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Financing Issues

Higher interest rates make it harder to qualify for a loan and to pay it.  Recent jumps have made it much harder to afford payments.

How much of my income should I devote to housing expenses?  Ideally only 28-30%.  Remember your other loan commitments

Should I buy down my rate?  Paying points up front can be considered, but make sure that you plan to stay in the house long enough for it to pay off. 

What about an ARM?  These offer the hope that you can refinance at a lower rate in the future, but can also allow increased rates.  Could you afford it?

Should I use my 401K for a down payment?  Think twice as you will have to pay penalties up front and lose the retirement investment.  Taking out a loan against your 401K is a little better, but has the same costs if you fail to make payments for some reason. 

What about selling stocks?  This is a better option, but will subject you to capital gain taxes.  Try not go become cash poor as houses often come with sudden big expenses.

Can I refinance later?  Maybe, if interest rates go down, something we don't know.  There will be refinancing costs up to 1.5%.

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