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Life is full of difficult decisions, with many choices out of our control.
But when it comes to buying a home, there fortunately is a lot we can do to prepare and create a positive outcome.
The homebuying process doesn’t need to be a mystery for new borrowers. Having a mortgage loan officer you can trust is an important factor in navigating the ins and outs of the process.
Use our list as a helpful guide to decide whether you are ready to buy a home.
If you determine you need more time, keep this guide on hand to check in and reevaluate your situation and goals.
1. Your finances are stable
Your financial stability includes having a steady job and enough income to cover monthly mortgage payments, needed repairs, utilities, and other monthly expenses.
When you apply for a mortgage, you will need to prove your income and employment history. Make sure you can easily pull this information and show your lender that you can afford a mortgage.
For your own sake, though, list out all your financial information and current monthly expenses to show you how much else you can afford per month and help you determine if you’re ready to buy a home.
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2. Your debt is low
Are you paying your monthly debts on time?
Your loan officer will calculate your debt-to-income ratio (DTI)* to determine whether you’re able to repay your mortgage loan.
The lower your DTI, the better your overall financial health.
A high DTI, on the other hand, can mean a higher interest rate on your mortgage and limit the amount of money you can borrow.
*Debt-To-Income (DTI) ratio is monthly debt/expenses divided by gross monthly income.
3. You have a good credit score
Credit score goes hand-in-hand with your ability to manage debt.
If your debt is under control, you most likely have a higher credit score.
Your credit score influences your interest rate, so a high credit score means a lower rate and lower monthly payments.
A low score not only will impact your rate, but might mean you don’t qualify for a loan at all until you are able to boost your score.
Keep in mind that you need to have credit established to get a mortgage, too. If you have no credit history, it’s recommended to start building it by applying for a credit card or taking out a small personal loan.
4. You have enough money for a down payment
If you’ve been putting away a portion of your paychecks each month, you should have a nice accumulation of savings. This will benefit you as you begin your home buying journey.
Putting as much money down on a home as possible can save you thousands of dollars in interest over the life of the loan. Plus, putting at least 20% down means not having to pay for private mortgage insurance (PMI).
Your loan officer will tell you the down payment amount they will accept, but if you’re able to save enough to put down a healthy amount, you’ll help yourself out in the long run.
5. You can make your monthly payments
This may seem like a no-brainer, but there’s much more to it than simply making your monthly payments. You will need to determine how much home you actually can afford. This includes:
- Closing costs
Use a mortgage calculator to get a rough idea of what you can afford, but understand that this number won’t be as accurate as what your loan officer will provide.
Buying a home includes making certain sacrifices, but make sure you’re not going to be giving everything else up to purchase a home.
Vacationing and going out to eat should be included as part of your monthly or yearly expenses so you know what you really can afford.
6. You know what you want in a home
A home is a true investment. But it’s not just about the home itself.
Remember that when searching for homes, consider the location, schools, crime rates, and local entertainment in addition to the home amenities and price.
You may be ready to purchase a home, but could have to wait to find one that meets your wants and needs. All of these factors contribute to the process.
While you’re waiting, you also have more opportunity to get your finances in the most ideal place for your homeownership goals.
7. You’re comfortable staying in the same area
Simply put, are you ready to settle down?
If you’re used to renting, you understand the feeling of something not being truly yours. Along those same lines, once your lease ends, you are free to move wherever you want.
Owning a home is a goal for many, but it must fit into your current goals.
Do you think you’ll be at your job for several more years? Could you find another job easily in the area if you were to leave? Would you be willing to commute if you couldn’t?
Give these questions serious consideration before you decide to purchase a home.
8. You’re prepared to make necessary repairs
Owning a home means you are the one taking care of repairs and maintenance — or that you have the funds to pay someone else to do it.
Either way, when choosing a home you’ll need to understand the current condition, and always be prepared for unexpected issues to pop up.
This can include anything from chipping paint to pipe bursts and appliance replacements. This also includes regular maintenance such as mowing the lawn and shoveling snow.
Ask yourself if you are ready to take on that amount of responsibility.
9. You have savings and an emergency fund
In addition to your down payment and cash due at closing, you should have even more saved up in case of the unexpected.
This could include those sudden repairs or appliance replacements, or in case you lose your job.
Depending on your mortgage payments and income, determine what a comfortable emergency fund should contain to tide you over.
10. Living in a home will fit your lifestyle
If you don’t have time for repairs or home maintenance, or you’re not willing to give up your current spending habits, will you be able to properly care for a home and make your payments?
Homeownership needs to fit into your lifestyle and current goals. If it doesn’t, it’s better to wait.
11. You don’t want to rent anymore
Renting can be convenient or necessary for a lot of reasons, but if you’re tired of contributing to someone else’s mortgage — and want the freedom to do whatever you choose to do with your living space — you might be ready to buy a home.
The homebuying process can be overwhelming for new borrowers, which is why having a trustworthy loan officer on your side is essential.
The professional loan officers at home.com by Homefinity want to help you fulfill your life goals with the perfect loan for your unique situation.
Get started now with our convenient online form.
When you’re ready to buy a home, we’ll be here to help you get in a home you love with a loan you can afford.