Rosemary Allison Estates Director Coldwell Banker Previews International
PH:  805 491-2100
FAX:  805 435-0407
11521 Sumac Lane
Santa Rosa Valley, CA 93012

Can You Afford to Buy a House?

Information for Buyers

While everyone would like to live the American Dream of buying and owning a Home, it is important to understand all the costs involved in buying and owning a home.

Many potential buyers sometimes forget to factor in the down payment, homeowners insurance and the possibility of depreciation, as well as the costs associated with closing the transaction, moving, purchasing major appliances, and home, landscape, and pool maintenance, not to mention furnishings and design accessories once you move in.

For a general idea of your buying power, multiply your gross annual income by 2.5. For example, if you had a household income of $50,000, you might be able to qualify for a $125,000 home. The actual number may be more or less, depending on your individual situation, debts and credit history.

Housing Expense Ratio

As a general guide, your monthly mortgage payment should be less than or equal to a percentage of your income, usually about a quarter of your gross monthly income. The percentage can change depending on the type of mortgage you choose. However, there are mortgage products available that focus solely on the debt-to-income ratio. Your lender can provide more information on these types of mortgage products.

Debt-to-Income

Your buying power can be affected by factors such as your income, debt and credit history. Your debt, such as credit card bills and car loans, and other expenses such as housing expenses, alimony and child support, should not be more than about 30-40% of your gross income.

How Much Money Do I Need to Buy a Home?

You'll need money for:

1.) A down payment
2.) Closing costs
3.) Other housing-related costs - mortgage payments, maintenance and repair costs

Your Down Payment

The down payment is a percentage of the value of the property. What percentage that is will be determined by the type of mortgage you select. Down payments usually, range from 3 to 20% of the property value.

You may be required to have Private Mortgage Insurance (PMI or MI) if your down payment is less than 20%.

Closing Costs

Closing costs include points, taxes, title insurance, financing costs and items that must be prepaid or escrowed and other settlement costs. These costs generally range between 2-7% of the property value. You will receive an estimate of these costs from your lender after you apply for a mortgage.

While it may seem that it can take a lot to actually buy your home, you may be closer than you think.

Rosemary Allison
Coldwell Banker Previews International
Ph: 805 491-2100Fax:805 435-0407
11521 Sumac Lane
Santa Rosa Valley, CA 93012 US
BRE License # 00545184
www.rosemary4realestate.com
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