HOW MUCH HOME CAN I AFFORD?

In most instances, you can afford a home that costs up to two and one-half times your annual gross income, the amount you make before taxes are deducted. Lenders will also factor in how much cash you have available for a down payment and closing costs, plus your existing monthly debt payments, living expenses and credit history.

HOW MUCH WILL I NEED FOR A DOWN PAYMENT?

A down payment is the money you pay up front toward the house you're buying. The more cash you pay as a down payment, the less you will borrow and the less you will pay each month on your mortgage. Typical conventional loans require from 5 to 20 percent of the purchase price as a down payment. Conventional lenders are sometimes willing to accept a lower down payment if a private mortgage insurance (pmi) is secured to protect the lender in case of default in repayment of the loan. If you qualify for a veterans administration (va) or federal housing administration (fha) loan, you will benefit from very attractive down payments that can range between zero and about 5 percent. If you are a first-time buyer and have no equity from the sale of a previous home, some lenders will permit a portion of your down payment to come from money that has been given to you as a gift.

WHAT ARE CLOSING COSTS?

Closing costs include expenses such as the loan origination fee, loan discount points, advance payment of interest, credit report fee, appraisal fee, title search and title insurance fees, document preparation fees, and recording and transfer fees. If you plan to assume an existing mortgage, there may be an assumption fee. Because closing costs vary considerably from one lender to the next, it is wise to shop around for the best available loan.

WHAT ABOUT THE MORTGAGE LOAN?

Qualifying for a mortgage loan is the first step in the loan approval process. Qualifying means learning just how much money you may finance in order to purchase your new home. Real estate loans are generally available from 15 to 30 year periods. They fall into two basic categories:

(1) loans that have fixed interest rates and payments; and (2) loans with interest rates and payments that vary over the life of the loan. The interest rate, the principal amount of the mortgage, and the length of the loan will determine the amount of your monthly payments.

WHO WILL HELP ME IN THIS PROCESS?

Perhaps the most efficient means of shopping for a home is to consult a real estate professional. A real estate agent can provide a broad range of services to help you find the right home in the shortest period of time while acting in your best interest as a buyer's agent.