Buying a new home is a big decision and one that many wonder if they are truly ready for.
Use this guide to determine if you are ready to start house hunting:
Thirty percent of your income can cover a mortgage payment for your ideal home
The ability to afford month to month payments is incredibly important. Staying within the recommended percentages when it comes to budgeting helps you failsafe your finances from potential future hardship. At the very least you want your mortgage payment to be as close as possible to the thirty percent marker of your income.
You’re in a secure job.
In addition to having an income that can sufficiently support the month to month payments you also want to ensure that that income is a reliable source. Signs of a reliable income are that you have been with your current company for longer than two years with several months at the same pay rate.
You have a great credit score
This one shouldn’t come as any surprise to you. A great credit score will not just increase your eligibility for financing but also for a great interest rate. If your score falls in the “good” region you can take steps to bring up your score fairly quickly, as far as scores go, before applying.
You have a down payment saved up
A down payment is a big savings goal to tackle. So if you’ve already done the math and saved up a sizeable sum for the downpayment on your dream house you are most certainly ready! Ideally, this amount should be around twenty percent of the sale price.
You’ve prepared a prospective budget
If you already have a down payment saved you at the very least have part of this step taken care of! Knowing your future homeowners budget doesn’t just include your typical expenses plus a mortgage payment. You also want to factor in homeowners insurance, potential HOA (Homeowner Association) fees, and maintenance costs.
You’re ready to build equity - or it’s your next financial goal
For those scratching their heads, equity is the amount of your home that you actually own. This is the ratio between your homes value, the amount you have paid and the amount you owe. As you continue to make payments on your home your equity grows. Equity can also increase if the value of your property increases.
You’re ready for stability
If you’re ready to settle down in one place for at least the next five years you’re looking for stability. Perhaps you’re ready to put down some roots and start a family or become a part of a local community. Owning your own home provides you a steady living expense, builds equity and gives you (almost) complete control of your lifestyle.