Home Buying Considerations ##HOT##
You should examine your income, savings (for a down payment and closing costs), and recurring debt to figure out how much house you can afford to buy. The 43% debt-to-income (DTI) ratio standard is a good guideline for being approved and being able to afford a mortgage loan."}},"@type": "Question","name": "How Does Buying a House Work?","acceptedAnswer": "@type": "Answer","text": "Buying a house is often among the most significant purchases in your lifetime. When you find a house you want to buy, you should first figure out if you can afford it, then ask your lender for a pre-approval letter, which means the lender believes you are likely qualified for a mortgage loan, and then, you can make an offer. If the seller accepts your offer, you will need to take several next steps, including paying a downpayment and having your mortgage loan approved by an underwriter and lender.","@type": "Question","name": "What Is the 28/36 Rule?","acceptedAnswer": "@type": "Answer","text": "The term 28/36 rule is a guideline used by underwriters and lenders use to see if you can afford the home you want to buy. In general, this rule is considered one of the best ways to calculate the amount of mortgage payment debt, you can afford based on your income.Many lenders require that potential homebuyers' maximum household expense-to-income ratio is 28%, with a maximum total debt-to-income ratio of 36% in order to be approved for a mortgage."]}]}] Investing Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All Simulator Login / Portfolio Trade Research My Games Leaderboard Economy Government Policy Monetary Policy Fiscal Policy View All Personal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All News Markets Companies Earnings Economy Crypto Personal Finance Government View All Reviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All Academy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All TradeSearchSearchPlease fill out this field.SearchSearchPlease fill out this field.InvestingInvesting Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All SimulatorSimulator Login / Portfolio Trade Research My Games Leaderboard EconomyEconomy Government Policy Monetary Policy Fiscal Policy View All Personal FinancePersonal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All NewsNews Markets Companies Earnings Economy Crypto Personal Finance Government View All ReviewsReviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All AcademyAcademy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All Financial Terms Newsletter About Us Follow Us Facebook Instagram LinkedIn TikTok Twitter YouTube Table of ContentsExpandTable of ContentsUnderstand Your DTI FirstWhat Mortgage Lenders WantCan You Afford the Down Payment?The Housing MarketThe Economic OutlookConsider Your Lifestyle NeedsSelling One Home, Buying AnotherDo You Plan to Stay?Homebuying FAQsThe Bottom LineMortgageBuying a HomeAre You Ready to Buy a House?You'll need to consider more than just finances
home buying considerations
While there are many benefits to a larger down payment, don't sacrifice your emergency savings account completely to put more down on your home. You could end up in a pinch when unexpected repairs or other needs arise.
The term 28/36 rule is a guideline used by underwriters and lenders use to see if you can afford the home you want to buy. In general, this rule is considered one of the best ways to calculate the amount of mortgage payment debt, you can afford based on your income.
Beyond what you can afford, consider the long-term financial commitment: A higher-taxed home in disrepair will require a continuing commitment from you that could place considerable strain on your finances. Conversely, a more expensive, well-maintained house that has lower taxes and fewer anticipated repair costs might be more financially beneficial in the long run.
Ready to buy a home? Buying a home is one of the most significant financial decisions you'll make in your lifetime. From figuring out pricing to why you should consider a realtor, here are 10 Things You Absolutely Need To Know About Buying A Home:
1. Use a trusted realtor. We all know that realtors get a cut of the sales price of a home which makes some buyers hesitant to use a realtor: they believe it drives up the overall cost. Keep in mind that the seller, not the buyer, pays the commission. Brooke Willmes, real estate agent at SPACE & COMPANY in Philadelphia, says that potential buyers should keep in mind that a listing agent (the agent representing the seller) doesn't protect your interests and "that agent would simply pocket both sides of the commission." That means that you're not saving money. A savvy realtor who works for you can protect your interests and guide you through the buying process - from negotiating a price to navigating home inspections.
2. Remember that a house purchase involves a contract. When you're buying a house, there are papers to sign. And more papers to sign. Many of those papers - which are actually contracts - look like "standard" home buying contracts with no room for negotiation. That isn't true. Contracts are meant to be negotiated. You don't have to sign a standard agreement. If you want more time to review your inspection, wish to waive a radon test or want to make a purchase subject to a mortgage approval, you can make that part of the deal. That's where a savvy realtor can help. See again #1.
3. Don't necessarily buy for the life you have today. Chances are that buying a house will be one of the bigger financial commitments you'll make in your lifetime. Before you agree to buy what you think might be your dream house, consider your long-term plans. Are you planning on staying at your current job? Getting married? Having kids? Depending on the market and the terms of your mortgage, you may not actually pay down any real equity for between five and seven years: if you aren't sure that your house will be the house for you in a few years, you may want to keep looking.
7. Don't fixate on the purchase price. The purchase price is just one piece of owning a house: be sure to consider all of the costs associated with your potential new home. That includes the cost of insurance, homeowner association fees and real estate taxes - depending on where you live, those can quickly add up. And it's not just home improvements that can cost money: maintenance costs dollars, too. It's a good idea to ask questions about upkeep for extras like swimming pools, fancy heating and cooling systems and out buildings. Finally, Willmes suggests that you make sure you're comparing apples to apples: a condo with a large fee that's priced low may be more costly than a higher priced one with lower fees while a cheap home with high taxes may cost you more a month than a more expensive one with lower taxes.
9. Don't get carried away by the home mortgage interest deduction. Many taxpayers are tempted to buy more house than they can afford by figuring that they'll save enough with the home mortgage interest deduction to make up for it. The mortgage interest deduction is only deductible if you itemize on your Schedule A: only about 1/3 of taxpayers claim the itemized deduction. You itemize if your deductions exceed the standard deduction: for 2015, the standard deduction rates are $12,600 for married taxpayers filing jointly and $6,300 for individual taxpayers (those rates stay put for 2016). Assuming that you do itemize, remember that your out of pocket will still be more than your tax savings (if you're in a 28% bracket, paying $5,000 more in interest will only "save" you $1,400 in taxes). And you can't count on the same level of savings forever: mathematically, the longer you own your house, the less you will owe in interest. That's good for building your equity but it means a smaller deduction come tax time.
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