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Home
 Residential
Homebuyers
Guide Getting
Ready to Buy
Decide if the Time is Right
The first step in purchasing a home is deciding if you are
ready. Consider the housing market, interest rates, your purchasing
power, and how long you plan on staying in the area. You'll
also want to think about upcoming expenses and future income.
Are you planning on going back to school or buying a car?
Do you expect your income to rise or will you be taking time
off to raise a family?
Check the Benefits
of Homeownership section to learn more about building
equity, tax savings, and the other benefits of purchasing.
Another valuable tool for helping you make the decision is
the Rent
vs. Buy calculator.
Figure Out How Much You Can Afford
Once you've decided to purchase a home, you'll need to know
how much you can afford. Keep in mind that buying a home involves
both upfront and ongoing costs. Putting less money into a
down payment can free up money to remodel or purchase new
furniture but will result in larger monthly payments. Paying
more upfront, on the other hand, will mean lower monthly payments.
Upfront Costs
The down payment is the amount of money provided upon closing
that is applied toward the cost of the home. A common myth
is that you must put at least 20% down. Gershman Mortgage
offers a number of loan programs requiring only 3-5% down
and some with no down payment at all. See the sources of
funding section below for more information on low down payment
loans.
Closing costs are typically 2-3% of the purchase price.
These costs include fees for appraisals and credit reports;
homeowner's insurance; initial costs of establishing an
escrow account; points; and other fees associated with the
mortgage process.
Ongoing costs
The monthly payment, also known as PITI, includes principal,
interest, taxes, and insurance (homeowner's and mortgage).
Surprisingly, the monthly payment is often comparable to
a monthly rent payment. Purchasing a home comes with the
added benefits of tax savings and equity. Other ongoing
costs may include utilities and maintenance. A good rule
of thumb is to allow no more than 28% of your gross monthly
income for the monthly payment and no more than 36% for
you total monthly debts (including car loans, student loans,
credit card payments, PITI, etc.)
Use the calculators
in the Tools
and Tips section to help determine how much house you
can afford. If you aren't sure, talk with a loan officer
- Gershman Mortgage can help you understand your financing
options.
Sources of Funding
Gifts
Gifts from family and friends can be used toward the purchase
of a home. To include a gift as part of your assets, you'll
need a letter stating the amount of the gift and confirming
that it does not need to be repaid.
Government Programs
Both federal and state governments offer programs
to assist homebuyers. FHA loans, insured by the Federal
Housing Administration, are popular among first-time
buyers but anyone can apply for an FHA loan. VA loans,
guaranteed by the Veterans Administration, are available
to qualified veterans. Both programs offer low and no down
payment options.
In Missouri, the Missouri Housing Development Commission's
(MHDC) Mortgage Revenue Bond Program offers first-time
buyers below-market interest rates and cash assistance
for down payments and closing costs. Gershman Mortgage is
a participating lender in the program.
Click here to learn more about
loan programs available from Gershman Mortgage.
Co-Borrowers
If you feel that you will not qualify for a loan on your
own, consider taking on a co-borrower. A co-borrower shares
the burden of the loan as well as equity in the home.
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