Blog

Do You Have Enough Money to Buy a House?

Do You Have Enough Money to Buy a House?

August 12th, 2020 | Purchasing a Home

When potential buyers are ready to begin their dreams of homeownership, they often start by looking at real estate listings. The asking prices are the starting point for determining how much home a buyer can afford, but there are plenty of other costs and fees not spelled out in that one number. By looking at all the associated expenses, you can decide if you have enough money to buy a home.

  1. Down Payment
    Most mortgage loans require at least some down payment (VA loans for military are one big exception). A conventional loan an require as much as 20% down. For a $250,000 home, a 20% down payment would be $50,000. If 20% is too prohibitive, there are several other loan types that allow much lower down payments. FHA loans, for example, require just 3.5% down. However, borrowers should realize that any time they put down less than 20%, they will have to pay for mortgage insurance. This is insurance that protects the lender, not the buyer, in case of default. Borrowers must pay this premium until they reach 20% equity in their homes, although some government loans now require mortgage insurance premiums for the life of the loan.
     
  2. Closing Costs
    These are fees paid to the lender and other third-parties that helped facilitate the home sale. They can amount to between 2%-5% of the mortgage and include things like home inspection fees, appraisal costs, lender origination fees, title search and insurance, prepaid property taxes and homeowner’s insurance. In some cases, you may pay discount points to the lender in exchange for a lower mortgage interest rate. One point is equal to 1% of the home loan total, so paying points is usually only helpful if you plan to stay in the home for many years.
     
  3. Property Taxes
    Once you become a homeowner, you continue to pay state property taxes. This can be paid annually in one lump sum or split into 12 and added to your monthly mortgage payment. Even after you completely pay off your home loan, you will still have to pay property taxes every year.
     
  4. Homeowner’s Insurance
    You will also be required to have a current homeowner’s insurance policy as long as you have a mortgage. Typically, the premium is divided and paid monthly as part of your home loan payment, but you can choose to pay it annually or bi-annually. If you live in hazard areas – those prone to earthquakes or floods – you will need extra insurance for those possibilities.
     
  5. Utilities
    Potential buyers should also factor in the cost of utilities before making the decision to buy. Utility rates can vary from city to city depending on the power and gas companies. Costs also rise dramatically with larger homes.
     
  6. HOA Fees
    Some neighborhoods are part of Home Owner Associations (HOAs) or Condo Associations. These require monthly dues for the upkeep of certain community features. Be sure you know how much those fees are before buying.
     
  7. Home Maintenance Expenses
    And of course, homeownership requires plenty of maintenance costs. This could range from fixing plumbing and appliances to repairing or replacing the roof to yard care expenses. It is a good idea to always keep roughly 1% of the home’s value in reserve to cover routine and unexpected home maintenance costs.

Give us a call today at 847-257-7278 and within just a few minutes - we can let you know how much you can borrow to buy a home.

 

Comments



Leave a Comment

Contact Us


Not readable? Change text.


docs

Required Documents

VA Loans

Veteran Loans

Disclaimer:
Prime 1 Bancorp, Ltd is not affiliated with any government organization or bank nor do we act on behalf of the FHA or VA. This material is not from HUD or FHA and has not been approved by HUD or a government agency. We are not a Federally chartered or State Chartered Bank. We are an we are an Illinois Residential Mortgage Licensee by the Office of Banks and Real Estate Lic #MB.6761138, a California CFL Licensed Mortgage Brokerage by Department of Business Oversights Lic #60DB055973, a Colorado Registered Mortgage Brokerage by Division of Real Estate, a Florida Residential Mortgage Brokerage Licensed by the Office of Financial Regulation Lic #MBR1930 dba Prime 1 Mortgage Inc, a Kentucky Mortgage Loan Broker Licensed by the Office of Financial Institutions Lic #MB729362, a Tennessee Licensed Mortgage Broker by the Department of Financial Institutions Lic #218020, a Texas SML Licensed Mortgage Brokerage by the Texas Department of Savings and Mortgage Lending, and a Wisconsin Licensed Mortgage broker by the Department of Financial Institutions Lic #1434638BR Prime 1 Bancorp, LTD Corporate Office is located at 2720 S. River Rd Suite 50, Des Plaines, IL 60018 our Toll Free Number is 888-205-3737. NMLS: 1434638

Loan product availability is subject to qualification of the borrower and loan approval after full review of the file. Not every applicant qualifies or is eligible for every loan program. Some loan products may not be available in all states. Loan approval, note rate and annual percentage rate are dependent on factors including, but not limited to, credit, collateral, income, assets and overall financial history. Not all applicants will be approved for a loan. All loan programs, terms and annual interest rates are subject to change without notice. NMLS: 1434638

Figure: 7 TAC §80.200(b)

"CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A COMPANY OR A RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.

THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIALMORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.