Cost of a New Home - Part 2

Last time we talked about how to guage how much home you can afford and ways to offset expenses such as renting out space to help pay the mortgage. This week we have a few more helpful tidbits to aid you in your search for a home.

Now that you have some idea of what you can afford to spend on a home, you have to find out if it's enough. You may see homes being advertised for large sums, but don't worry. It just isn't cost effective to advertise a less expensive home if the ad costs a lot of money. Affordable homes are out there, and right now, many properties are being listed more cheaply than they have been in a long time. If you have certain criteria for the home you want on Maui, then use our search tool so that you can see listings that fit your specific requirements.

Once you've found a home that you feel is suitable, you want to consider whether you want a fifteen year or thirty year mortgage. Lenders will prefer that you take out a thirty year mortgage because much more interest will be paid on the loan. In the long run, it will cost much more, but in the short term, your monthly payments will be smaller. Because the monthly payments are smaller, lenders are likely to approve a larger loan for a more expensive property than if you chose a 15 year mortgage.

Keep closing costs in mind. What are closing costs? Survey fees, mortgage application fees, appraisal fees and brokerage commission are just a few possible closing costs that you may need to pay. You will either have to take this amount out of your savings, reducing the amount you can put into a down payment, or apply for a larger mortgage so that the closing costs will be included in the loan (known as "rolling the closing costs").

What are your monthly payments? Typically, your monthly payment will be anywhere between .75% and 1.15% of the purchase price of the home. This is a general estimate and there may be some variation in your case. 

As you consider these factors and continue your search for the right property, remember that we are here to help you find the right Maui home to fit your needs. As you may know, we specialize in north shore Maui properties, and have a great number of worthy listings. That's it for this week. Thanks for reading. Happy holidays and mahalo!