If you are in the market for your first house, it's an exciting time,
but it can also be a daunting one. One of the most important things you
have to do is to save money for a down payment and closing costs, and
of course you'll need to make sure you take into account all of your
monthly housing expenses, including taxes and homeowners insurance, as
well as maintenance -- things you don't normally think about if you
just rent.
Let's talk about your down payment and closing costs, first. Homeowners
who already own a home and are just looking to buy the next one can
sell that home, use the proceeds from the sale of the house to make a
down payment on the next one, and be good to go. First-time homebuyers
are going to have to come up with that down payment and those closing
costs first, and that can be difficult to do if you're still trying to
pay rent.
Fortunately, both the federal government and your state's government
want to help. Most states offer first time homeowners monetary help to
make the down payment, and/or to pay closing costs. One of the best
places to start is on the Housing And Urban Development website. Here,
you'll find a list of the 50 states, and each state lists any local
home buying programs for that particular state. In addition, there are
federal government resources listed here, including federal mortgage
programs. Many of these are cheaper options for first-time homebuyers
than going through traditional mortgage programs.
Just as one example, an FHA loan requires just a 3% down payment (as
opposed to 10%, for a conventional loan), and you can have an employer,
relative, or even charitable organization help you with that down
payment; a conventional loan requires that you come up with the money
yourself for a down payment, usually.
Other expenses you'll need to consider with first-time homebuyer
programs
Remember that even if you go through first-time home buyer programs to
help you get into the house, you'll still be responsible for monthly
expenses once you've gotten into the house, including maintenance. Your
real estate broker and other financial advisors in these programs will
be able to help you figure out not only how much you can afford to pay
for a down payment, mortgage amount, and closing costs (and provide
help for some of those expenses, most especially the closing costs and
down payment), but can also often help you figure out what your monthly
expenses are going to be. For example, utilities in a house are often
more expensive than they are when you rent, because you may not pay for
utilities like water or electricity when you rent, such that these
expenses are included in rent. With a house, you're almost always going
to have to pay those expenses yourself. In addition, there are the
maintenance costs you have to pay to keep up the house, which you
usually don't have when you rent; your landlord is responsible for
those.
Sitting down with someone who's financially savvy and who knows the
home buying process, as with an expert in one of these first-time home
buyer programs, will help you figure out these expenses and figure out
just how much you can afford based upon income and current expenses.
That'll help you make a much better choice so that you can buy a house
you can actually afford.
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