One of the most common goals for most people is purchasing a house, whether it's your first family home or it's an investment. Although it makes for a wise investment, there is plenty of planning involved before finding the right house. From saving for the down payment to maintaining a strong credit score, there are a few signs that will show you that you're ready to buy a house and can manage the overall cost.
You Know What You Can Afford
To ensure you'll be able to afford the property you're eyeing and can maintain its condition, it's important to first calculate what you can afford before making an offer. Instead of only calculating the mortgage payment, you'll also need to factor in repairs that are needed, utilities, homeowner's insurance, HOA fees, and moving expenses. If you've done your homework and know exactly what you can afford, then you're ready to purchase a house by staying within your budget.
You should also be emotionally prepared to deal with the time and energy involved with maintaining the property to ensure it increases its value with time. You should expect to perform the landscaping, clean out rain gutters, and even pay for exterminators when it's necessary.
You Have a Long Work History
One of the main qualifications that lenders look for in applications for home loans is a long work history because it shows stability. You're likely ready to purchase a house if you have been employed for one to two years at the same location and have not switched jobs frequently in past years. This will assure lenders that you'll have the financial means to stay current on your mortgage payment each month and are less of a risk with a possible foreclosure.
You Have Strong Credit
You'll know you're ready to be a homeowner when you have strong credit that will allow you to be approved for a loan. Having strong credit that is a minimum of 620 will also allow you to obtain lower interest rates. Monitor your credit each month and avoid using more than 20% of your credit card limits. You can also dispute any errors through credit bureaus.
Lenders will also look at the debt you owe when determining if you'll be approved for a home loan. This will require you to lower your balances, avoid late payments, and continue to use your credit to increase your overall score.
You've Saved Enough for the Down Payment
To obtain a home loan, you'll be required to provide a down payment to secure the transaction. The amount that you'll need to pay depends on the type of loan that you obtain. Depending on if this is your first home or not, your down payment can be anywhere from 5-20% of the cost of the home. Lenders will also want to see that you have additional money saved, which will cover closing costs and taxes. Fixed-rate mortgages generally require private mortgage insurance, which will protect the lender from losses that can occur.
You're Ready to Settle Down
Experts recommend only investing in a house if you plan on settling down for at least five years. If you plan to move in the next year or two, it can make for a bad investment that causes you to lose money with mortgage-related fees or repairs that you'll pay for. When investing a large amount of money, you'll be lucky to break even if you sell it in three years instead of staying long-term. The longer that you stay in the home, the better the investment.
Although there are many steps involved with purchasing a home, there a few signs that will reveal themselves if you're ready to buy a house and make both the emotional and financial investment. With enough preparation and financial planning, it will make for a step that is worthwhile and rewarding long-term.
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