Every home buyer faces tough decision-making, especially when it comes to figuring out total costs and ensuring the budget works out to meet the entire obligation. There are many unforeseen contingencies that arise. Here are suggestions to better navigate those hazards when it comes time to crunch the numbers, and avoid making costly errors before signing that bottom line. Additionally, look for the best mortgage rates so you can get the lowest monthly payment possible.
How to Avoid Budgeting Hazards
Calculating the Total Budget
When determining the full scope of the budget, calculate a payment structure that allows maximum flexibility regarding what can be realistically paid for. Online mortgage calculators are a great help in planning the cost variables, and determining the most affordable buying options. Once established, discuss these estimates and projected calculations with a lender or broker offering the best loan deals. It goes without saying that meeting the monthly payment obligation is certainly the most important element of responsible and successful home ownership.
Over and Above the Basics
Every monthly mortgage repayment calculation must include the four primary cost factors. These, referred to as the PITI, are the principal, interest, taxes and insurance. While the mortgage calculators will help determine the primary factors of the principle and interest every month, it is also just as important to calculate the added figures that represent the required property taxes and homeowners insurance into the overall monthly repayment figures. In some cases, the taxes and insurance may not fall within monthly budget outlay, but it is mandatory that these funds be set aside.
Bringing it All to a Close
During negotiations with the lender of choice, getting the final numbers can be done with the Good-Faith Estimate (GFE). This document will spell out the complete range of projected costs involved with finalizing the loan process. It will also illustrate what funding will be required at closing, which will include the down-payment, which varies from 3.5% to 20% or more depending on the lending source and loan program. Closing costs may vary between 2% and 5% of the purchase price, and include charges such as loan origination, title insurance, and property inspections.
If you keep these tips in mind when it comes time to choosing a mortgage, you will be less likely to have problems with your chosen mortgage in the future. For first time home buyers, these tips will be of particular importance since you have never been through the process before. Before you start searching for homes, be sure to be able to answer the question, “How Much Home Can I Afford?”