#1. Is homeownership right for you?
#2. Are you financially ready and the pre-approval process
#3. The next big question is how much can you afford?
There are great calculators online but there’s really three key factors lenders are looking for when it comes to your affordability:
#4. What’s really important about that last point of affordability?
For a newer home buyer that is worried about their costs, going into a fixed 5 year term or longer might make sense as they don’t have to worry about their rate going up for a while, hence, set payments.
However, as a variable rate over say a 20 year period is unusually less than any fixed rate term, it’s not for everyone. And I strongly caution those that are getting into homes too expensive because of the low variable rates without considering that rates will go up in the future. If going variable, you should pad your payment and pay as if you’re in a 5 year fixed. That way, when rates do go up, you’re already paying more than you have to a have created a cushion.
New buyers should also go in with a maximum possible down payment for many reasons
#5. But a payment isn’t the only factor – what about hidden costs?
There’s many the new buyer needs to budget for like property taxes, condo fees, closing costs and of course maintenance. Plus, a house and condo owner need to get their own inspections to ensure there aren’t’ major possible repairs in the coming years over regular maintenance. A buyer needs to budget for closing costs like legal fees, title insurance, property insurance and more that aren’t always factored into your mortgage payment.
Lastly, don’t let low rates trick you into less of a down payment or bigger house than you could afford. It’s better to rent a little longer and build up emergency fund than to potentially lose it in the future –just need to heed the lessons of some many in the US.
Mary Berg cooks a make-ahead vegetarian chili with butternut squash and apples.
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