What to think about when you're buying a home Hawaii

Buying a home is a serious financial undertaking and it is important that you know what you’re getting yourself into. Ask yourself some important questions so that you can make the smartest financial move.

How much can I afford?

There is not a set formula for how much you should spend on a home. Many experts indicate that you shouldn’t spend more than two and half times your total yearly income. Others suggest that no more than thirty-five percent of your total monthly income be spent on your living expenses, including utilities. Talk to your lender and devise a reasonable monthly budget so that you can determine for yourself how much you can truly afford to spend.

How large should my down payment be?

First, you will need to find out the minimum down payment required by your lender. If your lender does not require a 20 percent down payment you will probably be required to pay private mortgage insurance (PMI) if you put less than 20 percent down. There are some options you can look into, such as a piggyback loan (also known as an 80-10-10 loan), that can be used to avoid paying PMI even if you don’t have a large down payment. Also keep in mind that the larger your down payment is, the lower your monthly payment will be. Think about your savings, your budget, your lender’s requirements and your loan options when making a decision about your down payment.

What kind of mortgage should I get?

It is important that you educate yourself on the different kinds of mortgage products before you buy a home. Different products have different terms, requirements, and interest rates. For instance, a fixed-rate mortgage keeps a constant interest rate for the life of the loan, while an adjustable-rate mortgage (ARM), has an interest rate that changes periodically according to general interest rates. When it comes to buying a home, do your research and make sure you’re getting the best mortgage you can.