Financial Facts: How much will that home really cost? |

Financial Facts: How much will that home really cost?

When a homebuyer sees a new home they want all they see is the purchase price. Then they see the floor plan, they see the views and they see the potential of owning a piece of the American dream. The one thing first time homebuyers do not see are the hoops they will need to go through to get the mortgage.

Let us take a look at the case of Ms. Demeanor. She has decided to look at finally buying a home here in the High Country. She is to the point in her life where her debt is well within reasonable limits. Her rent is going up year after year, and she has finally determined that the federal tax benefits will be to her advantage.

Ms. Demeanor has a good job and makes a decent salary and a very important factor is that she has saved a substantial amount of funds to make her down payment. Her current employment is to the point where she knows that she will not have to worry about seasonal layoffs and so home ownership is the next step.

I met with Ms. Demeanor to review her financial situation and to determine which of the various mortgage programs will meet her needs best. We reviewed her employment status, her income, her debt load and her savings. Yes, I said savings. Savings are a very important as having just the down payment will not generally get you the mortgage. An underwriter will want to see documentation of income, debt, savings and credit history. All are important and if any one of these areas is weak the potential of obtaining a mortgage may be in jeopardy.

As a first time homebuyer Ms. Demeanor needs to know that in the price range of $350,000 closing costs will be in the area of one to two percent. This amount pays me, the appraiser, the title insurance, the homeowners insurance and many other up front costs. In addition to these costs the underwriter wants to see a reserve of funds that could be available if necessary. The reserve should be approximately six months of the projected monthly payments. So is the monthly payment is $2,500 we want to see $15,000 in savings, IRA’s, or 401k’s. If you have thousands of shares of IBM or Microsoft stock it will work also.

So after our meeting and seeing how much a monthly payment would be Ms. Demeanor submitted an offer on a property. Her offer was accepted and there were no surprises as she was well prepared for the closing. And she loves her new home.

So if you are a first time homebuyer know that you need to have more than just a down payment. To be sure you know the details of real estate purchase set up a meeting with a mortgage professional today. Sit down with them to learn the facts and be prepared for when the event occurs.

For answers to your mortgage related questions call Bob Kieber at (970) 262-1199 or e-mail him at Bob is a local mortgage lender and principal of Resort Lending. He has 30-plus years of professional experience in real estate, finance and investments, and is a longtime resident of the High Country

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