So you want to move on from apartment life and renting. You’ve been considering getting a place that is all your own, but are you ready to buy a house? You likely have a lot of questions like, how do I know that I can take this on without going broke? You don’t want to rush into the biggest investment of your life without knowing for sure you are prepared. If you’re going to buy a house, you don’t want to regret your decision. Luckily we have five important questions that will help you answer the question – Are you ready to buy a house?
5 Questions to Determine if You Are Ready to Buy a House
1. Do I have money in the bank?
If you’ve been seriously considering home ownership, you likely know that mortgage lenders like it when you have enough money for a 20 percent down payment. This means if you’re going to buy a $200,000 home, you will have $40,000 available for the down payment. If that number surprises you, the good news is that you don’t have to have 20 percent.
While some financing options require 10 to 20 percent, others need as little as 3 percent of the purchase price. For that $200,000 home, it would be $6,000 to meet the 3 percent requirement, which is much more attainable.
In general, the more money you invest initially through a down payment, the smaller the monthly payment will be.
You will also need to account for any closing costs, property taxes, mortgage insurance and home inspection as well so having decent savings set aside is a good idea and the best way to determine if you should purchase a home.
2. Do I have a lot of debt?
If you don’t have much money set aside and you owe considerable money to others, it is more of a reason to hold off on buying a home.
A rule of thumb many experts will tell you is that you shouldn’t spend more than 30 percent of your monthly salary on your house. Many lenders typically won’t approve a home to somebody who, after purchasing a property, will then have a debt-to-income ratio of 43 percent or more. This means that if 43 percent of your salary is going toward paying debt, you will have a difficult time getting approved.
Debts, such as student loans, credit card debt and car loans won’t automatically disqualify you from borrowing money for a house, but it can if your debt is severe enough.
3. Do I plan on starting a new job soon?
The point of asking yourself this question is to think about where your life is at currently. If you decide you are ready to buy a house, you won’t want to move around immediately. Do you like the area? Is the commute appropriate? Do you plan to stay there for a while?
If you can’t commit to staying put for at least a few years, it’s probably won’t make sense to buy a house. Like any other investment, home ownership is an investment that grows over time. Buying and selling quickly could leave you at a financial loss, so it is important to think about your long term goals before settling down.
4. After I buy a house, will I have money left?
This is important, too. Even if you aren’t carrying a lot of debt, and everything seems to line up for a home, will you have the cash to care for your house? A common mistake first time home buyers make is failing to plan for repairs or surprise expenses.
Problems happen, and you’re going to need money to keep your home running. You will no longer have a landlord to handle any issues. However, as a homeowner, you are responsible for any fixes that may arise. It is important to plan ahead and set aside an emergency fund before you decide you are ready to buy a house.
5. How is my credit score?
While you can still buy a house without having outstanding credit, you shouldn’t buy a house just because you can get approved for one, especially if your credit score is low.
It’s usually best to wait until your score improves, so you are eligible for lower interest rates and lower monthly payments. A score of 760 and up is an excellent credit score and will guarantee you an excellent rate.
If your score isn’t quite where you’d like, there are ways to improve it over time. The more debt you pay off and the more on-time bills you pay, the better you’re score will be. Plus, paying off your debt will help you be more comfortable when you are ready to buy a house.
Buying a house is likely the biggest investment you will ever make, so you want to be sure you are ready before you take the leap to home ownership. Once you do, you want to make sure you protect that investment properly. That’s where we come in! Just call us at 724-929-2300 and let us do the comparing for you. We will find you the best price on the coverage that fits your needs! Our experienced team of local agents take the time to get to know you, so you can be certain that the coverage we provide you is the perfect fit. Call us today!