Wednesday, June 11, 2014

Three Things You Need to Know to Get a New Home

Buying a house can be a confusing process, but like most life-changing

endeavors, it's much easier to understand if you break it down into smaller steps.

First, figure out what kind of mortgage you want. Second, know how much you

can afford and anticipate what other expenses are involved. Third, determine

what you need to finalize a deal. Purchasing a house is likely the biggest

purchase you will make in your life. Most likely you will have to borrow the money

from a bank or other financial institution by getting a mortgage -- a long-term loan

secured by the property you purchase. Shopping for a house is taking the first

step toward fulfilling the dream of owning your own home. You can even deduct

the mortgage interest on your federal income tax. Remember that securing a

mortgage is serious business. The bank owns the house until you pay off the

loan, so look before you leap into that dream home.

Determine Your Mortgage

Most banks offer several types of mortgages, and it’s up to you and your

advisors to determine which type of mortgage will work best for you. If you

are planning on doing some reconstruction on your new home, you could also

look into construction loans. With a fixed-rate home loan your interest rate

will be the same for the life of the loan, and the payment is divided into equal

monthly payments until the loan is paid off.  The interest payments are front-
loaded, which means that during the first few years of the loan term, only a small

portion of the payment pays off the principal – most of it will go toward interest.

Adjustable-rate mortgages are a bit different. Unlike a fixed-rate home loan, the

interest rate on an adjustable-rate mortgage, or ARM, changes each year. After

the fixed-rate period, the loan is amortized over the balance of the term with a

rate that changes yearly.

Know What You Can Afford

Do a bit of research to find out about how much money you should and can

borrow, based on your income, credit, and debt. Also take a look at the housing

costs in your preferred areas to figure out if you can actually afford the home you

wish for. If not, it may not be the time to buy. Remember, real estate is a great

investment, but only if you have enough capital to have some of it tied up in a

property for many years. Realistic expectations are key when looking for a new


Finalize the Deal

Once you have found the home you want, it’s time to close the deal. Do some

research on reasonable negotiations for the area in which you’re shopping and

the size of the home. Before you make an offer, be sure your bank will grant you

a loan in that amount. Consider closing costs, renovations, and inspections in

your offer. Hopefully you’ll be in your new home soon.

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