Figure Out What You Can Spend – Then Start Home Shopping!
It’s a good idea to figure out how much you can afford and get pre-approved for a mortgage before you start home shopping.
Before you go out looking for a home, you can get an idea of what you can afford by using our Financial Tools. These handy tools will help you estimate how much mortgage you can handle.
Another thing to consider is your down payment amount. Think you can’t buy a house without a 10% or 20% down payment? Thanks to more lenient government guidelines and new mortgage products, many people can now get into a house for as little as 3% down-or-less. There are even some special programs for first-time buyers that help with closing costs.
The Benefits of Equity
Equity is the principal part of your monthly payment that you can use as a down payment on a new home, or collateral for a home equity loan. You can use a home equity loan to finance home improvements, a child’s college tuition or a new car.
Real estate is also a great way to keep a hedge against inflation. While some homes do appreciate in value more quickly than others, real estate usually keeps pace with inflation. In fact, homes in general have been appreciating at a steady 3% a year.
That Wonderful Thing Called A Tax Break
As a homeowner, when filing your taxes you can deduct the interest portion of your monthly payment, and that can mean big savings. You can deduct your property taxes, too.
So look at what your monthly mortgage payment will actually be, taking your tax breaks into consideration. You may find out it’s about the same as-or sometimes even less-than a rent payment!
Pre-Qualification vs. Pre-Approval
Pre-Qualification is just a guesstimate of how much you could afford. But with a pre-approval, it’s just that: getting your mortgage approved prior to going out and looking for a new home.
Your loan officer will show you which items you should bring to apply so neither of you will need to wait for various written income, asset and liability information. So you could get a loan in just days.