I wouldn’t call a lower downpayment a discount.
Thanks for all the valuable responses. This definitely gave us an overview of what to expect. Our journey to purchase our very own home seems to be challenging and never ending. But we know and we are hoping that this is the start of what is best.
Anyway, like what some of you mentioned, choosing to have a lower monthly amortization will somehow have a “negative” for us, because this will mean that we will have to pay with longer terms thus, the interest rate will definitely increase. This has been thoroughly discussed by a financial adviser who was generous enough to discuss issues regarding mortgage rates in Califronia.
Nonetheless, we are only hoping that everything will be sorted out and will lead to us moving to a new abode.
The last house I bought worked out beautifully for me.
I got a 15 year fixed rate mortgage. I then obsessed over paying it off as quickly as possible. I worked my ass off (ten hour days instead of my current five hour days) and put every penny I could toward paying down the principal (principle?). I worked a second job on Sundays and put that money toward the mortgage. I minimized my household bills, doing crazy shit like keeping the thermostat set at 50 all winter and sleeping in an arctic sleeping bag, putting the money saved toward the house.
I did all major improvements (landscaping, painting, etc) myself, considering it “sweat equity”.
I paid the mortgage off in five years. Woohoo! Then I went back to being lazy.
You had it right the first time.
“Main” (as in “amount from which the rest of the calculations begin” or “person in charge”) = principal.
“Idea” (as in “those are the concepts I find ethically important”) = principle.
Thank you!
A buddy of mine is a high school principal, so I’m overly cautious with the word.
This is a good start, but doesn’t budget for property taxes or insurance, both of which are significant components of home ownership cost. A really comprehensive calculator would also account for those items, along with the fact that interest and property taxes are deductible when you do your income taxes. That last item is complicated since it depends on your income and tax situation, so it’s fair to leave that out - especially since doing so gives you a more conservative estimate of things.
When I bought my first house years ago I first read The Complete Idiot’s Guide to Buying/Selling a Home. It was a good primer, explaining the various loan types, the steps in the home buying process, and so on. I would encourage the OP to get something like this, or Home Buying for Dummies.
One surprise on my first house was the property tax reset. Many cities limit the rate at which a current homeowner’s property tax bill can rise in response to rising home prices, but they let it jump up for the buyer. This means you may end up paying more in property taxes than the current owner - possibly a lot more, if the housing prices have been going up very rapidly. So don’t rely on the seller’s most recent property tax payments for your budget; find out the city’s millage rate, and calculate what your property tax payment will be based on how much you’ll be paying for the house.
Also remember that while the principal+interest part of your payment is stable for the life of the loan, both taxes and insurance generally go up every year with inflation or maybe even more than that.
As Machine Elf says, property tax rises in many areas are rate-capped for current owners but reset on sale. I know people here in FL who’ve lived in one house for 25 years and whose property taxes would triple if they traded identical houses with their neighbors.
California is especially extreme in this as a result of Prop 13 lo those many decades ago. Property tax rises of 10x are not unheard of.
So be sure to find out what you will pay in property tax, not what the current owner is paying/has paid. You county tax assessor can help with that.