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Purchasing a Home: Where to Begin
by Dick Lepre, Homeowners.com |
The first question to ask is: Why buy a
home? I live in a beautiful Victorian home in San Francisco that was built in 1880. It's
solid redwood, it's cool. Shortly after I moved in in 1970 I stood in the dining room and
threw a rubber ball against the wall and caught it. I did this 20-25 times. (I made 20-25
spots.) But it felt great. When I was a kid I couldn't do this. But now I owned a house
and I was going to throw My ball against the wall of MY house and make MY spots and that
was it.
I think that that little kid in all of us who doesn't want his or her parents or anyone
else telling us where we can put our feet and what color we can't paint our walls is the
real reason we buy houses. It gives us a sense of freedom that we could never have at
someone else's house.
But What About the Money?
For most people buying is more expensive than renting but the tax deductibility of our
mortgage expense makes the prospect of owning a bit more practical. In essence, our Uncle
Sam is making about a third of our mortgage payment.
Once you have made the leap and decided that you are going to buy a home you have to find
out what you can afford. That is where we come in.
When you decide to buy you should first contact a mortgage broker. You should discuss why
you want to do this and see if it makes sense. Unless you fit into one of the
"special categories" of loans: VA, FHA, special Census Tract, First Time
homebuyer you are going to get a "conventional loan". Some areas, by their
demographics, have a lot of these special case loans, some do not. The remainder of this
discussion pertains to "conventional loans".
The purchase price that you will be able to afford will depend on 3 main factors:
- Your income and how much other debt you have. This will determine how large a PITI
(principle, interest. tax and insurance) payment you can afford
- How much you have for down payment and closing costs, and
- Your credit history.
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