As things regress to normal on a national level, now is a great time to consider becoming a homeowner. Interest rates are historically low. The economy is stabilizing. Job security is increasing. Is this the right time to buy into the American dream? Though everyone’s jumping off point is different, here are 6 indicators that you may be ready to buy a home.
Stable Employment & Steady Income
If you have a stable employment history with several years of experience, preferably with the same employer and in the same field, the more favorably you’ll be viewed as a mortgage candidate. Keep in mind, no more than 30 percent of your monthly income should be put towards your mortgage payment. Even if you have the potential for higher income at a later time, you should be prudent in the amount of income you put towards your house payment.
A good rule of thumb is that 20 percent of your income should go towards savings. And before committing to purchase a house, you should have an amount that is equal to at least a year of monthly expenses. Having that financial cushion helps cover the unexpected and emergencies that can happen in life. And don’t forget, there are additional expenses that come with homeownership like insurance, property tax, repairs, and maintenance, so it’s important to be financially prepared.
Zero or Low Debts
Lenders will focus on your debt-to-income ratio to compare how much you owe each month to how much you earn. If you’ve paid off all your outstanding credit cards, car loans, or other liabilities, you’ll be able to show the added cash flow to cover any future obligations.
Solid Credit Score
After paying off your debt, your credit score will most likely rise, which will help increase your chances for a better interest rate, which gives you a lower monthly mortgage payment.
Adequate Down Payment
The more money you can put down, the lower your monthly payment will be. The amount of down payment required differs with each mortgage loan program, but if you have enough savings to put down at least 10 percent, you are in a good financial position. With even higher down payments, you may be able to avoid paying PMI (private mortgage insurance) requirements.
Buying a house is one of the most significant investments you’ll make. Before you take on that responsibility, make sure it’s in alignment with your near-future plans. Are you considering a career move in a couple of years? Do you want to start a family right away? Before committing to buy a home, make sure there are no short-term goals that could increase your financial vulnerability and your ability to afford your mortgage.
Ready to Get Started?
Think you are ready to buy a home? Get started by prequalifying for a mortgage loan. Luxury Mortgage can help borrowers get prequalified in minutes so you’ll know how much house you can afford. Connect with one of our licensed mortgage consultants today to learn how to get started.
We're dedicated to helping borrowers find the right home loan program for their situation. Contact us today for a free quote and consultation.
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