How Much Can I Afford?

Think you can't buy a house without a 10% or 20% down payment? Thanks to more lenient government guidelines and new mortgage products, many people can now get into a house for as little as 3% down-or less. There are even some special programs for first-time buyers that help with closing costs.

The Benefits of Equity

Equity is the principal part of your monthly payment that you can use as a down payment on a new home, or collateral for a home equity loan. You can use a home equity loan to finance home improvements, a child's college tuition, or a new car.

Real estate is also a great way to keep a hedge against inflation. While some homes do appreciate in value more quickly than others, real estate usually keeps pace with inflation. In fact, homes in general have been appreciating at a steady 3% a year. (Your REALTOR can provide you with the housing appreciation rates in the areas in which you're interested in buying.)

That Wonderful Thing Called A Tax Break

As a homeowner, when filing your taxes you can deduct the interest portion of your monthly payment-and that can mean big savings. You can deduct your property taxes, too.

So look at what your monthly mortgage payment will actually be, taking your tax breaks into consideration. You may find out it's about the same as-or sometimes even less-than a rent payment!

With a 5% down payment, a $100,000 30-year mortgage loan at 8% interest (8.15% APR) requires a monthly principal and interest payment of $733.76. Assuming a 28% tax bracket and $150 for monthly property taxes, the after-tax monthly payment would be about $615! (This is only an example. Please consult with a tax advisor regarding your own tax situation and current tax laws.)

Pre-Qualification vs. Pre-Approval

Pre-qualification is just a guesstimate of how much you could afford. But with a pre-approval, it's just that: getting your mortgage approved prior to going out and looking for a new home.

Call Taos REALTOR Peter Fay today at 575.770.0457, or email him to get started on your Taos, New Mexico real estate adventure.