Buying a home is a huge financial decision and it is tough to know when you are ready to make the leap. Just because you can buy a house doesn’t always mean you should.
So how do you know whether or not it’s the right time?
We recommend having these 5 things in place before getting started on your home buying journey.
1. Your finances are in order.
Before you make the decision to buy a home, it’s important to have a solid understanding of your current financial situation. Take some time to assess your current debt and monthly expenses. Make a list of everything you pay for each month.
Answer questions such as:
- How much credit card debt do I have?
- Do I have a lot of student loans to pay off?
- Do I have auto loans or personal loans?
- Is my household income stable?
Having some debt doesn’t necessarily mean you aren’t ready, but your debt to income ratio is taken into consideration when you are trying to qualify for a mortgage. If you find yourself struggling to pay off current debt or barely making ends meet each month, it might not be the right time to buy a home.
On the other hand, if your debt is manageable or you’ve paid off most of it, your income is stable and you have a solid understanding of your finances, you may be ready to purchase a home.
2. You know your credit score
Most people have struggled with credit at one point or another during the course of their life. It is important to understand your credit score and take care of anything that may be causing problems. If there is anything you are unaware of on your credit report, you can challenge those items and sometimes get them removed. Having a higher score means qualifying for a better interest rate, which lowers your mortgage payment. You can pull your credit for free online with tools like Credit Karma and start getting an idea of where you stand.
3. You have enough saved for the down payment.
Depending on the type of loan you may qualify for, you may need to save anywhere from 3.5% to 10% of the price of the home you are hoping to purchase. There are several factors that determine the exact amount you need to save, but it’s always good to have more than enough set aside for extra expenses involved in moving and making a home purchase.
4. You won’t be house poor.
While you may be able to afford your new mortgage, there are other expenses to consider before buying your dream home. Some of these expenses include:
- Property taxes
- HOA fees
- Home repair and upkeep
Make sure there is room in your budget not only for the new mortgage, but for other expenses involved in owning a home. Otherwise, you may have a nice big house, but you can’t afford to buy new furniture or even take a vacation.
5. You know what you want and have done some research
While your Real Estate agent will be able to help you hone in on what you are looking for, it doesn’t hurt to do a little research ahead of time. Search current listings and get to know what areas you like, how many bedrooms and bathrooms you hope to have, if you are looking for something newer and more modern or if you are ok with a fixer upper. The more information you can give your agent, the more likely they’ll be able to help you find the right home for your situation.
Whether you are ready to start looking for a new home or you know you need to wait a bit, it doesn’t hurt to have an expert in your corner answering all of the questions you may have. Feel free to contact us, search our listings, or let us help you start your home buying journey! Wherever you are in the process, The Fields Team is here to help!