Are You Ready to Stop Renting and Buy a Home
Renting a home gives you the freedom to move around and not have the responsibility of a mortgage, yet homeownership is a goal for most people. With mortgage rates at an all time low, you may be asking if you are ready to make the big move. This is a major personal and financial decision. How do you know if the time is right? Here are some signs that you are ready to say goodbye to your landlord and switch from being a renter to a homeowner.
1. You're tired of rising rents. Rental prices are on the rise and paying rent may begin to feel like a bad investment.
2. Credit score rises. A healthy credit score gets you better mortgage interest rates and loan terms. Remember that keeping credit card balances at or below 30% of the available credit limit has a positive impact on your credit score.
3. You're good at managing debt. Lenders look at your debt to income ratio when they screen an applicant. It's calculated by adding up all your monthly debts and dividing the sum by your gross monthly income. Most prefer a ratio of no more than 43%.
4. You have enough set aside. Repairs are no longer the landlord's responsibility and neither are property taxes, routine maintenance, and homeowners insurance. If your income has risen or you've been able to set aside savings, you may have enough extra money now to handle the added expenses of homeownership.
5. Downpayment and closing costs are doable. Funding the downpayment is one of the biggest hurdles to first time homeownership. The downpayment required depends on the type of home loan you get. Most conventional loans have a 20% downpayment to avoid paying private mortgage insurance but FHA loans require just 3.5% down. Compare loan programs to see which is best for you.
6. You're ready to settle down. The upfront costs of buying a home take time to recoup. Do you have a stable job and a stable income?
7. A major life change. Did something change in your life that prompts a change? Marriage, a growing family and a new job are just some of the catalysts for people to buy a home.
8. You know what you want. Having an idea of where or how you plan to live help as you begin your house search. Determine your needs for the type of home, the size, its location, and amenities.
Your next step should be to get pre-approved for a mortgage. This helps you know how much you can afford and what price range to focus on so you don't overextend your budget. Next, find a local Realtor to work with who can help you through the process of finding, negotiating and buying your first home. Working with professionals will help you avoid problems during the course of your purchase and make your purchase a positive and exciting experience.