Century 21 Associates Realty LLC 
     Karen J. McLinden
      Phone 508-677-3233
       Fax 508-679-2006
       657 Pleasant St., Fall River, MA 02721 
                                                                                                                                   
 
Residential Real Estate, Commercial Real Estate, New Construction, Investment Property, Rentals, First Time Home Buyers, Relocating Assistance, Short Sale Assistance.   Areas Include But Not Limited To: Fall River, MA - Swansea, MA - Somerset, MA - Westport, MA - Dartmouth, MA - Tiverton, RI - Assonet, MA - Freetown, MA - Berkley, MA - Taunton, MA - Dighton, MA - Rehoboth, MA - Seekonk, MA - Warren, RI - Portsmouth, RI - Middletown, RI - Little Compton, RI - New Bedford, MA - Lakeville, MA - Middleboro, MA - Fairhaven, MA -   Wareham, MA

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Here are some common questions about costs involved in buying property:

How Much Can I Afford?

You can save yourself a lot of wheel-spinning if you take a minute to figure out how much mortgage you can afford. Generally, a lender will want your monthly mortgage payment to total no more than 29% of your monthly gross income (that's your monthly income before taxes and other paycheck deductions are taken out.) You also need to consider current loan interest rates. The lower the interest rate, the more expensive the home you'll be able to afford.  It doesn't cost you anything to get pre-approved.  There may be an application fee involved when you apply for a mortgage once you have found the property you want and you have a 'Purchase and Sale' contract on it.  Ask your bank or mortgage company if they have an application fee and how much it is.

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How much money will I have to come up with to buy a home?

Well, that depends on a number of factors, including the cost of the house and the type of mortgage you get. In general, you need to come up with enough money to cover three costs:

1. Earnest money is  the deposit you make on the home when you submit your offer, to prove to the seller that you are serious about wanting to buy the house. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price.  If you go for 100% financing you may get this money back at the closing.  If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.

2. Down payment is a percentage of the cost of the home that you must pay when you sign a 'Purchase and Sales' agreement.  There are mortgage options now available that  require no down payment, but the larger the down payment, the less you have to borrow, and the more equity you'll have. Mortgages with less than a 20% down payment generally require a mortgage insurance policy to secure the loan, this is known as PMI ask your bank or mortgage broker if you will have this and how much it will be monthly.  PMI stands for Private Mortgage Insurance or Insurer. These are privately-owned companies that provide mortgage insurance.  When considering the size of your down payment, consider that you'll also need money for closing costs, moving expenses, and - possibly -repairs and decorating.

3. Closing Costs average 3-4% of the price of your home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won't be caught by surprise. 

There may be closing cost customary or unique to a certain locality, but closing cost are usually made up of the following:

  • Attorney's or escrow fees (Yours and your lender's if applicable)
  • Property taxes (to cover tax period to date)
  • Interest (paid from date of closing to 30 days before first monthly payment)
  • Loan Origination fee (covers lenders administrative cost)
  • Recording fees
  • Survey fee
  • First premium of mortgage Insurance (if applicable)
  • Title Insurance (yours and lender's)
  • Loan discount points
  • First payment to escrow account for future real estate taxes and insurance
  • Paid receipt for homeowner's insurance policy (and fire and flood insurance if applicable)
  • Any documentation preparation fees
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Home Inspections

When you make an offer on a home your offer will be contingent on a home inspection, conducted by an independent authorized inspector of your choosing. You will have to pay for this inspection yourself, but it could keep you from buying a house that will cost you far more in repairs, down the road. These can cost anywhere from $150 to $1000 depending on who you hire and what you have inspected.  If you are satisfied with the results of the inspection, then your offer can proceed. If you aren't, you may want to negotiate, asking the seller to pay for certain repairs or asking for a lower price.

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Appraisals

Your lender will require you to get an appraisal of the house you want to buy, to make sure it's worth the money that you're borrowing. Your bank or mortgage company will select their own appraiser.   You may be required to pay this at the time the appraiser goes out to view the property or it may be included in your closing costs.  Again this fee could be anywhere from $250 to $1000 depending on who they hire and what type of property it is.

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Homeowner's Insurance

Lenders require that you have homeowners insurance, to protect both your interests and theirs. This will have to be paid by you before the day of closing, and you will need to come to the closing with an insurance binder that has been paid for the first year.  Like everything else, be sure to shop around for the best prices for insurance that fits your needs.

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In addition to the mortgage payment consider:

Don't forget you'll have your monthly utilities. If your utilities have been covered in your rent, this may be new for you. Your real estate broker will be able to help you get information from the seller on how much utilities normally cost. In addition, you might have association dues. You'll definitely have property taxes. Taxes normally are rolled into your mortgage payment. Again, your broker will be able to help you anticipate these costs.
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What will your mortgage cover? 

Most loans have 5 parts: principal: the repayment of the amount you actually borrowed; interest: payment to the lender for the money you've borrowed; homeowners insurance: a monthly amount to insure the property against loss from fire, smoke, theft, and other hazards required by most lenders; and property taxes: the annual city/county taxes assessed on your property, divided by the number of mortgage payments you make in a year. PMI : Private Mortgage Insurance if your down payment was less than 20%.  Most loans are for 30 years, although 15 year loans are available, too. During the life of the loan, you'll pay far more in interest than you will in principal - sometimes two or three times more! Because of the way loans are structured, in the first years you'll be paying mostly interest in your monthly payments. In the final years, you'll be paying mostly principal.

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 2013, Karen McLinden & Century 21 Real Estate LLC. CENTURY 21 is a registered trademark licensed to Century 21 Real Estate LLC. Equal Housing Opportunity. Each Office is Independently Owned and Operated.