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New Home Purchase Loan Advice

Kiss Your Landlord Good-bye: What to Know When Buying a New Home
Buying a home can be intimidating even for seasoned investors. First-time home buying is even more nerve-wracking. The amount of money involved makes your new home purchase a high-stakes game, but it's a game you can win. Follow these steps to buying a home and lose that lease.  

How Much House? Making an Affordable New Home Purchase
There are three factors that limit what you can spend on a new home: Your comfort zone, what your lender will allow you to borrow, and the amount you can put down on the property.

• Your Comfort Zone: First, look at what you are paying now for housing. If you are renting, your landlord deals with maintaining and repairing the property, paying taxes, and maybe even utilities. When you take on home ownership, your mortgage is only the beginning. You'll also be faced with taxes, insurance, maintenance, and utilities. So decide first how much you feel comfortable paying each month for all these items. Then use a mortgage calculator to see what buying homes in different price ranges will cost you each month and find the price you can live with.
• What Your Mortgage Lender Will Allow: Next, find an online prequalification mortgage calculator, enter your income and expenses, try different interest rates, and get an estimate of what you are qualified to spend. If you are buying a home with bad credit, you may qualify for a smaller loan than if you have good credit.
 
• Your Down Payment: Finally, look at what you have saved (or plan to save) for a down payment. Many programs let you put as little as 3% down. If you are buying a second home or investment property, you may need a larger down payment. Take the amount you have saved and divide by the percent you want to put down. For example, if you have $9,000 and want to put 5% down, divide $9,000 by .05 (5%), which equals a purchase price of $180,000. If you change that to a 3% down payment (.03), your $9,000 gets you a purchase price of $300,000. Remember that you will incur closing costs, and you should leave enough in the bank after closing to cover a couple of month's expenses for emergencies.

Compare all three amounts. The lowest of these amounts is the maximum price you should pay for your new home. After all, you're buying a home, not a casino--take the gamble out of your purchase by playing it safe.

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