Without knowing anything about you, we can guess that you probably want to own a home someday (if you don’t already). Everybody wants to stop paying rent and be more independent, but a lot of people just aren’t ready for the many difficulties that are often involved. If you are in a position in which you are not sure whether to buy a home or not, we recommend that you ask yourself the following four questions.
Question 1: Do I Have Enough Money Saved?
Buying a new home involves a lot of expenditure. Obviously, the down payment cost of the home itself is usually the biggest expense. In many cases, you will have to pay extra for the lot, and there will be a lot of closing costs involved. Also, you will need to have at least one inspection done, and those can add up quickly as well.
You will also need to consider homeowner’s insurance, the costs of moving, property taxes, as well as any repairs and/or maintenance that might be needed on your home. It is a good idea to make sure that you have saved about 30% of the total cost of your home. About 10% of that will cover the down payment, while that other 20% should cover all the other costs.
Question 2: How Is My Credit Score?
Unless you are swimming in money, you will definitely have to take out at least one loan in order to get this new home. Thus, your credit score will definitely come into play. In order to qualify for any kind of home loan, you will need a bare minimum of 500 on your credit report. 600 or 650 would be a lot better, and 700 or above is a near-guarantee of approval.
If your credit score is not very good, we would recommend that you take out the smallest loan you can get. Pay it back on time and in full, and this will certainly increase your credit score. By repeating this process, you can potentially raise your credit score quite a bit. The only problem is that you can’t do this if your credit score is terrible, as no bank will loan you money in the first place. Still, there are many other ways to raise your credit score.
Question 3: Is My Income High Enough?
As we already mentioned, the home buying process is certain to include a home loan. In some cases, you may need more than one loan. In any case, you need to make sure that you will be able to cover the monthly premiums. You can only trim your budget so much before it becomes a real problem, so it’s not always as simple as living cheaply for a while.
The thing here is to avoid the mistake of living above your means. If your premiums are too high for your income, you might be able to struggle along and make those payments for quite a while. However, it will catch up with you sooner or later. When it does, you could end up defaulting on the whole loan and losing everything you’ve worked so hard to attain.
At some point in the process of buying a home, you might be tempted to make a purchase even if the premiums turn out to be higher than expected. As hard as it is, you should probably turn down the deal if the premiums are going to strain your ability to pay. It’s just too much of a gamble to take.
Question 4: How Is The Housing Market Right Now?
Like any other market, the housing market experiences periods of highs and lows. It might be compared to the weather. These price fluctuations are caused by a number of different factors and would be outside the scope of this article to discuss in full.
While you are saving for that new home, you should go ahead and start keeping your eye on the housing market. By using any internet search engine, this is an easier task than ever before. You must simply choose a particular area in which you would like to live. You might want to pick more than one. Either way, get into the habit of looking up home prices in that area on a regular basis. If your memory isn’t the best, you might want to take notes from time to time. The idea is to get a general idea of what a home in that area should bring in the current market. This will enable you to determine when you have found a good deal, and when you have not.
Well, there you have it…after you have answered these four questions, you will know whether or not you are ready to buy a house. As a final note, we would advise that you use a lot of caution when making large purchases like these. When in doubt, wait a little longer. Because large loans are involved, this whole process is a huge risk, but it is worth it for those who can do it right. We thank you for reading our work, and we hope it has been helpful to you. If so, we invite you to fill out the contact form below to receive more articles like this one.