Thinking of Buying a Home?

Friday, April 11 at 09:35 AM
Category: Personal Finance

Figuring out how expensive of a house you can afford will largely be dependent on the level of your monthly payments. There will be property taxes, insurance and upkeep, but your monthly payments will probably be the most important part of your decision.

The fine line you walk when determining a level of down payment is based on the level of mortgage payments you can afford and how much money you have for the down payment. Mortgage rates are constantly changing and there are all different types of mortgages available.

If you are looking at mortgages of different levels, you can use a mortgage payment calculator to estimate payments.

Accumulating a down payment

Most lenders require certain levels of down payments to consider you for a mortgage. It often ranges from 3.5 percent to 25 percent of the purchase price. The larger the down payment, the more comfortable they will probably be giving you the mortgage. You should also remember it may be nice to have some extra money available after you move into your new home. New carpeting, new furniture or improving the landscaping all take money. You should not stretch yourself too thin financially.

Here are some ways to consider building funds for the down payment.

  1. Save. As simple as it sounds, most people end up saving for a couple of years to accumulate the amount needed. This may mean less or cheaper entertainment or dining out. One easy way to save is to enroll for an automatic savings plan at your financial institution. Have a certain amount transferred from your checking account to a dedicated savings account each month. You may be able to use a money market type of account to earn higher interest.
  2. Borrow the down payment from your retirement plan. Many company-sponsored 401(k) or profit sharing plans have provisions to let you do this. Check the details of your plan. The human resources or payroll department can help.
  3. Move. Living in a cheaper apartment while you accumulate your down payment can help you get your money faster. Cheaper rent may balance off a longer commute to your job. If you are just starting out or are considering changing jobs, you may want to consider an area with lower costs of living.
  4. Reduce other high interest rate debt. Paying off credit cards will take some of your savings, but you will not be paying the high interest rates usually found with credit cards.
  5. Make a deal with the seller. Sometimes a seller is willing to help sell their home by taking a second mortgage for part of the purchase price. Be careful if you are considering this and make sure a qualified attorney looks at all the documents.
  6. Sell some of your investments.
  7. Get a second job and save your earnings.
  8. Skip a year's vacation.

Conclusion
Buying a home is a big financial and emotional step. Do your financial homework and investigate your mortgage options. Determine what level of monthly mortgage payments will be affordable and comfortable. Use some discipline to save your down payment and when the time is right, begin the house hunt!

Wondering what to keep in mind for you house hunt? Check out our Pinterest board for home buying tips.*

Links marked with * go to a third-party site not operated or endorsed by Arvest Bank, an FDIC-insured institution.

Tags: Financial Education, Home Loans, Mortgage
David W Price on 4/25/2014 at 12:29 PM
Actually I'm home was destroyed In early morning fire April 5!!! My insurance provider has paid my mortgage. So I have approximately 1 1/2 acre lot on Lake Ouchita at the crystal springs rec area. Looking to secure a new construction loan. Any suggestions would be Appreciated. Thank you David Price
Arvest Blog Admin on 4/25/2014 at 2:02 PM
David - We're sorry to hear of your house fire. We'll have a lender reach out to you to discuss your options.

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