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Before You Look at Your First House
Experienced home buyers know that one of the first-steps in beginning a successful search for a new house is taking a hard, objective look at finances. Determining how much money you can dedicate to the purchase of your new house affects almost every aspect of buying a new home - including how we write the offer, which mortgage programs you will qualify for, shopping for the best mortgage loan and which homes are truly in your price range.
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Here are the questions that each home buyer should ask:
- How much cash is available for my initial investment? The amount you have available for a down payment and costs will affect the types of loans for which you can qualify. Learn more about the Down Payment.
- Am I ready to write a check for the earnest money? Earnest money is a cash deposit made to a home seller to secure an offer to buy the property. This amount is often forfeited if the buyer decides to withdraw his offer.
- How much additional cash will be available to pay for closing costs? There are certain standard costs associated with closing the sale of a house. These fees are the responsibilty of the buyer and the seller, as spelled out in the sales contract. Learn more about Closing Costs.
- What is the maximum monthly mortgage payment that I can afford? You may want a lower payment than you can afford or you may want a house that will require a bigger payment than you can qualify for. Speak with a MetFund counselor to determine the Mortgage that works for You!
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The 28/36 Rule (does it still apply?)
It used to be that no more than 28% of your gross income could be applied to your mortgage, real estate taxes and insurance. And no more than 36% of your gross income could be applied to your mortgage expenses plus your regular ongoing debt expenses (car payments, credit cards, other loans, etc.). But with the advent of automated underwriting systems (AUS) and credit scoring the old 36% is routinely being allowed to 45% and sometimes as high as 60%. It all depends on several factors including credit history and score, length of employment, savings pattern, and finally, the amount of liquid assets after your transaction is completed.
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