Exploring ways to start in real estate:
The common question “how do I start?”. Whether purchasing your first home or an investment property, FHA is the way to go. 3.5% down payment is all you need to begin the journey. However, an FHA loan does require Primary Mortgage Insurance (PMI). When someone pays less than 20% for a down payment it can be risky for a lender to authorize this loan (incase the lendee does not pay the mortgage) hence the need for PMI. This can be around $45-$65 per $100,000 of the purchase price. Take a look at the numbers below to see what price range would work best for you.
Price ~ 3.5% DP ~Monthly Mortgage and Interest
$200,000 ~$7,000 ~ $867 + PMI
$300,000 ~$10,500 ~ $1,300 + PMI
$400,000 ~$14,000 ~ $1,733 + PMI
$500,000 ~$17,500 ~$2,167 + PMI
Now, this is only part if the full expense to owning real estate. The mortgage payment is what is know as principal and interest in the PITIA formula. When you begin speaking with lenders they will throw this acronym at you a lot. Next week, we will explore the TIA portion of this formula and how much to expect for those costs.
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