Buying Your First Home

by Stephanie Berenbaum – February 10, 2011

The Costs of Becoming a Homeowner

So, you’ve finally saved up enough money for a down payment, and you’re all psyched to start some serious house hunting!  Not to be a total buzz kill, but there are other significant costs to owning a home that you MUST consider – beyond the down payment.

Luckily for us, we talked with mortgage broker Larry Steinway of PHH Online who has a great website with lots of helpful info for a first time homeowner – including a fantastic Rent vs Buy calculator!

Here is Larry’s home ownership reality check list to help shed some financial light and prepare you for not just the benefits, but also the added risks and responsibilities that come when owning real estate!

Cash on Hand

Wait – is this a trick question? You’ve been saving for years!  However, the days of 0% down/interest only loans are over (& that’s a good thing).  Be prepared to put down at least 20% of the purchase price – plus the closing costs!  If you’re looking to secure a mortgage, most banks these days require you to prove that you can afford to own the property at hand by putting down a significant down payment, thus lessening the bank’s risk on the loan they give you.

Hire an Inspector

It will cost a few hundred dollars, but hiring a professional to assess the the structure, roof, plumbing, wiring, etc of your home to be, will not only warn you of potential costly repairs, it may give you some extra negotiating power with the seller!

Securing an Interest Rate on Your Mortgage

Securing a low interest rate on your mortgage is not only based on the nationwide rates set at a certain point in time, but your credit rating also plays a BIG role in getting the best rate possible!

The length of your loan is another important point to take into consideration. There are varying interest rates for 5, 15 or 30 year loans.  You must carefully think about your personal situation and discuss all of your options with your mortgage broker before deciding on the length of your mortgage and locking in an interest rate!  Great ‘introductory’ rates which shoot up after a few years got a lot of people into a lot of trouble over the past few years…

Loan Origination Rate

What?! I had never heard of this before I owned, either.  This is the percentage the lending institution charges for its origination fee.  For example: 1% for a $100,000 home equals $1,000.  This is a cost you will likely have to pay as part of your closing costs.

Other Closing Costs

Closing costs include filing fees, appraiser fees, title searchers, legal fees and any other miscellaneous bank charges that you are required to pay at the closing.  These costs can add up to thousands.  At times, they are rolled into your loan (you will then pay interest on these fees overtime), otherwise you must have cash in hand to cover the costs!

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One Response to “Buying Your First Home”

  1. suki says:

    Good information! The supplemental property taxes really surprised me. Wish I had known how much extra they were.

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