Purchasing a home is an exciting journey especially if you are a first time home buyer. However, before making a step, look or shop for the reliable lender that could give you the best deal on mortgage interest and the closing costs. Buying a home requires you to have a big savings in order to show your financial stability to your possible lender.
When deciding to buy a home you need to determine the cost of the home you wanted to buy, the lowest down payment needed, and the amount of monthly amortization including the monthly interest that it requires. In this way, you know how much does it cost to buy a house.
Approval of Loan
A bank approval of home mortgage loan is only the basis of a stable job history. At least, the person has been in the same job for the immediate past two years. The bank also requires that the family annual income will be in between one-third to one-half of the cost of the home. In order to qualify for a more expensive home, the borrower should take an extra job during the weekend.
Most banks finance 70 to 80 percent of the cost of new homes while the buyer is required to make a down payment of 20 to 30 percent of the cost. In a 100,000 Dollar home, the bank will requires from the borrower a 20,000 dollar cash or bank deposit to be made available as down payment. A bigger down payment results to lower monthly mortgage amortizations.
Closing Costs of the Deal
What are the closing costs of buying a home? Most buyers are not aware of these costs that add up to the total costs of the home they purchased. These may include broker’s commission, sales and transfer tax, insurance premium payments, and other fees that the lending bank may charge. The closing costs will run from three to six percent of the cost of new homes, while that some of the closing costs are non-negotiable; the lending bank could give a discount or may no longer charge some closing costs.
It is important for the first time home buyer to discuss with the lending bank the estimated amount of the closing costs prior to the submission of home mortgage application for the bank’s approval. This is to safeguard first time home buyers from hidden fees that lenders usually charge.
Escrow is required by the lender to the home buyers and this is needed for the property tax and home insurance. Usually the monthly payments include insurance premiums and tax. Throughout the year, the sufficient funds are being deposited in the administered account by the lender in order to cover the whole expenses. The premiums and taxes vary depending on the state but the deposit includes lots of dollars.
Buying a home for the first time is exciting if you are familiar with the process. By familiarizing about the process, through readings and continued research you will have an idea on how much does it cost to buy a house.