Buying a New Home
Financing Factors to Consider |
By B Shelton |
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In industry parlance, a deal is deemed sealed or closed
or done when the final payment for the property has been made.
If you belong to the group described above, it is wisest to do your
math first before leaping into getting a mortgage loan when you are
buying a new home because you wouldn't want to be left out in the
cold until the deal is sealed, now, would you
It is not so
simple to just compute your take-home pay and readily, hastily
conclude that you can manage it. Your first consideration would be
how much down payment you have saved up for this venture ready to
give up front. The usual trade-off for smaller down payment is a
higher interest rate on the balance, and this might mean it would
take a longer period of time before you could pay it in full to
close the deal.
Next would be how much of your take-home
income (this refers to the bottom-line figure, after all the taxes
and other debts have been deducted from your gross take-home pay)
could you afford to peg for your monthly amortization on the balance
without breaking your back.
The answer to these questions
requires that you have to first list down all your quantifiable
expenses and then finding out how much is left -- is it enough for
the monthly amortization with enough left for the other basic
necessities, like food, clothing, payment for monthly basic
utilities and your kids education. Would it leave you with enough
extra funds for emergencies like unexpected hospitalization
And would it still allow you that mandatory 10 percent minimum
savings
If you must get a loan for buying a new home, do not
opt for the so-called adjustable-rate mortgage. On the surface, the
adjustable-rate mortgage is very attractive because it is usually
coupled with an initial payment that is lower than the fixed-rate
mortgages; but if you examine it closely, the government might up
the mandatory real estate taxes and, of course, the lender would
pass on this increase to the end-consumer (the borrower), and you
be caught gasping for dear life because it would affect the balance
of your loan. You might end up not being able to afford further
amortization and lose everything when you default payment on the
remaining balance. Sad scenario, but it could happen.
Instead, opt for the fixed-rate mortgage because the steady interest
rate on this type of loan gives you comfort that nothing will upset
your budget and lifestyle in the duration of its lifetime. When you
get a salary increase in your job or if you are awarded a
good-performance bonus -- money you are not expecting and did not
peg for any of the necessary expenses you listed down earlier -- you
can put these unpredicted-but-welcome income to good use by using it
to pay up your loan; this way you'd get out of debt faster.
You could also opt for owner financing, or have the property's owner
finance part of your purchase. The only problem with this
arrangement sometimes is that you could end up paying higher
interest rates than you would if you had taken out a bank loan. The
only time you will feel that buying a new home is pleasurable is
when you can call it your very own, and no longer mortgaged. |
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