Preparing to Buy your First Home

Oct 16th, 2007 @ 7:25 PM by MortgageMentor

When deciding to purchase a home, you should not sign any documents unless you are confident that you are able to make the mortgage payments and pay for all the other related costs. Many people only consider the monthly mortgage payment, and are surprised at the “real” costs of home ownership.

The hidden costs—which are not hidden at all, but perhaps obscured by our enthusiasm– include the down payment and closing costs, as well as “settling in costs”—things like buying new appliances or repairing those that are already in the home. The down payment could be as little as three percent of the purchase price, if you have excellent credit. Three percent of a $100,000 home is $3,000. Down payment funds can come from your savings account, checking account, stocks, bonds, life insurance policy, or a gift from a friend or family member.

Besides the mortgage payment itself and the closing and other up-front costs, you will have numerous ongoing costs. These may include:

• Property taxes from your local municipality. These are based on the value of the property, and you should be able to find them out before closing.
• Homeowners’ insurance – also called hazard insurance. This should be equal to the replacement cost of your home.
• Mortgage insurance – required if you owe more than 80% of the equity on your home.
• There will also be moving expenses, repairs, and you may need to buy new furniture or land and garden equipment.

Don’t let these costs catch you off guard. Do your research so that when it’s time to become a homeowner, you are prepared and ready.