Give a call to one of the agents listed on this page. They are ready to help you find a new home for your new life.
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