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Are you thinking about becoming a first-time home owner? How do you know when you’re ready to buy a house? Buying a house is a big decision that requires a lot of thought. Here are some signs that you’re ready to buy your first home.
You feel like you’re in a good place
Do you like where you live enough to stay where you are? Buying a house doesn’t mean you can never move again. But because of bank fees, down payments and moving expenses, staying put for at least four to five years makes the most financial sense, according to the article of “Are You Ready to Buy Your First Home?.”
No More Debt
You have killed the outstanding credit card and car payment debt so you don’t have those extra bills that diminish the funds you have available to pay for a mortgage. The extra cash flow available which is not going toward debt is also necessary to make sure you can cover other expenses related to being a homeowner, such as property tax, homeowners’ insurance, repairs and maintenance and furnishings, according to the article of “10 Signs You’re Ready to Buy a House.”
Make Sure You Have Savings and Emergency fund
There’s always the unexpected with a house and generally something unexpected will always come up in life, too. It just makes sense and is important to plan for this stress with extra accounts, including a savings account and emergency fund. After all, you don’t want to have to rely on a monthly income to cover those unexpected costs because your monthly income has already been calculated and is needed for the mortgage and other bills.
By having income set aside that is the an equivalent of at least a year of monthly bills — is a good position to have before buying a house. Again, living lean and having this as a firm goal is the only way to attain this position for yourself, according to the article of “10 Signs You’re Ready to Buy a House.”
Make Sure You Have Enough for a down payment
If you have at least a 10 percent down payment saved outside of your savings and emergency fund totals, you are ready to buy a house. If you want to put even more down like 15 percent or 20 percent, then it’s even better because you can avoid the PMI (private mortgage insurance) requirement. Gone are the irrational days of no money down or a small percentage — because the lesson learned about this situation was that it put too many people at risk financially where they were not be able to continue to afford their homes, according to the article of “10 Signs You’re Ready to Buy a House.”
Do you qualify for a mortgage?
"For many homebuyers, sitting down with a bank representative to discuss mortgage options (fixed or adjustable rate; 15 years or 30?) is the moment of truth. Before you get to that point, though, I advise taking a few minutes to calculate your debt-to-income ratio. That figure compares the amount of debt you have against your overall income. Banks often use it to assess your ability to handle a mortgage and the interest rate they can offer you. Generally, to qualify for a mortgage, monthly payments on your debts should come to no more than 43% of your monthly pre-tax income, according to the article of “Are You Ready to Buy a Home?”
What is your credit like?
Before you apply for a mortgage, take advantage of your right to a free credit report from each of the three nationwide credit reporting companies to find out where you stand. Request corrections right away for any inaccuracies you find—updates can take time, according to the article of “Are You Ready to Buy a Home?”