How Much Can I Afford? A Look at Home Loans

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As home prices are still at record lows, now is a good time to look into purchasing a house. What are some things you should take into consideration when buying a home for the first time?

Maintain a Good Credit Score

Most credit scores fall between 600-750. An ideal credit score?

Over 700.

Consider What You Can Afford:

It’s important not spend TOO Much on a home. As far as figuring out how much you can afford, try to follow this equation:

Your household income X 2.5= The Amount of Home You Can Afford

Utilities Taxes and Fees

While it’s important to think about your new mortgage, don’t forget about utility costs and fees when buying a home.

When you factor in:

– Electricity

– Gas

– Water

– Property Taxes

– Fees

– Cable and Internet

– Insurance

The non-mortgage cost of a home can really add up.

Loans

There are three basic types of home loans. What’s the difference between each?:

Fixed-Interest Mortgages

In a fixed interest mortgage, your interest rate remains the same for the life of your loan and is split into a monthly payment.

Adjustable Rate Mortgages

Adjustable rate mortgages on the other hand, feature interest rates that change over time.

Interest Only Loans

Interest only loans are really only good for people who expect their incomes to go up drastically after a few years. Basically, you only pay interest for a few years, and then your mortgage rate goes up, sometimes dramatically.

In closing, buying a home is exciting, and scary. Hopefully with these facts, you can make a more informed decision as you look for the home of your dreams.

References

1http://www.experian.com/credit-education/what-is-a-good-credit-score.html”>http://www.experian.com/credit-education/what-is-a-good-credit-score.html

2http://home.howstuffworks.com/real-estate/buying-home/10-financial-factors-to-consider-when-buying-a-home.htm

3http://www.bankrate.com/finance/mortgages/3-types-of-mortgage-loans-for-home-buyers-1.aspx

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