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Buying a home may seem like a smart financial move. However, it may not always be the right time or the right move for you. While buying a home is a great investment, you may not be ready to buy a home of your own. The following questions should help you to determine whether or not you are fully ready to buy a house in the near future.
How Much Money Do You Make? How Much Have You Saved?
buying a home is a significant expense. First, you’ll need quite a large sum of money for a downpayment and closing costs on the home. Second, to get approved for a mortgage, the lender will look at every part of your finances from your income to your assets. Once the home is purchased, you’ll also need quite a bit of capital for expenses including insurance, taxes, HOA fees, emergency funds, utilities, and furniture. You don’t want to buy a home only to be overwhelmed with costs. You want enough of a financial cushion to enable you to furnish your home, decorate your home, and not have a completely empty bank account. That’s why you should make sure that you do make enough money to buy a home.
How Much Debt Do You Have?
If you have established that your income is enough to buy a home, the next thing that you need to establish is that your debt isn’t too high. Before you enter into the adventure of homeownership, you’ll need to make sure that your bills are under control. These expenses include things like car loans, student loans, and credit card bills. Your lender will put your debt into consideration as a part of your entire financial picture. Your debt (including your proposed mortgage payment) should be less than around 36% of your gross income. Before you take the leap into buying a home, you’ll need to make sure that your debt is under control. If you need to take a step back and pay your bills down before you start house hunting, you should as it will make buying a home easier for you.
Are You Seasoned At Your Job?
In order to secure a mortgage for a home, you’ll need to show that you have been at the same job for a certain period of time. Your average income will probably be calculated based on how long you have been at the company and your job history. You should be able to explain any income gaps, changes in positions or companies. Otherwise, you’ll appear to be an unstable person to lend to. Lenders want to know that you’ll have a steady, stable income.
How Is Your Credit?
In order to secure a mortgage, you’ll need to have a good credit score. Check on your credit report when you begin thinking about buying a home. If your credit is on the low side, you’ll want to work on bringing that score up.
There’s a lot of things to think about before buying a home--some financial, others personal. Most people tend to focus on one or the other. However, both are instrumental in choosing the right house and buying at the right time.
In this article, we’re going to talk about some of the ways you can determine if you’re ready for homeownership. We’ll discuss things like credit scores and down payments, but also important life factors like your career and future plans.
Getting your finances in order
There are a few simple things you can do right now that will help you understand if you’re financially secure enough to start looking at houses. First, you’ll want to look up your credit score.
Lenders strongly consider your credit when determining how much risk is involved in lending to you. A higher credit score can not only get you approved for a mortgage, it can lower your interest rate and make you eligible to borrow without having to pay private mortgage insurance.
The amount of money this saves seems trivial in the short term, but over the lifespan of your loan it can save you tens of thousands of dollars. So, read a free credit report and if your credit is lower than 700 start finding ways to improve your credit.
In the meantime, you’ll want to save for a down payment. While it’s possible to buy a home with a small or no down payment, it can come back to haunt you in the form of interest as you pay off your loan. Furthermore, many lenders won’t pre-approve you unless you make a down payment of a minimum amount (often 20% of the loan).
If you have a high credit score and you’ve saved for a down payment, another thing to check off your list would be proving your stable income. This can be difficult for the self-employed, contract workers, or people who have recently changed jobs.
Lenders want to see that you have a stable income history to ensure that you’ll be able to pay your mortgage each month. If you recently changed jobs or are in between jobs, it could be to your benefit to wait 3-6 months before getting pre-approved. In that time, you can continue to raise your credit and save for a down payment, further increasing your chances of getting a low-interest loan.
Preparing for homeownership
While the financial aspects of homeownership are important, so are the personal aspects. You’ll want to consider several life factors before buying a home.
First, think about your longterm goals. Do you want to live in the same area for the next 10 to 30 years? Will your career bring you to different regions or will you attend school somewhere else? These questions will help you decide if it’s a good time to buy or a better investment to save money while renting.
If you have a family (or plan on having one soon), you’ll also have to find a way to balance all of your living needs.
Finally, ask yourself if you have time for homeownership. Many people who are used to renting aren’t aware of the amount of time and money it takes to maintain a home. You’ll have more bills, you’ll have to mow your own lawn, and you’ll be responsible for maintenance of your home.
Are you planning on buying a home by a certain date? It’s unfortunate that life can’t go as we plan it all the time! With a bit of planning finding the right home at the right time is possible. Many times, families are looking to buy a home before the end of the summer. This allows them to get settled in and get the kids started in a new school before the start of the year in September. Just because there are more popular times throughout the year to move doesn’t mean that the inventory of homes changes much as to what’s on the market. Whatever the reason for the short supply of homes, you’ll need to be informed and creative in order to land a house in a high demand market when it’s crunch time. Below, you’ll find some tips to help you on your search.
Research Your Location Ahead Of Time
Every housing market has a bit of a down time. You want to pinpoint that period. Does your location have a time of year where people flee the area for vacations? The holiday season can also be a great time to look. There may still be low supply, but there also will be less competition. Do a bit of research in order to find pricing trends. When the prices dip, you’ll know that’s a time where competition for homes is lower.
Always Have Your Finances In Order
When you’re buying a home, no matter what time of year it is, you need to have your lender on call. Make sure that you have been preapproved and that your downpayment money is at your disposal. Sellers like serious buyers who are ready to pass paperwork.
Know What You’re Willing To Compromise On
When you’re buying a home on a timeline, you may not have the luxury of searching around endlessly to meet your wishlist. You should have a few musts, but there may be many things that you’ll need to work with or compromise on in finding the right property. You may be able to find a home in the right neighborhood, but it might not have the granite countertops that you’re looking for. When time is of the essence, your home search priorities need to be set straight.
Don’t Look For Bargains
When you’re in a time crunch to land a home, you don’t want to fool around with price. In order to land a home that you love, you might have to offer a bit more than the asking price. There’s no space for a bidding war, a low offer, or an extended search when you need to buy a home fast.
If you want to buy a house, it pays to enter the real estate market with a checklist in hand. That way, you can streamline the process of going from homebuyer to homeowner.
Now, let's take a look at three things to include in your homebuying checklist.
1. Your Budget
Your budget will dictate whether you're able to afford a condo, luxury home or something in-between. As such, you'll want to assess your finances closely as you determine exactly what type of house that you can afford.
Oftentimes, it helps to get a copy of your credit report. You are eligible to receive one free copy of your credit report annually from each of the three credit reporting bureaus (Equifax, Experian and TransUnion). If you know your credit score, you can determine whether now is a good time to enter the real estate market, or whether you should improve your credit score first.
You may want to consult with several banks and credit unions too. These financial institutions can teach you about various mortgage options and help get pre-approved for a mortgage. Then, once you have a mortgage, you'll know exactly how much you can spend on a house and tailor your home search accordingly.
2. Where You Want to Live
Living in the suburbs is very different from residing in the city. Therefore, you'll want to consider where you want to live so that you can search for a home in specific areas.
For example, if you prefer the peace and quiet of a small town, you may want to consider houses in small towns in the state of your choice. These towns may feature dozens of available homes. Plus, in many instances, small town houses are priced lower than big city residences.
Or, if you enjoy the hustle and bustle of the big city, you can search for residences in any city, at any time. These houses likely will ensure that you'll have quick, easy access to a variety of big city attractions and landmarks.
3. Real Estate Agent
There is no telling whether you're about to enter a seller's or buyer's market, as the housing sector often fluctuates. Fortunately, if you hire a real estate agent, you can increase the likelihood of a quick, successful homebuying experience, regardless of the current housing market's conditions.
A real estate agent is committed to your homebuying success and will do what it takes to help you find the right home, at the right price. He or she will learn about your homebuying goals and offer expert insights into the real estate market. Also, if you ever have homebuying concerns or questions, a real estate agent is available to address them.
For those who want to streamline the homebuying process, it helps to hire a real estate agent. And if you hire a real estate agent today, you can get the assistance that you need to make your homeownership dream come true.
Get started on your homebuying checklist, and you can simplify the process of acquiring your ideal residence.
If you plan to submit an offer to purchase a home, there is no need to leave anything to chance. And in most instances, it is a good idea to put your best foot forward with your offer to purchase. That way, you can boost the likelihood of receiving an instant "Yes" from a seller and moving one step closer to acquiring your ideal residence.
Now, let's take a look at three tips to help you put together a competitive homebuying proposal.
1. Study the Housing Market
The current state of the housing market may impact the definition of a competitive offer to purchase. For instance, if the housing market favors buyers, you may face limited competition to acquire your ideal residence and can craft your offer to purchase accordingly. On the other hand, if the housing market favors sellers, you may need to submit an offer to purchase at or above a seller's initial asking price to secure your dream home.
Take a close look at the housing market and analyze market data. Then, you can differentiate a buyer's market from a seller's market and determine how much to offer for a house.
2. Weigh a House's Pros and Cons
A home has its strengths and weaknesses, and as a property buyer, you should dedicate time and resources to learn about all aspects of a residence. By doing so, you can determine whether a residence is right for you and submit an offer to purchase based on a house's age and condition.
Consider any home repairs that may need to be completed as well. If you understand the costs of potential home improvements, you can craft an offer to purchase that accounts for these tasks.
3. Collaborate with a Real Estate Agent
Submitting a competitive offer to purchase sometimes can be difficult for experienced and first-time homebuyers alike. Fortunately, if you work with a real estate agent, you can get the help you need to create an aggressive offer to purchase.
A real estate agent understands the ins and outs of buying a house and can offer expert insights into the property buying journey. He or she will teach you about the real estate market and respond to your homebuying concerns or questions. In addition, a real estate agent will help you find your dream home, set up house showings and keep you informed about residences that become available and fit your homebuying criteria.
Furthermore, a real estate agent can provide in-depth housing market data and insights. He or she ultimately can help you take the guesswork out of crafting a competitive homebuying proposal. And as a result, a real estate agent will do everything possible to ensure your offer to purchase matches a seller's expectations.
Ready to submit an offer to purchase your dream residence? Take advantage of the aforementioned tips, and you can bolster your chances of acquiring your ideal residence in the foreseeable future.