How to Buy a Home on Your Own
Let's say you want to buy a $200,000 home and make a 20 percent down payment. That would leave you with a $160,000 mortgage. If you're a little tight on cash, then you might want to go for a 10/1 hybrid mortgage (more on this in a sec) that currently charges 5.8 percent interest. So, for the first ten years, your monthly mortgage would be $939. Add 40 percent, or about $375, to cover the day-to-day "extras," and your total monthly cost ends up in the vicinity of $1,314.
To test your readiness for ownership, open a savings account and each month deposit the difference between your current rent and the total cost of a mortgage plus extras (check the rates at EmigrantDirect.com, which tends to offer higher percentages). Using the preceding example, if you pay $1,000 in rent, deposit $314 in the savings account on the first of each month. If you can keep up with this routine for six months, then you can afford the extra cost of owning a home.
A nice way to keep costs in check is to buy a townhouse or a condominium apartment. They're typically less expensive than a single-family home, and you'll pay a separate monthly or quarterly fee, known as maintenance, that covers shared expenses such as the gardener, snow removal, and keeping common areas shipshape. One side benefit is that condos and townhouses often have close-knit communities; as a single woman, it can be very reassuring to know there are nearby neighbors you can rely on in a pinch. No wonder single women make up about 50 percent of all condo owners.
The no-stretch rule also holds true when you're ready to make an offer on a home. In the current market, it's common for multiple bids to be made on the same house. Please, do not lose your head and get caught in a bidding war: Before you place your first bid , write down the absolute amount you can afford and don't go a penny over. Don't be frustrated; be strategic. If bidding wars in your area typically send the sale price of a house 20 percent above the listed price, then limit your search to homes with starting prices equally below your target. That way, you'll have room to negotiate.
The absolute safest mortgage is a 15- or 30-year fixed-rate loan. (The interest rate never changes, thus the fixed.) Another option is known as a hybrid mortgage. The typical hybrid is 5/1, 7/1, or 10/1, which means the interest rate is fixed for the first period (be it five, seven, or 10 years) and then converts to a rate that can change every year. The advantage of a hybrid is that the starting interest rate will be lower than on a fixed-rate loan. And if you move within that initial period, you won't be hit with an adjustment (but make sure beforehand that there are no prepayment penalties).
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