Owning your own home is part of the American Dream. When purchasing a home, make sure you consider all the costs involved. Interest rates are just one aspect. Your down payment and closing costs also need to be considered.

Pre-Qualifying For Your Loan
Knowing your price range before you start looking will help avoid the disappointment that comes when you set your sights too high. So before you fall in love with a certain home or neighborhood, it is important to conduct a careful analysis of your personal finances so you can determine what you can afford to spend. Pre-qualification programs are available to help you find out exactly how much you can afford and the type of mortgage that is best for you.

Down Payment
When purchasing a home you will need to come up with a down payment. This is the amount you pay up front before you are able to receive financing for the rest of the cost of the home. Generally you will need to pay 5%-20% of the purchase price. The higher the down payment, the lower your monthly mortgage payments and closing costs will be. There are some 100% financing programs available to buyers who meet certain criteria.

Loan Establishment Fees
Loan establishment costs include loan application and origination fees, attorney’s fees, mortgage insurance premiums, transfer tax, and prepaid interest.

Documentation Preparation Costs
These costs include a title search, home inspection (for termites and structural damage), as well as survey and deed recording. Title insurance protects a homeowner and/or lender from past defects in title from unknown risks such as mistakes in recording, liens for unpaid taxes, and forgery. Title insurance may be required as a condition of obtaining a mortgage.

Fixed vs. Variable Rate Loans
With a fixed rate mortgage, you have the assurance that your mortgage payments will stay the same over the life of the loan. A variable rate mortgage that typically starts out at a lower monthly cost, may allow you to buy a home you otherwise could not afford. However, you may face higher rates and payments later in the life of the loan. If you think your income is likely to rise enough to afford the higher payments or that you may be able to refinance when interest rates change, that may be a chance you are willing to take.

Government Sponsored Programs
If you are a veteran of the armed forces, a first time homeowner or have an annual income under a certain level, you may qualify for special programs that have lower down payment requirements or lower interest rates. Meet with your mortgage lender to see if you qualify for any special assistance.