THINK ABOUT BUYING A HOUSE OR APARTMENT
7. Think About Buying a House or Apartment
Despite all the havoc in the housing market, at some point in the next few years you may start to feel that it’s time to purchase a home of your own. Deciding that it makes sense to buy involves more than simply comparing your monthly rent with the monthly mortgage payments you’d make as an owner. A whole range of financial factors, including the tax break you’ll get from buying, the fees you’ll pay when you buy, and how long you plan to live in the new home, should enter into your decision.
If you do decide that it’s time to buy, you may wonder if it’s really as hard as they say to get a home loan, also known as a mortgage, these days. The answer depends on your situation. One of the toughest obstacles is coming up with the down payment required by the lender. You will likely need to have an amount equal to at least 10% of the purchase price of the home to qualify for a mortgage.
In addition to that cash, you will need a good credit score and to be able to prove that your salary is high enough to make the monthly mortgage payments. Mortgage lenders also want to make sure that your other debts are manageable.
Once you are ready to buy, your next step is to look at sites like www.hsh.com, www.bankrate.com, and www.freeratesearch.com to find the best mortgage deal you can get. It’s also a smart idea to check with your local bank or credit union—sometimes the best home loan deals are right in your own backyard.
But what if you’re eager to buy and can’t come up with the full down payment or don’t have great credit? All is not lost. One option, for example, is to look into the Federal Housing Administration (FHA) loan program. FHA loans require only a 3.5% down payment and they’re usually easier to qualify for, but you may end up paying somewhat more in interest and fees over the long run.
Contact a lender or your local Housing and Urban Development office (www.hud.gov) for more information on FHA loans. You can also call your state housing office to see if it offers any low down payment mortgage options for which you’re eligible. The advantage of these state programs is that they typically charge a lower interest rate than you can get on a bank mortgage.
If you don’t qualify for any of these programs, don’t give up. Make it your goal to spend the next one to two years improving your credit score (by paying all your bills on time) and saving up for that down payment. You’d be surprised how quickly you can build your credit record.
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