Step 2: Understanding Financing
Like many things in life, planning ahead is the key to success. You should determine the price range you can afford before you start shopping. Here are a few things to keep in mind:
- Down payment – this is usually the percentage of the total cost of a home that you’ll need to pay. The more money you put down, the more money you’ll save on monthly payments and, in the long run, interest paid
- Knowing what you can afford – how much house you can afford comes down to 3 factors: your monthly mortgage payment, your down payment and the amortization period or length of time it will take to pay off the loan
- Getting pre-approved – this will really help you figure out what you can spend on a home because you’ll know before you start shopping. And you’ll be protected against rising interest rates as well.
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