The first thing to understand about buying a house is that you don't have to have all the cash saved up in order to make your purchase.
good news is that there are lots of folks out there who are very
interested in lending you as much as 95% of the purchase price of your
home, at very favorable interest rates. Furthermore, they are willing to
spread out the payments over a long period of time so that you can
afford the house you want.
Just to cover the basics, let's elaborate on the points in the last paragraph:
you have a steady job and a reasonable credit history, there is a good
chance that you can find a home lender who will lend you most of the
purchase price of your new house. Home loans are also called
"mortgages," which comes from a Latin phrase meaning "pledge unto
death." While lenders don't take your promise to pay quite that
seriously, they DO expect to get repaid on time. Just to make sure you
remember, lenders take an ownership interest in your house until the
loan is paid in full.
Home loans typically are offered
in amounts of 80%, 90% and 95% of the price you are paying for the
house. You are expected to pay the remaining amount in cash from your
own savings. As you might imagine, the lower percentage loans are
somewhat easier to qualify for.
The reason the lender
is willing to lend you up to 95% of the value of your house is that
history has shown real estate to be such an excellent investment.
Lenders expect that your home will be worth more in the future than it
is today - so their investment in your home is considered very safe.
also why the interest rate you can obtain on a home loan is one of the
best around. Consider that America's largest and strongest corporations
borrow at what is called the "prime rate," and that today you can borrow
a home loan - fixed at the same rate for many years - at substantially
less than the prime rate. Lenders have found that home loans tend to be
excellent investments, and you benefit every month when you make your
Finally, home loans are available to be
repaid over terms of usually 15 or 30 years. The shorter term loan
offers a slightly lowered interest rate, so if you can afford the higher
monthly payments, you'll save in interest costs by choosing the 15 year
loan. At today's interest rates, a 15 year loan costs about 27% more
than a 30 year loan in terms of your monthly payment. But the amazing
thing is that lenders are even willing to offer a fixed rate loan for
that time period. It's better financing than you can get on just about
any other investment.