Is it the Right Time to Buy a House?
It doesn’t matter if it is your first house or your fifth, there are many things to consider when deciding to buy a house. Before you make a big financial and emotional commitment, you need to think through if this is the right time for you to buy a house.
Your Reason for Wanting to Buy a House
Before diving into purchasing a home you need to consider what your reason is for wanting to buy. It is not a decision that should be rushed into. Knowing the reasons why you are buying will help you determine what your priorities are when you are searching for a house.
Are you looking to have close neighbors in a neighborhood where you children have other kids to play with? Or, maybe you are looking for a place with some acreage where you have plenty of privacy in your own yard.
Thinking through questions like this help you know where to start looking.
Are you Financially Ready?
Obtaining a mortgage to purchase a house requires a good credit score, and many times cash for a down payment. If you have a low credit score it can take you months or years to get it corrected, so don’t delay.
There are home loans that allow you to skip making a down payment, but not everyone will apply. Even if you don’t need funds for a down payment, you still want to make sure that you have funds set aside for the closing costs.
You also want to become familiar with your income and expenses. Knowing your debt-to-income ratio can help you know if you will be able to be approved for a mortgage.
If you have any questions about how your finances will relate to your mortgage approval contact a mortgage lender.
How Much Can You Afford?
Once you know you can be approved for a mortgage it is also important to know how much you can comfortably afford. There are additional expenses with homeownership when compared to renting. You will be required to pay for homeowner’s insurance and taxes, as well as the utilities and upkeep.
Your lender will let you know an amount that you qualify for, however, it does not mean that you can necessarily afford to spend that much. Your lender is looking at your amount of income and your total debt.
They do not take into consideration your lifestyle expenses such as dining out or taking vacations. They also do not figure the amount you spend on gas commuting to your job or how much you spend on groceries.
That means if you spend the highest amount that the lender will approve you for, you can end up “house poor,” meaning you have no extra money to spend because all of your funds are going to your mortgage payment.
Once you know what you are looking for, what you can be approved for, and how much you can really afford you are ready to start the process. Looking at houses is a lot more fun than going through the process of determining your priorities and finances, however, these are crucial steps in helping you r determine if you are ready to buy a house.
If you determine that you might not be ready, keep working in these areas so you will be ready in the future.