Buying a home is one of the major financial goals that many new couples set for themselves after getting hitched. Few homebuyers have the resources to purchase a home outright, so they take mortgages to make up the difference. Plan carefully when taking out a mortgage to ensure that you don't not to bite off more home than you can chew.
How Much Can We Afford?
Determining how much you can afford to pay for a home and sticking to that price can help you avoid getting in over your head. The U.S. Federal Reserve Board recommends that prospective homeowners create a monthly spending plan that includes mortgage payments, real estate taxes, homeowners insurance and monthly maintenance and utilities to help assess how much they can afford. Your monthly budget should leave room for savings, entertainment and other normal monthly expenses.
How Much Can We Put Toward a Down Payment?
A down payment is a lump sum of cash that you pay toward the value of a home when you take out a mortgage. A larger down payment results in lower monthly mortgage payments and may also gain you a lower interest rate. If your down payment is less than 20 percent of the selling price of a home, the lender typically makes you buy mortgage insurance.
How Long Are We Going to Live Here?
Buying a home is rarely a good financial decision if you don't plan to live in the home for more than a couple of years. If you plan to live in home for several years, but not for the entire duration of your mortgage, an adjustable-rate mortgage with a low introductory interest rate could save you money. If you plan to live in the home for a long time, a 15- or 30-year fixed-rate mortgage is the safest mortgage option.
Have We Gotten Several Mortgage Quotes?
Mortgage companies set different interest rates, terms and conditions, so it is beneficial to get quotes from several companies when shopping for a mortgage. Even a seemingly small difference in a mortgage rate can result in substantial savings over the life of a loan.
Do We Understand All the Terms and Conditions?
Never sign on to something that you don't fully understand, especially something that involves spending dollars like a mortgage. Read all the terms of your mortgage carefully and ask for clarification about anything that doesn't make sense. Getting advice from a trusted source, such as a real estate attorney you hire, can help you weed through the details.
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