THURSDAY, FEBRUARY 23, 2023
Buying your first home is a big decision that comes with responsibility. If you’ve never purchased a home before, it’s normal to have questions. Continue reading for answers to frequently asked homeownership questions.
Can I Afford to Buy a Home?
If you’re taking out a mortgage on your home, your lender may look at your debt-to-income (DTI) ratio to determine if you can afford to pay for a home. Your DTI is calculated by dividing your total monthly debt payments by your gross monthly income.
However, your mortgage lender may not factor in your nondebt payments. For this reason, it’s important to consider your monthly expenses when deciding if you can afford to buy a home and how much you can afford to pay for a mortgage.
The following are examples of nondebt payments for you to consider:
- Grocery bills
- Medical bills
- Insurance bills
- Utility bills
- Saving plans
How Much Does Buying a Home Cost?
There are several costs you will likely have to pay before closing on the property. Up-front payments may include the following:
- Your down payment—A down payment is required for most conventional or Federal Housing Administration (FHA) loans. The amount required may vary with your lender but could be as much as 10% or 20% of your total home value.
- Closing costs—Your closing costs include all the fees associated with your mortgage (e.g., home inspection fee, application fee). The overall cost generally varies between 2% and 5% of your total loan.
- Reserves—Your lender may require you to show proof of additional cash in your bank account to guarantee you’ll be able to make your mortgage payments after closing. Typically, lenders will ask to see a minimum amount of two months’ worth of mortgage payments.
In addition to what you’ll pay up front for your home, you may also have to pay ongoing costs associated with homeownership. The following are examples of ongoing costs:
- Mortgage payments
- Home improvement costs
- Property taxes
- Homeowners insurance
- Mortgage insurance
- Home maintenance fees
- HOA fees
Do I Need Homeowners Insurance?
Although homeowners insurance is not legally required, most mortgage lenders will require it. Without homeowners insurance, you could be responsible for mortgage payments even if your home was destroyed. You could also face costly out-of-pocket expenses arising from property damage or personal liability lawsuits if someone is injured on your property.
How Much Does Homeowners Insurance Cost?
Your insurance premiums may vary with numerous factors, including:
- Home age and condition
- Claims history
- Coverage limits and amounts
- Credit history
- Location (e.g., zip code)
- Your deductible
Contact Insurance Associates in Middletown, Ohio, to get a free homeowners insurance quote today.
We’re Here to Help
Buying your first home may seem daunting, but you don’t have to go through the process alone. Call Insurance Associates to learn about our insurance options and to speak to an agent today.
This blog is intended for informational and educational use only. It is not exhaustive and should not be construed as legal advice. Please contact your insurance professional for further information.
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