Home ownership is one of the best, most reliable ways to build wealth. But for first time buyers, the process of buying a home can seem pretty intimidating. There’s no way to sugarcoat it, buying a home in Maryland is no walk in the park. But if you go into the process armed having done your homework, you can definitely make it easier on yourself.
That’s why over the next few weeks we’re going to talk about the process of buying a home, from start to finish. Our blog will serve as a general overview, but remember you can always come to us with any questions you have!
This week, we’re going to cover the first step of buying a new home, which is taking a look at the financial requirements of buying a home.
How much home can you afford?
What’s the First Step of Buying a Home in Maryland?
Financial Requirements
So you want to buy a home. The first question that comes to almost everyone’s mind after they have this thought is, “How much can I afford?”
The answer will of course vary, but the process to find out how much you can afford does not. Here’s what goes into it:
How much mortgage can you afford?
The size of the mortgage you can afford depends on a number of factors. This includes your income, credit score and credit history, the size of your down payment, and the size of any debts you owe such as a car payment. It also includes factors you can’t control, such as current mortgage rates. There are a number of free calculators online you can use where you put in your own figures for each of these factors and it tells you how much mortgage you can afford.
Upfront Costs
There are a lot of upfront costs you’ll have to pay when you buy a home. This includes things like your down payment, mortgage application fees, mortgage points closing costs, and earnest money.
Down Payment
The higher your down payment, the lower your monthly mortgage payments will be. You’ve probably heard about the 20% down rule of thumb, but many homeowners put down 10% or even less.
Earnest Money
If the seller accepts you offer, you pay what’s called earnest money, which is essentially a deposit that gives weight to your intention to buy the home.
Closing Costs
Closing costs can be between 2%-5% of the total loan amount. This includes things like attorney’s fees, title insurance, mortgage application fees, mortgage points, and more.
Mortgage application fees are generally 1%-2% of the total purchase price. Mortgage points are optional. If you pay to reduce some points from your mortgage, you can get a lower interest rate.
Ask Us Your Questions
Do you have questions about buying a new home in Maryland? Grays Home Solutions has answers! Contact us today at 240-347-3141 to get your questions answered!