Buying a New Home

Benefits are in the details,…

Whether it’s your first new house or your retirement get away, buying a new home is both a wonderful and painful experience.

We get excited about the opportunities that lay ahead and often overlook some of the genuine details that determine the burden and risk involved in life’s most expensive investment.

Here’s a short list of things to consider.

Down Payment – You will need 5 to 20 percent of the sale price in cash to qualify for a conventional loan. While a no money down VA loan may sound appealing, it only serves the bank.

Every dollar you put down on a new home will buy down the principle. The principal is the actual dollar amount you borrow on that loan. The lower the principal the lower the cost of the loan. That means more money in your pocket every single month. A strong down payment will always command a lower interest rate.

Interest Rate – Securing a low interest rate is certainly a strong advantage. How a lender arrives at the actual percentage rate is a rather complicated explanation. Nothing, however, dictates a better rate than good credit and/or a strong down payment. These two factors are most influential in obtaining the lowest possible interest rate.

For a $200,000 loan with an interest rate of 5% over 30 years you will ultimately pay $386,000 to settle the loan. Same loan at a 4% rate will settle at $344,000; just one percentage point less will save more than $40,000 over the lifetime of the loan. Always shop for the best possible rate. It turns into big money.

Insurance – Mortgage Insurance is a mortgage guarantee insurance policy which protects investors for losses due to default of a mortgage loan. Mortgage insurance can be either public or private depending upon the insurer. In any case it will help to reduce the interest rate and increase buying power.

Mortgage Insurance rates vary based on several factors, most of which will work to the advantage of the buyer. On our $200,000 loan the monthly expense would roughly be $70/month. As the loan matures the borrower has the option to cancel the coverage and in some cases may receive refunds as the principal is reduced.

Taxes – Failure to pay property taxes will ultimately result in either a lien against the home or worse, foreclosure. Failure to pay the property taxes is an event of default.

Property taxes can be a rather hefty bill to pay every year and in most cases they don’t take partial payments. The lender assumes liability for unpaid taxes. And they will take your house to get their money. The best solution is to roll those payments into the monthly mortgage.

Closing Costs – Closing costs consist of several different itemized one time expenses: A credit report fee, a loan origination fee (paper processing), Attorney’s fees, required inspections, discount points paid in exchange for a lower interest rate, appraisal fee, survey fee, title insurance, title search fees, escrow deposit for property taxes and private mortgage insurance, pest inspection fee, recording fee, underwriting fee.

Typically, home buyers pay between 2 and 5 percent of the purchase price in closing costs. When shopping for a lender, always consider how they handle these expenses. Some lenders will charge no points or closing fees while others are willing to negotiate these fees.

If you want to feel good about buying a new home, you need to feel great about the decisions you make to get the best deal.

The professionals at Christofi and Company can help you fine tune your plans, prepare you for the details and help you get the best possible deal on your new home.

Contact us today and let’s make your dream home a reality.