Mortgage payments represent only a fraction (albeit a large one)
of the total cost of your house. Make sure that you have added
up all of the other expenses involved with homeownership. While
this process might be somewhat disheartening, it is far worse
to learn that your house costs too much after you have already
closed on your house.
Some of these costs might be upfront, although hidden upon first
glance. Down payment requirements, for example, vary widely from
lender to lender. Still, you should know that you are more likely
to obtain a favorable rate if, in advance, you can put a sizable
amount of cash down.
Something that is closely related to your down payment, but not
necessarily discussed when you are in the shopping-around stage,
is private mortgage insurance. Again, policies surrounding this
insurance vary from lender to lender, but as a general rule, you’re
going to have to get it if you can’t pay twenty percent
of the cost upfront in cash. This insurance will cost you over
and above your regular mortgage payments.
Then, there’s closing costs. (Feeling panicky yet?) Again,
these vary, but five percent of the cost of the house is a reasonable
estimate for a standard mortgage. While lenders are required to
disclose these costs during your mortgage application, they are
not bound by law to this estimate. Many experts claim that lenders
inflate these costs after they provide the estimate.
Last, but far from least, you have the money you will inevitably
pump into repairs and routine upkeep. Learning about these costs
is usually depressing for first-time homeowners. You can avoid
that let down if you face the music upfront and include these
costs in your budget from the start.