When buying a home, it's important to assess your financial situation. First, consider how much readily available cash you'll have because nearly every lender will require some form of down payment-5%, 10% or 20% of the purchase price. On a $200,000 home, that could be a down payment of $10,000 to $40,000! Do you have that kind of expendable cash on hand? If not, that doesn't mean you can't purchase a home; it just means you may need to find a more inexpensive home.

The next step is to determine how much cash you can allocate for closing costs. In most real estate transactions, the buyer is the one who foots the bill for the closing costs. Closing costs can be anywhere from a couple hundred to a couple thousand dollars.

Finally, you'll need to decide whether you are open to a loan offer with points or if you prefer a no-point loan offer. Choosing a loan with points may decrease your mortgage loan interest rate and thus your monthly payment but loans with points require payment of the point fees at closing. Do you have enough saved up to cover paying points on a loan in addition to the down payment and the closing costs? If not, choosing a loan with a higher interest rate and no points may be the smart decision.

Clearly, there are a number of financial factors involved with purchasing a home but don't feel overwhelmed. Feel informed! Having a clear picture of your financial situation will give you a good idea of the maximum home loan you can afford and therefore, a home price range that's realistic.

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