Buying a home is usually the largest financial transaction most people have in a lifetime. Helping my clients buy a home is a responsibility I take very seriously. If you're thinking of buying now or in the near future I would appreciate the opportunity to help you.
There are literally hundreds of financing programs available now for everyone from people buying that first home to seasoned buyers financing a multi-million dollar home.
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It is not possible to give a hard and fast rule on how much you will need for a down payment. Generally the more cash you have available for a down payment the lower your monthly payments will be because you won't be borrowing as much.
Here's a couple of examples:
With Federal Housing Administration Financing (FHA) you can get into a home for as little as 3% of the purchase price as a down payment. FHA financing is probably the best way for average buyers to get into a home with the least amount of cash.
With most conventional financing, if you're able to make a 20% down payment you will not have to pay an additional mortgage insurance premium (MIP). MIP protects the lender if you default on the loan.
Closing costs are what it costs you in cash, and in addition to your down payment to buy a home. Some of the items included in closing costs are; appraisals, surveys, loan origination fees to lender, title search, property transfer tax, and several other fees. As a rough, rule of thumb, closing cost are about 3 to 6% of the sales price but can vary widely. It's also possible to have your closing costs paid in part by someone else such as a relative or even the seller of a property. I can advise you on this as your agent.
Here's a quick and easy way to calculate how much you will be able to borrow.
Step one is to determine your gross income. Your gross income is what your total household income is before any taxes are deducted. Divide this figure by 12 to get your monthly gross income.
There are usually two figures lenders look at to determine how much they will lend you to buy a home:
The first is what your housing expense will be. These expenses include the principal and interest payment, property taxes, homeowners insurance, and any condominium or co-op fees. Together all these payments should not total more than 28% or your monthly gross (gross is before taxes) income. This is your housing expense ratio.
The second is the total of your housing expense plus all your other long-term debts. The total of all these debts should not total more than 36% of your gross monthly income.
Fannie Mae, a federally chartered, private corporation, that helps people like you and me buy houses offers some excellent Calculators to help you determine how much you can borrow, what your payments will be, and what a specific monthly payment will buy. Fannie Mae also offer some very in depth advice on buying a home at HomePath
If you would like help determining what price home you can qualify for or help finding a home, please give me a call or e mail, I would be happy to help you.
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Realty Executives Associates
10255 Kingston Pike
Knoxville, TN 37922
Toll Free 1-800-662-2488
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