Shopping For Your Home Loan: Hud'S Settlement Cost Booklet - U.s. Department Of Housing And Urban Development (Hud) Page 5
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48 What is your estimated monthly payment for the home? In addition to the
monthly payment for principal and interest, you will have to pay for taxes and
insurance and possibly homeowner association dues. If your down payment is
less than 20%, your lender may require that you pay the added expense for
mortgage insurance.
What are the other costs of owning a home? Be realistic about the costs of
owning a home like heating and cooling and other utilities. You will generally
need to budget for repairs and routine maintenance of your home, especially if
you buy an older home.
What can you afford? Be confident that you can make the monthly payments.
Have a financial plan and make a budget. Do you have a steady source of
reliable income to pay your mortgage should your interest rate increase in the
future? Consider how many long-term debts you have such as car or student
loans, as well as credit card bills.
Have you talked with a housing counseling agency?
Housing counselors can
be very helpful, especially for first-time home buyers. The U.S. Department of
Housing and Urban Development (HUD) supports housing counseling agencies
throughout the country that can provide free or low-cost advice.
You can
search online at HUD’s web site, or you can call HUD’s interactive voice
system. This contact information can be found in the Appendix of this
booklet.
After answering the questions above, have you determined that buying a
house is right for you? If so, congratulations! Let’s start shopping for a house and a
loan.
III. Determining What You Can Afford
To determine how much you can afford, you first need to know your monthly
income. Second, you will need to calculate your monthly expenses which may include
credit card bills, car payments, insurance premiums and all other debts. There is a
worksheet in the Appendix (“Determining What You Can Afford Worksheet”)
that will help you calculate your income and expenses to help determine what you can
afford.
Consider talking with a financial professional such as a housing counselor to
help you determine what you can afford. Keeping your payments affordable is the
best way to avoid foreclosure or other financial difficulties. While mortgage lenders
will tell you how much they are willing to lend you (which is the loan amount you
“qualify” for), you probably know your finances better than anyone, so you should
determine how much you are willing and able to pay every month for your home.
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