Looking At Houses

Buying a home does not need to be stressful, as long as you have prepared a budget, saved for a down payment, and created a realistic plan to buy your home. Here are some tips to help you budget and finance your new home purchase so you can begin the search with your real estate agent.

Your Budget for a Home

One of the first steps to begin your home search is to decide how much you can afford and how much you plan to spend on your home. You may have an idea in your head of the size and type of home you want to buy and the specific neighborhood you plan to live, but until you look at your monthly allowance for housing, you won't know for sure. And one way to do this is by talking to your mortgage broker about pre-qualifying for a mortgage loan.

During the pre-qualifying process, your broker will look at your income, credit, and employment history and match you to a mortgage loan program with a specific interest rate and loan length that will determine how much you can afford. Your broker will be able to tell you how much of a loan you qualify for and what the estimated monthly payment will be on that loan. This helps with knowing how much of a house you can buy.

For example, you may qualify for a $240,000 loan with a mortgage payment of $2,100. You can calculate this monthly payment into your household budget each month to make sure you will be able to afford the payment along with all your other bills. If you are not comfortable with that payment, talk to your broker about a more affordable payment with a lesser loan amount, and use the recalculated loan amount they provide to you to begin your search for a home.

How Much Cash to Bring to Closing

A second part to planning for your budget for home buying is to know in advance how much cash you need to have on hand to buy your home. You may need to bring a down payment amount to the home closing and signing for the home purchase to happen. Your down payment may consist of a lump sum down payment to coincide with your new loan, or your down payment may be paid toward the closing costs with the purchase transaction.

Talk to your mortgage broker about any funds you will need to pay for at closing, as they can calculate this in advance for you. You will also know how much money your specific loan will require for you to put down as cash. For example, if you are getting a loan to finance 95 percent of the home, you will need to bring 5 percent of the purchase as a cash down payment. Contact your mortgage broker for more home buying tips that will assist you in this process.