How To Buy A House (And Stop Renting): How To Know You're Ready
Renting is a great option if you are not ready to buy your own place. However, some people think that they will never be ready or able to stop renting and become homeowners. This couldn't be further from the truth! In order to know whether or not you are ready for homeownership, there are a few things that you need to ask yourself:
- Am I tired of paying rent?
- Do I have enough saved up for a down payment?
- Is my credit score good enough?
- Is my income stable and sufficient for a mortgage?
There are many more questions to ask yourself, but these are the big ones. Once you have answered all of those questions, it will be easier for you to know if homeownership is right for you!
Now that we've talked about how to determine whether or not you are ready to become a homeowner let's talk about how to buy your first house!
The process of buying a home is not as complicated or scary as it may seem. There are so many things that you need to do when purchasing a property, but the most important thing for you to focus on during this time is ensuring you have saved enough money for a down payment, have enough income to support the mortgage payments on your new home and you are able to make an offer that is competitive in today's housing market.
-Am I ready to stop renting?
You need a reason that is compelling enough for you. If your answer is "I want less hassle," or "it's too expensive" then there are other factors involved and it might not make sense financially, so continue reading the post before making any decision.
If you're prepared to stop wasting your hard-earned money on rent and are ready to stop missing out on building up equity, then you're probably ready.
-Do I have enough savings for a down payment?
A 20% down payment is necessary to avoid paying mortgage insurance. The more you put towards the purchase, the less interest you'll pay over time. If possible, try to save up at least 20%. You may be able to get assistance from your employer or an outside organization like non-profits that assist first-time homebuyers.
-Is my credit score good enough to become a homeowner?
If you're looking for a traditional 30 year fixed rate loan, lenders typically require at least a FICO of 680 or better to obtain a competitive interest rate. But before you go out buying a house you need to know what your FICO score is. And if your FICO score is not 680, do not worry we can help you.
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-Do I have enough income to cover the monthly mortgage payments?
Take a look at your current budget and figure out what you spend every month on items like groceries, clothing, gas, entertainment. If there's room in the budget for an extra expense then becoming a homeowner may be worth it to you.
If you're hoping for a traditional 30 year fixed rate loan, lenders typically require that your total household debt (including loans and mortgages) not exceed 43% of pre-tax income. Additionally, if one person is on the title alone they may need an even lower debt to income ratio.
A 20% down payment is necessary to avoid paying mortgage insurance. The more you put towards the purchase, the less interest you'll pay over time. If possible, try to save up at least 20%. You may be able to get assistance from your employer or an outside organization like non-profits that assist first-time homebuyers.
Owning a house has many benefits that renting does not. But knowing you are ready to become a homeowner is the first step you need to take. If this sounds like something your family needs, then it’s time for you and me to have an honest conversation about what steps we can take together towards homeownership!
If you’re ready to buy a house, but don’t know where to start or need some help with your finances, look no further than a financial coach. A financial coach can guide and support you through the process of buying a home that is right for you and your family. Contact us today for your free 30-minute no-obligation consultation.
