The thought of making a mortgage payment each month is better than paying someone else’s mortgage (rent), but you shouldn’t become a homeowner without first considering the various costs of owning and buying a home. Many buyers forget about homeowner’s insurance, down payments and depreciation, as well as relocation expenses, closing costs, appliances, maintenance and furnishings.
* Determine the neighborhood’s average property value. It’s determine by comparing the prices of recently-sold, comparable homes in the area. Your Real Estate Agent in West Michigan can provide you with this information.
* Review and compare mortgage types and down payments, to see if they fit your budget. A down payment is based on the property value, and determined by the chosen mortgage type, but is usually from 3-20% of the value of the property. Don’t forget about PMI (private mortgage insurance) which protects the lender if you default. The lower your down payment, the more you’ll pay in PMI.
* Get your estimated closing costs (including points, recording, taxes, inspections, prepaid interest, title insurance and finance fees. These typically equal about 2-7% of the property’s value, and you’ll get this information from the lender after you make a mortgage application.
* Add closing costs and the down payment to determine what you’ll need right away. You’ll also need to think about relocation; will you hire movers or do the work yourself? Either way, the more belongings you have, the more expensive the move will be.
* Consider property taxes: Most mortgage lenders require monthly tax and insurance payments to be held in escrow. This portion of your monthly payment will equal about 1.5% of your home’s purchase price.
* Consider repairs. The average new roof can cost up to $5000, and electrical rewiring can be expensive. A new AC can cost up to $5000, and new insulation can cost over $1500. Once you’ve added everything up, you may come up a little short, and you’ll have to find other ways to pay your down payment. Ask your Real Estate Agent in West Michigan what programs are available in your area.
In your determination of whether home ownership is financially feasible, you should carefully weigh the costs against the benefits. Homeownership will give you a consistent monthly payment, along with tax benefits (interest and property taxes are typically tax-deductible). A home can increase in value but the most valuable part will be having a place of your own. Contact Midwest Properties to hire professional real estate agents in West Michigan, MI and the surrounding areas.
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