Buying
A Home

The exact amount you’ll need to buy a home depends on a few factors, primarily the price you can afford and the type of mortgage you choose. You’ll typically need cash on hand for closing costs, which range from 3-6% of the purchase price. Plus, you’ll need funds to cover the down payment. How much do you need for a down payment? In general, having 20% of the purchase price as your down payment will allow you to avoid paying for private mortgage insurance (PMI), but that doesn’t mean everyone must have 20% saved up before buying a home. There are a variety of mortgage options with down payments of 10%, 5% or even lower depending on what you qualify for. At Grow, we also offer a 100% Financing Home Loan.

Of the many mortgage options, they all generally fall into two categories: fixed-rate or adjustable-rate. Fixed-rate mortgages are the traditional option for most home loans. The interest rate doesn’t change throughout the life of the loan, so your payment won’t change (aside from fluctuations in taxes or insurance), and you can choose the length of your loan term. Adjustable-rate mortgages, also known as ARMs, on the other hand offer a lower starting interest rate and a lower monthly payment for a fixed time frame of the loan, then the rate and payment may increase over time.

That depends on what you want to prioritize. To help you choose between fixed-rate or adjustable-rate, consider the potential benefits of each option.

Benefits of a fixed-rate mortgage:

• Level principal and interest payments for the full term of the loan
• No risk that changing market conditions will increase your monthly payments

This may be the best choice if you prefer stable monthly payments and plan on staying in the home longer than a few years.

Benefits of an adjustable-rate mortgage:

• Lower monthly payments and lower interest rate, for the first part of the loan
• Can allow for a higher loan amount and enhanced buying power

This may be the best choice if you want to keep the payment as low as possible for the first few years of the loan, you plan to sell the home within the next few years, or you expect your income to increase significantly over the next few years.

When it comes to real estate, escrow is the legal arrangement where a neutral third party temporarily holds onto all the paperwork and funds until all parties involved in the transaction fulfill their obligations under the contract. You’re said to be “in escrow” and “under contract” during the period of time between having your offer accepted and closing on the home.

This is a common question, and it’s smart that you’re asking it. Before looking at listings, it’s important to know how much home you can afford. This will mainly depend on your income compared to your debts, known as your debt-to-income ratio (DTI). Lenders find your DTI by taking the sum of all your monthly payments and dividing that by your gross monthly income. Let’s say you make $2,000 of payments every month on a combination of miscellaneous debts, and you bring in a gross income of $6,000. In this scenario, your DTI would be 33%. Generally, a DTI of 50% or lower is needed for most mortgages. If you’re unsure how much home you can afford, talk to us. We’ll help you look at your whole financial picture to figure out which mortgage option is right for you.