Consider automating your savings so that your home money is diverted from your salary once it’s deposited. It seems obvious, but if you buy more house than you can afford, you’ll feel short of cash every month. Look for homes at the bottom of your budget, rather than stretching your boundaries. To determine your ideal price range, take a look at HomeLight’s Home Affordability Calculator, which takes into account your current income, savings, and monthly debts. (Note that our calculator is a great starting point; however, it’s no guarantee of how much you can afford.)
For example, if you got the same $240,000 loan at a rate of 5.5 percent, the monthly principal payment and interest increases to $1,362. You can expect to pay 2 to 5 percent of your mortgage sum in closing costs. In 2021, borrowers paid an average of $6,387 in closing fees and taxes, according to ClosingCorp. However, the closing costs vary greatly depending on where you shop.
A 10% deposit would require more to be paid each month for private mortgage insurance, but would only require $40,000 to $50,000 upfront. For a 20% deposit, you would avoid mortgage insurance payments, but you would need $80,000 to $100,000 in cash to complete the purchase. We know the Clarks have $1,050 to spend on their monthly mortgage payment. When researching new savings accounts, consider selecting a high-yield account that offers more significant interest, to build up your money faster. Many of these types of accounts are online only, which means they don’t have physical locations.
You may be eligible for loan programs that require only 2 percent for a down payment of up to 20 percent, depending on the purchase price of the home. Now, 5 percent may house and lot for sale sound like the best option, but remember that buying a home is a balancing act. The higher the down payment, the lower the monthly mortgage payment you will enjoy.
It all depends on how motivated you are to achieve your financial goals. Review all of your expenses — your car payment, outstanding student loans, monthly transportation and food costs, utilities and more — to create a realistic budget. Your mortgage rate has a huge impact on your monthly mortgage payment, making it crucial to buy from multiple lenders to get the best mortgage rate.