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Cost analysis

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.

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