The First Place to Start when Purchasing a Home:
How much can I afford?
It's important to be objective about your finances. Once it's determine how much money you can devote to your new home, you can start narrowing down which homes you would like to preview, and possibly make an offers on.
Every home buyer should answer the following four questions:
The amount you have available for a down payment will affect what types of loans for which you can qualify.
Earnest money is a cash deposit made to a trust account (escrow account). This deposit will typically be credited back to the buyer of the home at closing. The deposit is a sign of good faith that you are seriously interested in buying the home and then secures the offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.
There are certain standard costs associated with closing the sale of a house. These fees are split up between the buyer and the seller, as spelled out in the sales contract. Find out More.
As a general rule of thumb, most lenders will use the '28/36 rule' to determine the maximum mortgage payment that you can afford.
The 28/36 Rule
No more than 28% of your gross income can be applied to your mortgage, real estate taxes and insurance. And no more than 36% of your gross income can be applied to your mortgage expenses plus your regular debt expenses (car payments, credit cards, other loans, etc.).
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