Saturday, November 2, 2013
Home Finance Basics
Buying a first home represents the major financial landmark in your life. With homeownership, you take on the single largest investment you'll ever make, with all the advantages - and risks - such an investment requires. Understanding home finance can be somewhat confusing, as there is a wealth of information available, and no shortage of companies eager to provide mortgage-related services. How do you weed out the good advice and make an informed decision? Simple: start with the basics of home finance.Are you ready?First, evaluate your economic situation. Are you carrying substantial unsecured debt, such as credit cards and student loans? Do you have a steady income and the means to survive an interruption in that income, if necessary? Are you willing to pare down your spending, in order to maintain mortgage payments and, most likely, additional home finance expenses like Private Mortgage Insurance (PMI)? These are major considerations when deciding whether or not to trade the relative simplicity of renting a home for the financial responsibility of ownership.How much can you afford?Next, run the numbers. Use an mortgage calculators to determine how buying a home will impact your budget. The government says that housing costs are excessive if they surpass 30% of your household income. Home finance means borrowing a substantial sum from a lender and repaying that amount over a period of time, with interest. Depending on the price of the home and the amount that you borrow, you will probably experience a dramatic rise in the amount you're spending, just to put a roof over your head. Be sure that you are realistic about the amount of "home" you can handle financially.Where should you buy?You've heard it before: the three most important considerations when buying a home are "location, location, and location." Actually, there are plenty of other considerations (see above), but deciding where to buy is nearly as crucial as deciding which home finance loan to choose. Spend time checking homes online, before you venture out. You'll have a good idea of price values, amenities, and neighborhoods, which saves time when the actual house hunting begins.What are your mortgage options?The selection of home finance options for first-time buyers is astonishing. From zero-interest mortgages to the traditional 30-year fixed rate loan, you'll find a vast array of terms, rates, and other choices. Once you've done some homework and determined how much you can afford, it's time to go mortgage shopping. Speaking with a lending expert can save you plenty of time, but you should be prepared to ask questions of your own. After you identify a couple of affordable home finance options, try running the numbers again, this time with the exact loan, term, and rate amounts. Be sure to include costs such as PMI, points, bank fees, and any additional charges involved with closing your loan. You don't want to encounter any financial surprises at the end of your home buying odyssey.You've mastered the basics. With preparation, practicality, and a little luck, you can join the ranks of homeowners who have steered through the home finance process successfully, and settle into your personal oasis with pride. For help along the way, contact the mortgage experts at HomeLoanCenter.com, who can explain the process fully and help you evaluate all your options, at no obligation.