Home prices are on the rise, so how much should you save?

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Tanisha A. Sykes, Andrea Kramar

One of the biggest surprises home buyers face when looking for a home is the true cost of buying a home.

The cost is on the rise. In March, the median selling price of an existing single-family home jumped 18.4% to $ 334,500, according to the National Association of Realtors.

Nationally, it takes 14 years to save for a down payment on the home, according to the 2019 Unison Home Affordability Report.

“Typically, experts say you shouldn’t spend more than 30% of your income on housing expenses,” says Swapna Venugopal, reporter at USA TODAY Housing and Economy. “In addition to the mortgage payment, this includes costs such as mortgage interest, property taxes and maintenance. “

To make it easier to save for this goal, here are some financial guidelines and upfront costs to keep in mind once you’re ready to buy:

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Start with savings, income, good credit

Before you click on the first ad or call a real estate agent, carefully consider your finances and your willingness to buy.

“You should have a secure job, saved savings, and be able to get a good mortgage with a great credit score,” says Omer Reiner, licensed real estate agent and president of FL Cash Home Buyers LLC in Florida.

Get your free credit report from annualcreditreport.com. A “good score” is 670 to 739, according to the leading credit reporting bureau Equifax. “It depends on the lender, but a score closer to 700 is ideal if you plan to get pre-approved for a mortgage,” says Venugopal.

“How much you can afford depends on your income, how much you’ve set aside for a down payment, what mortgage you qualify for, and the local real estate market,” says Reiner.

Include living expenses and the costs associated with owning a home, such as taxes and maintenance. Online calculators bankrate.com can help calculate the numbers.

The deposit

A down payment is a percentage of the purchase price of your home that you pay up front at closing. Lenders often view the down payment as your investment in the home.

“Some experts suggest paying a down payment of 20% so as not to incur the additional cost of private mortgage insurance (PMI),” says Venugopal. “Also, when a seller sees that a buyer is paying 20%, they may feel like your mortgage will be approved faster. “

However, says Reiner, you can buy a home for as little as 3.5% down payment or no down payment using government guaranteed loans from the FHA or USDA, respectively. “Keep in mind that not everyone or every home qualifies for these types of loans,” he says. “Lenders typically require buyers to pay PMI to qualify for low down payment mortgages, which will increase your monthly expenses. “

Mortgage conditions

“One of the best ways to shop for a mortgage is to ask what the rate and closing costs are and get pre-approved where the lender checks income and credit,” says Jason Gelios of Community Choice Realty. in Michigan. “It can be a waste of time telling a buyer they can get a certain rate only to find the rate will be higher based on the credit being reviewed. “

Venugopal advises home buyers to obtain mortgage quotes from several lenders.

Closing costs

Beyond the down payment, homebuyers are required to pay closing costs or fees and expenses such as title insurance, attorney fees, appraisals, and taxes.

Closing costs tend to be 1% to 5% of the sale price, says Reiner.

When buying a home, make sure you have enough cash in your coffers to cover not only the initial costs, but also maintenance, repairs, and upgrades once you’ve moved into your new home. lodging.



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