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5 Home Buying Costs to Consider Before a PCS

If you're thinking about buying a house now that the market cooled and you have orders to relocate, ask yourself these five questions first.

1. What monthly mortgage payment can I afford?
As a rule of thumb, your total debt payments, including your home, should be less than 36 percent of your gross monthly income. But factors such as your credit score, monthly income, and assets may allow you to afford a mortgage with a higher debt-to-income ratio.

Before you take the plunge, consider other ongoing expenses, such as homeowners insurance, maintenance, taxes and utilities, to make sure you'll have enough to cover the house payment.

2. How long do I plan to stay in the home?
Most financial planners agree that if it's less than five years, you should think twice. Why? The shorter your length of stay, the less time you have to digest closing costs, real estate commissions, and other fees. But you can find mortgages tailored to homeowners who move often.

3. Do I expect my income to rise?
Getting a raise or bonus can make you more confident about taking on a mortgage, but don't be overly optimistic. You should also consider the possibility of lifestyle changes — like new additions to the family or a switch from two incomes to one.

4. How much should I save for a down payment?
Down payments are generally a good idea because they can help lower your monthly payment. If you put down 20 percent  or more of the purchase price, you'll avoid paying costly Private Mortgage Insurance.

Some mortgages, such as those guaranteed by the Veterans Administration, don't require down payments.

5. How much money should I commit to points and fees?
Mortgages come with a variety of upfront expenses. When evaluating lenders compare their good-faith estimates of closing costs before applying.

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