A lot goes into the process of buying a home. Like any other decision in life, timing is everything. When buying your first home, it is important to make proper financial plans for it. This helps avoid unnecessary debt and ensures that you get a home that suits your needs and budget. But how do you know whether you’re ready to buy your first home? Here are some telltale signs.
- You Have Enough for The Down Payment
Buying a hose comes with a few upfront costs that you must pay. The biggest cost is the amount you have to pay as down payment. Your down payment cost depends on the type of mortgage you want. It can cost anything between 3% and 20% of the home’s total cost.
For example:
- FHA loans require at least 3.5% as down payment
- 230K loans require 3.5% as down payment
- Conventional loans require between 3% and 20% as down payment
- Jumbo loans require between 15% and 30% as down payment.
- Your Credit Score
You need a good credit score to buy a home without too much trouble. A perfect score is no longer the most important factor when it comes to home loans. However, having one that is above 640 increases your chances of being approved for a home loan. Anyone with a score of less than 580 may have a problem qualifying for a home loan and their options are mostly limited to FHA loans.
- Mortgage Affordability
Whether you are looking to buy a townhouse, condo or a flat, the mortgage amount you stand to get for buying your new home is determined by your debt to income ratio. It is always recommended that you keep your debt to income ratio at less than 36%. If you are currently paying rent, there is a chance that your mortgage repayments will be equal to your current rent. Use online mortgage calculators to determine how much mortgage you qualify for.
- You Are in A Steady Employment
If you have been working in the same company and same job for more than 2 years, you are seen as one who is stable enough financially to get a mortgage loan. Therefore, it is important to have a stable source of income before you think of buying your first home. Lending companies want to loan to people who will be able to repay the loan in time. People with steady employment stand the best chance.
- You Can Afford to Run Your Own Household
Most people are stuck in rented houses because they offer an easier deal. Home maintenance and repairs are the responsibility of the landlord. If anything stops working, the landlord is called in to fix it. When it comes to home ownership, these responsibilities are transferred to the homeowner. You always need to have a rainy-day account for emergency repairs that may arise. You can also get a home warranty plan that cater for repair costs on a monthly basis.
