Things to know when buying a home

Don’t buy if you can’t stay put

If you cannot commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet.

With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner – even in a rising market. When prices are falling, it’s an even worse proposition.

Down payment and closing cost

In preparation for a home purchase, take a look at your finances. Save as much as you can towards your down payment.

In addition, your savings should take into account closing costs that range from 1-5% and appraisal cost of $250 to $500.

A down payment of 20 percent is common. If you cannot put down the usual 20 percent, you may still qualify for a loan

There is a selection of public and private lenders who offer low-interest mortgages, if you qualify. Those mortgages offered require a down payment as small as 3 percent of the purchase price. Terms and restrictions may apply.

However, you will most likely get a lower interest rate if you can make a 20 percent down payment. Interest rates will go up if you make a smaller down payment.

If you make a 20 percent down payment, you will save money on your monthly payments, because you will not need to pay private mortgage insurance, which often is required on smaller down payment purchases.

The factors of how much house you can afford

There are three main factors that will weigh into how much home you can afford. The main factor is your monthly income before taxes, in addition long-term debts and cash you can accumulate for down payment and closing costs.

Lenders generally say that housing expenses should not exceed 25 to 28 percent of the homebuyer's gross monthly income.

Consider the monthly mortgage payment as a total of the principal, interest payments (interests), property taxes (taxes) and homeowner’s insurance (insurance), which is known as PITI. All revolving debt is also considered in qualifications.

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