A real estate purchase includes costs more than just the sale price. Here are other considerations to include in your homebuying budget.
Some lenders require a 20% downpayment at closing. While it can take time to save up that much, paying a lump sum up front will lower your monthly payment. Generally, the majority of Buyers do choose a loan that may only reuire 3-5% down payment. Don't let the 20% number stop you from pursuing your own home, if your lender helps you determine you can afford it.
Your payments will cover principal, interest, taxes, and insurance. You may also have other recurring expenses, such as HOA dues, that you should factor into your budget.
If you don’t pay at least 20% of the purchase price as a downpayment, your lender will probably require you to pay private mortgage insurance (PMI). This isn’t insurance for you—it protects the lender if you default on the loan.
A buyer and a seller can negotiate how much each party pays at closing. But unless the seller agrees to pay all of the closing costs, you’ll be responsible for paying a portion of these fees.
When you’re ready to become a homeowner, contact a REALTOR® to determine how much you can realistically afford.
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