There are various factors to look at when buying a house. One major consideration is the mortgage agreement you will be getting. These are very simple, however, you need to pay close attention to the terms and do the math before signing. Look out for hidden costs and make sure the lender is not about to give you an offer that is too much above what you can qualify for. Here are some of the major considerations to look at when buying a house.
1. Down Payment – What amount do you have to give the seller? If it’s zero, there’s a problem. It indicates the seller is still looking for a buyer. Normally, a down payment is equal to 15 percent of the value of the house. Some lenders are allowing as little as 3 percent down payment. As an alternative, you can put as much as 20% down, however you will be required to pay private mortgage insurance (PMI) for the balance.
2. Closing costs – Why are you being charged so much? Make sure you have all necessary closing costs reimbursed by the lender. These are the things like title insurance, escrow, attorney fees, and more. Also, make sure to cover the taxes and PMI. This can usually be reimbursed as a one-time charge or spread out over several years.
3. Taxes – What portion of the selling price do you pay the IRS? This applies to both the initial purchase price and the tax amount. Also, how much is the PMI fee that you need to pay as well? If the PMI fee is higher than the amount of your down payment, this can indicate that you might not be ready to purchase the house yet.
4. PMI – The premium bond interest charge. This is a fee paid by your lender, which invests the interest from the loan in order to pay you a portion of your monthly payment. Make sure you include it in your monthly payment calculation. Also, how much do you pay for the PMI insurance?
There are various other items you can add in these items. These will be in addition to the things discussed in item #2 above. Make sure that you pay attention to these items and understand them thoroughly before signing any contract.