Are you thinking about purchasing a home for the first time but don’t know if you’re ready? While there are many factors that go into determining if you and your family are ready to purchase a home, here are eight simple questions that you should ask and answer before you pursue a home mortgage.
1. Are you ready to settle down in one area for several years? Make sure you’re ready to settle down in one area for a while. It’s never a good idea to buy a home if you don’t like the area, know the area or have a job that requires you move regularly.
2. Do you have enough savings to cover at least three and preferably six months of basic living expenses? If your answer is yes, then you’re in good shape from a standpoint of covering your current bills. If not, and especially if you live paycheck to paycheck, you should seriously reconsider purchasing a home at this time.
3. Do you make enough money to cover a mortgage for the kind of home you want? Take a look at the values of the homes for sale in your area and check out the ones that are of interest to you. Get a quote on what your monthly mortgage payment would be, including taxes and insurance. Make sure the monthly payments and additional home expenses will fit into your budget comfortably. Your budget should still allow you to save a little each month after expenses, or otherwise it is not very comfortable.
4. Have you saved for a down payment? In addition to having enough savings to cover bills for several months, you’ll need additional funds that will be used for a down payment. You can purchase a home with as little as 3.5% down but should consider having at least 10% saved, and 20% is best.
5. Have you been in the same line of work for at least two years? Any lender will want to know that you are stable in your career or business and will want to see that you have been in the same line of work for at least two years.
6. Is your credit score at least a 640? While there are programs that allow for you to have a score as low as 520, you will have an extremely hard time finding any bank that is willing to take the risk. Most banks will refuse to lend to you unless you have a score of at least 640 and some prefer your score be even higher before considering a loan. A higher credit score could get you a lower interest rate.
7. Do you intend on taking out any other loans in the near future? If you were thinking of financing a new car or taking out any other larger loans in the near future, you should wait until after you’ve purchased a new home. Banks often see such purchases as being an increase in risk and they could decline or pull a home loan offer as a result.
8. Do you have enough free time for home repairs and maintenance? Any home will need maintenance and cleaning, whether it’s simply mowing a lawn or mopping the floors. Unless you can afford hired help, you or someone in your household will need to have enough free time to take care of this work. If you’ve considered all of the above questions and still feel confident in your stability and readiness, then you should be ready to buy a home. Good luck with your purchase!
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