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I want to buy a house, but how do I pay for it?

 

Buying a new house can be both exciting and stressful, especially if you’re a first time home buyer. Often times, the first question people will ask is, “How will we pay for a house?” The answer for the most part will be “Get a mortgage loan.” But there are different types of loans, and different ways to qualify for a loan. Here are your major options.

Conventional loan
A conventional loan is a loan provided by a bank which is not guaranteed by the federal government. Typically, you will be required to make a down payment upfront of a certain percentage of the purchase price (i.e., 20%) and then pay it off over a certain period of time (i.e., 30 years). The amount you get and the interest rate depends on a variety of factors, including your income and credit score. There is generally no mortgage insurance required, saving the buyer money in the long run.

FHA Financing
An FHA loan is one that is insured by the Federal Housing Administration. You will have to pay for mortgage insurance regardless of the amount you put down. However, these loans can be easier to get than conventional loans and require a lower down payment of 3.5%.

VA loan
This type of loan is available to qualifying veterans and their surviving spouses. Often, no down payment is required and the rates can be very favorable. This loan has many advantages, so veterans are encouraged to consider it if thinking about buying a house.

Get a co-signer
If your income and credit score are not good enough to get a loan (or enough of one), you might have a family member co-sign on the loan with you. Their financial situation will be factored in and may help qualify for a bigger loan. Of course, the co-signor will then be liable for the loan, so there is some risk on their part.

Gifting
Sometimes a relative may be able to give you the money for a down payment on a house. Be careful though. There are both tax and lender rules you must follow for this type of gifting.

Seller financing
If you are unable to get a loan from a bank, you may still be able to get a loan from the seller. The terms of this loan will be open to negotiation, but should be reduced to a written purchase agreement drafted by an attorney.

Pay cash
If you can afford to pay cash, this can be a big advantage. Generally, you will be able to close the sale in a much shorter time. You won’t have to pay interest or deal with a bank, and you can often get the house for a purchase price lower than what is listed.

If you’re thinking about buying a house, you should first talk to a lender. They will be able to look at your finances and see what your options are. If the amount you qualify for is too low, the lender will be able to provide suggestions on what you can do to improve the amount or get other financing.

Palisade Realty can help you find a house

We can answer your questions about home buying, recommend a lender, and ultimately help you and your family find a great house.
If you’re interested in learning more, please call us at (619) 794-0218 to discuss how Palisade Realty can help you.