Buying a first home is overwhelming, and the down payment can be the most intimidating part. Figuring out exactly how much you’ll need in order to enter the market will help you set a goal to save for, and understand exactly how much you’ll need before you can even start looking.
What is it?
A down payment is the minimum amount of money you are required to put down on your home. Since homes are too expensive for most people to purchase outright, the bank is willing to lend out the money so people can become homeowners—this is what a mortgage is. Before they will give it to you though, you have to invest in the home upfront. In Canada, the minimum amount for a down payment is five percent of the value of the home you are purchasing.
How much do...
Closing costs are 2-5 percent of the purchase price of a home, resulting in an average of $3,700 in fees for paperwork required to buy a house. That’s a lot of money to come up with when you may have already put everything toward a down payment.
Some fees from mortgage lenders are required by federal law to be the same, and there isn’t much you can do to change these costs listed in a HUD settlement statement — origination, underwriting, administrative and doc-preparation, among others.
Other closing costs, however, can be negotiated. Here are some to check into:
Lender fees: All customers must legally be charged the same lender fees by a lender, so you can’t negotiate them. But you can shop around for a lender with low...
A home inspection can make or break a transaction. Without it, you wouldn’t know if you’re buying a money pit or a home that will last a lifetime.
Homebuyers are responsible for hiring a professional home inspector, who should uncover possible problems before they buy the home. An offer on a home is often conditional upon a successful inspection.
The inspector should evaluate the physical structure and its critical internal systems. These include:
- Heating and cooling systems
- Walls, ceiling and flooring
Windows and doors
There are some things a home inspector may not uncover. These can include hidden problems...
Obtaining a mortgage is a little different when you’re self-employed.
Reporting your income as a self-employed worker on Schedule C for income tax purposes can make qualifying for a mortgage loan or refinancing a little more complex. The reason being that proving consistent and reliable income as a freelancer can be more involved because you don’t typically receive a regular paycheck. Because of this, the lender wants proof that you can repay the loan.
Each lender is different. Some require self-employed borrowers to go through extra hoops to prove employment, while others may or may not wait until the loan gets to its compliance or operations department. Early in the applications stage, for example, you may need to provide contact information for your employer so the lender can confirm you’re working regularly....
There are many ways parents can help their children purchase a home: contributing to a down payment, helping with closing costs, co-signing a mortgage or allowing their kids to move back home so that they can save money.
While most of these avenues involve giving your children money, deciding where that money should come from is an important decision. For parents nearing retirement, pulling money from a savings account or a 401(k) retirement account can be problematic if the money is needed for retirement. Without it, they could end up moving into the house they helped their children buy.
A poll by loanDepot found that more parents are planning to help their millennial children buy their first home. Sixty-seven percent said they planned to pull the money from their savings account.
Here are the...
Many lenders pre-qualify or pre-approve mortgage applicants, which can help considerably in the buying process. While the terms are often used interchangeably, there are some important differences to note.
In general, pre-qualification is considered an initial step in which the applicant provides information on income, assets and debts. The lender may or may not require documentation.
Pre-approval is considered the next step and requires documentation and a credit check. A hard credit inquiry can affect your credit score, and several by different lenders in a short period of time can cause your score to take a significant hit. If you’re thinking about getting pre-qualified or pre-approved for a mortgage, ask if the company will perform a hard credit inquiry and decide if you are willing to risk the potential impact...
If you’re shopping for a mortgage, you need to decide whether to choose one with a fixed or adjustable interest rate. An adjustable-rate mortgage, or ARM, might be a good idea if you’re only planning to stay in your home for a short period of time, but you need to ask questions and read the fine print first. You might be surprised by skyrocketing payments if you don’t understand the terms clearly.
How an ARM Works
With a hybrid ARM, the interest rate will change periodically based on market conditions. That means your monthly payments will also change. The interest rate will be fixed for a period of time, and then it will adjust periodically after that. The interest rate is typically low at the beginning, but it may rise dramatically once the fixed-rate period ends and the adjustment occurs. The lender decides which index to use to set...
If you’re shopping for a mortgage, one of the most important decisions you have to make is whether to choose a 15- or 30-year loan. You need to consider your current financial situation and long-term goals to decide which makes more sense for you.
Difference in Payments
A 15-year mortgage will have a significantly higher monthly payment and the same amount of principal than a 30-year mortgage because the repayment term is shorter. Some people simply cannot afford the higher payments associated with the shorter term and choose a 30-year mortgage.
The interest rate on a 15-year mortgage is usually lower than it would be for a 30-year loan. If you can afford to make the higher monthly payments, you can save a significant amount of money in interest over the life of the loan.
If you dream of living in a particular neighborhood but are unable to find a house you like in your price range, you might want to consider buying a fixer upper. Purchasing a house at a low price with the intention of renovating it can get you the home of your dreams in your ideal neighborhood. It can also potentially lead to financial disaster. Before you buy a house that needs major work, carefully weigh the pros and cons and be prepared for things to not go according to plan.
Reasons to Buy a Fixer Upper
The biggest advantage of buying a fixer upper is cost. It may cost much less up front than other houses in the same neighborhood. If you snag a house at a low price and have the funds available, you can remodel it and have the exact house you want in the neighborhood where you want to live.
If you have a child who will be starting school soon, you are probably hearing a lot of advice about how to choose the best one. Some people say you should avoid public schools and choose a private or charter school. The truth is that schools in all of those categories vary widely in terms of educational quality, and one type is not necessarily better than another.
Schedule a Visit
Looking at a brochure or website will not give you a true sense of what a school is like. Your best bet is to visit schools to get the inside information you need to make the right choice for your child. If you are interested in a school, call the office and ask for permission to observe classes for students in your child’s grade.
Look for a teacher who explains concepts clearly and engages students....