The different needs and circumstances of borrowers call for varied types of home loans. For…
The thought of buying a home can elicit a lot of anxiety. How do you know you’re ready to be a homeowner? What if you aren’t able to pay the mortgage in full? What if your interests change in the future? However, amidst all this anxiety, it’s essential not to forget the benefits of owning a home. You get to pride yourself on the fact that you’re a homeowner. You can paint the walls as you desire, plant a permanent garden, turn up the music over the weekends, and attach permanent fixtures to the house. A house is a significant investment that appreciates over the years.
But how do you know you’re ready for this step, which could be one of the biggest decisions you ever make? Here are the top five signs that you are ready to buy a home.
- You Have a Steady Source of Income
Let’s face it; buying a home is expensive. The standard mortgage term in the United States is thirty years. Therefore, you need a steady income to make monthly payments over the mortgage term. You also need funds to pay the down payment, closing costs, and any repairs required before moving into your new home. If you’ve been in your current job for over two years, and there are prospects of stability, you are ready to become a homeowner. If you’re in business, your firm should have been bringing in steady profits for at least two years for you to consider taking out a mortgage on your income.
Use an online mortgage calculator to help you determine the amount of money you need every year to cover the costs of your desired home. If you meet or surpass this threshold, you are ready to own a home. If you’re below the limit, you can find an additional source of income to supplement your primary source and channel the extra funds towards a mortgage payment.
- You Have a Good Credit Score
Most mortgage lenders don’t need you to have a perfect credit history to qualify for a mortgage. However, a good credit score increases your chances of being approved for a loan. Note that if you intend to get a loan from FHA, you will need a minimum credit score of 580. If your score is lower than this, you may get a loan, but at a higher down payment amount. If your score is above 580, you can quickly get approved by most lenders. Some tips to help increase your current score include the following:
- Pay your bills on time
- Don’t close unused credit cards
- Keep the balances on your credit cards low
- Apply for new credit cards only when needed
Finally, remember that regularly getting credit and paying it on time is an excellent way of improving your credit score!
- You Can Afford a Mortgage Down Payment
Do you already have some money saved up for down payment? If so, you’re ready to buy your first house. The value of the down payment depends on the lender. For example, FHA requires a down payment of 3.5% on the value of the home for individuals with a credit score of at least 580, and 10% for a score below 580. Other lenders include the following:
- Veteran Affairs (VA) loans at 10-20%
- 203k loans at 3.5%
- Jumbo loans at 15-30%
- Conventional loans at 3-20%
Choose your preferred lender and determine whether you’re able to raise the down payment amount. Note that some lenders attach conditions to their terms. For example, conventional lenders may require you to carry private mortgage insurance if your down payment is below 20%. Take note of such terms before settling with a financier.
- You Can Afford Mortgage Expenses
In addition to the monthly mortgage payments, there are other extra costs of buying a house. These include the following:
- Homeowner’s Association (HOA) fees
- Property taxes
- City assessments
- Water, sewer, and garbage
The costs of these vary depending on the type of property, location, and so forth. Research your desired property and ask around to establish how much you’d pay for these and other associated costs. If your current income can cover them, you’re good to go!
- You’re Ready to Settle Down
It’s easy to get hung up on the costs of owning a house and forget your personal needs. Are you ready to settle down? Do you see yourself living in your desired neighborhood for years? Do you want to have kids or expand your family? If the answer to these questions is yes, you’re ready to be a homeowner. Buying a home is not just about feeling good about having a place of your own. It’s a long-term commitment, and you should be ready to settle down. As you buy, choose a neighborhood that you will still want to live in ten years from now.
Not sure whether you should buy a house? These pointers should help you decide whether it’s time to stop renting and become a homeowner. If you’re still not sure, consult a professional.