Buying a home is a big decision because it has many financial and lifestyle implications. That’s why it’s important to consider if you’re ready to buy a house before making the commitment.
With so many factors to consider, you’ll want to make sure you’re prepared and are making this choice for the right reasons.
Not everyone is in the right situation to buy a home right now - and that’s ok! It’s better to wait until you’re ready before committing to something you’re not sure about.
Read on to learn about what factors you should look at before you commit to buying a home.
You have dependable income
To qualify for a mortgage, it is important that you have a dependable source of income. Lenders want to know if you will be financially stable enough to make your mortgage payments.
They will examine your income and employment history to determine if you qualify for a mortgage, so be prepared for them to take a look.
If you don’t have steady employment or an incomplete work history, it may be harder to qualify for a mortgage but it is still possible. Talk to your local mortgage lender to learn more about your available options.
You have a low debt-to-income ratio or manageable debt
Like your income, lenders will look at your debt to see if you have the means to make your monthly mortgage payments.
Typically, they do this by looking at your debt-to-income ratio, which is the percentage of your monthly debt compared to your monthly gross income. Debts such as credit cards and loans are examined to determine this ratio.
Ideally, you’ll want a debt-to-income ratio of less than 40%. The lower your ratio, the more likely you’ll qualify for a mortgage.
If you have significant student loans, personal loans, or credit card payments, it may be better to put off buying a house and focus on paying off other debts first.
You have a good or rising credit score
Another important factor when determining your ability to get a home loan is your credit score. This number signifies your “creditworthiness” and is calculated based on factors like your credit payment history, length of your credit history, and debt.
The higher your credit score the better when it comes to qualifying for a mortgage. Not only is it more likely that you’ll qualify, but you’re also more likely to get better interest rates, which can pile up to save you thousands.
For most mortgages, you need a credit score of at least 620 to qualify.
You can save enough for a down payment
While 20% has been the typical down payment amount, you don’t always need that much to purchase a home. Some conventional loans allow you to put as little as 3% down, while VA and USDA loans may not have one at all.
If you do plan to put down less than 20%, be prepared to pay private mortgage insurance. It is often required since it protects the lender if you end up not being able to pay your loan.
You can cover additional costs that come with home buying
While monthly mortgage payments and the down payment are some of the biggest expenses to consider when buying a home, they’re certainly not all of them. There are several more expenses that come with owning a home, such as:
Closing costs: When you close on your home, you’ll need money for appraisals, inspections, lender fees, etc. These expenses account for about 3-6% of your loan value.
Insurance: Many lenders require a homeowners insurance policy to protect your home against loss.
Property taxes: No matter where you live, you’ll have to pay property taxes to your local government. This amount is based on the value of your home and is used to fund public services like libraries, schools, fire departments, etc.
Maintenance: Owning a home also means you are responsible for fixing any issues. It’s important to have enough money set aside in case something goes wrong.
You feel ready to settle down
Homeownership is a big commitment, and it’s usually not the best financial investment unless you’re ready to settle down.
If you have the financial means and are looking for a place to settle into, you are likely ready to buy a home.
When you’ve decided you’re ready, finding the right home is another feat entirely.
But it doesn’t have to be difficult.
At Hunt Homes Group, we make it easy to find a home that you love. View our available homes and floor plans to see which options work best for you. Ready to take the next step? Send us a message to get started with your new home purchase.
