Buying a New Home Financing
Factors to Consider |
By B Shelton |
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In industry parlance, a deal is deemed sealed 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'd 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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