Homebuying Costs to Considerby Tim Manni
Federal interaction and incentives combined with the dismal conditions of the housing market have concocted the “perfect storm” for eager first-time homebuyers shopping for a great deal. Mortgage rates are at historic lows, first-time buyers can take advantage of an $8,000 tax credit, home prices are tumbling, and home owners are eager to sell. Could the time be any more right?
Before you jump in with both feet, here are a few important factors to first consider:
- Credit Score: Before you start shopping, make sure your credit score is at least above 640. If your score is below that, you should expect lenders to charge you a significantly higher interest rate. Click here to find out how your credit card use impacts your credit score.
- Down Payment: Since credit and housing conditions remain strained, lenders are demanding a larger down payment. Borrowers who don’t put down 20% are forced to purchase mortgage insurance (MI). MI can add upwards of $100 a month to your mortgage payment. Can I use my first-time homebuyer’s tax credit as my down payment?
- Fees: This is another instance when having good credit is a plus. Newly introduced fees by Fannie Mae and Freddie Mac will increase your interest rate if, among other things, your credit score is below a certain number. Also, standard closing costs can average a couple thousand dollars depending on your loan. Read Marc Eisenson’s article on 25 steps to save money at closing.
Looking to refinance? Be sure to read “How a Refi Could End Up Costing You.”