Another thing to consider
is your down payment amount. Think you can't buy a house without
a 10% or 20% down payment? Thanks to more lenient government guidelines
and new mortgage products, many people can now get into a house
for as little as 3% down — or less. There are even some special
programs for first-time buyers that help with closing costs.
The Benefits of Equity
Equity is the principal part of your monthly payment that you can
use as a down payment on a new home, or collateral for a home equity
loan. You can use a home equity loan to finance home improvements,
a child's college tuition, or a new car.
Real estate is also a great way to keep a hedge against inflation.
While some homes do appreciate in value more quickly than others,
real estate usually keeps pace with inflation. In fact, homes in
general have been appreciating at a steady 3% a year. In several
Puget Sound communities, it's closer to 6% per year. (Your real
estate agent can provide you with the housing appreciation rates
in the areas in which you're interested in buying.)
That Wonderful Thing Called A Tax Break
As a homeowner, when filing your taxes you can deduct the interest
portion of your monthly payment-and that can mean big savings. You
can deduct your property taxes, too.
So look at what your monthly mortgage payment will actually be,
taking your tax breaks into consideration. You may find out it's
about the same as-or sometimes even less-than a rent payment!
With a 5% down payment, a $100,000 30-year mortgage loan at 8%
interest (8.15% APR) requires a monthly principal and interest payment
of $733.76. Assuming a 28% tax bracket and $150 for monthly property
taxes, the after-tax monthly payment would be about $615! (This
is only an example. Please consult with a tax advisor regarding
your own tax situation and current tax laws.)
Pre-Qualification vs. Pre-Approval
Pre-qualification is just a guesstimate of how much you could afford.
But with a pre-approval, it's just that: getting your mortgage approved
prior to going out and looking for a new home.
Your loan officer will show you which items you should bring to
apply so neither of you will need to wait for various written income,
asset and liability information. So you could get a loan decision
in just days.
|
