Part 1: Common Questions From First Time Home Buyers
July 5, 2012
With the improving housing market, many first time buyers are starting to ask themselves if they should buy a home rather then continue to pay rent. Why should I buy rather than rent? Rather than writing a check and watching your money disappear into thin air as a housing cost, wouldn't it be nice if you got some of that money back at the end of the year? As a homeowner, that is exactly what happens. You can deduct the cost of your mortgage loan interest from your federal and some state taxes. You can also deduct property taxes. In the beginning most of your mortgage payments are comprised of interest, so in the early years of owning a home you have the largest deductions. How much money will I have to come up with to buy a home? This depends on several factors which include the type of loan you qualify for, the cost of the house, and what if any seller concessions are being offered. Sometimes home builders will offer closing cost assistance. However it's best to consult with a loan officer though there are 3 different costs associated with purchasing. You'll need:
- An Earnest Money Deposit - This is the amount that accompanies the initial contract on the home. This is necessary in order to prove you are willing to complete a contract if it is accepted.
- Down Payment - This is the amount you need to pay when you go to settlement. This will be determined by the percentage required by your loan type. This amount includes whatever was initially put down for the Earnest Money Deposit.
- Closing Costs - These are costs associated with the processing of the paperwork and can vary. On average you can expect these costs to be 3-4% of the purchase price. However when you apply for your loan you should receive an estimate from your lender so that you will not be caught off guard by the amount.