Guide to Homeownership

Buying a home is part of the American dream. It is a significant long-term investment that often represents the foundation of our lives, providing financial and emotional security. It is also the largest single transaction most people ever make. This section is designed to help you learn about the home buying process, so that you can make informed decisions.

Unit 1: Preparing for Homeownership

If homeownership is your dream, it can become a reality—but not without realistic goals, sound advice, careful planning, and a clear understanding of the costs involved.  Let’s look at the main costs involved in purchasing a home.  These include upfront costs and ongoing costs:

  • Up-Front Costs include the down-payment, closing costs, and the expense of moving and settling into your new home.  It may also include “earnest money” or a deposit that the homebuyer puts down on the home to show that they intend to purchase the home. 
  • Down Payment. When obtaining a mortgage from your credit union or financial institution, you are required to contribute some portion of your own funds to obtain the loan.  A down payment demonstrates to a lender that you are committed to paying the loan back.  Traditionally, lenders expect buyers to make a down payment of at least 20 percent of the purchase price.  However, many mortgage options are available, each with their own down payment requirements. 
  • Closing Costs. Besides the down payment, buyers must pay “closing costs,” or costs associated with the purchase transaction such as a title search, title insurance, appraisal fees, or attorney fees. 
  • Monthly Mortgage Payment.  The amount of your monthly mortgage payment depends on the amount you borrow, the interest rate, the repayment period, and the amount of your down-payment. 
  • Taxes and Insurance.  A homebuyer’s monthly mortgage payment includes taxes and insurance; these costs are held in an “escrow” account that ensure tax and insurance expenses get paid on time. 
  • Other Costs. Other ongoing costs include utilities and maintenance and costs for routine property management.  Often with the purchase of a home there are unexpected costs for repairs, so make sure you save money for emergencies.