Committing to buying a home is one of the largest decisions anyone can make with their life. Promising to pay hundreds of thousands of dollars for a property you have to maintain and care for can be overwhelming. If you’re not ready or go into it incorrectly, that could turn into debt or a lawsuit.
You could lose that home.
Instead, it’s vital for everyone who wants to buy a home to consider the following. This doesn’t have to be a high-risk game if you plan.
Any Near-Future Financial Changes
Financial changes are bound to happen in anyone’s life. Whether you’re planning on getting married and the household income doubling, or you’re hoping to have a child soon and staring down all of the costs that come with one, planned instability will happen. If you see something like this in your future, it’s important to consider whether you’ll still be able to afford a home with an increased expense or whether you can be sure that added income will occur.
Please don’t buy a home under the promised added income until it’s happening. If something happens where you have to afford the house off of your current income, you have to handle that.
Should I Rent or Buy a House?
Renting a home may not feel as personal, and you may want to have the feeling of ownership instead: but if you buy a home, you’ll have a lot more responsibility on your shoulders. You’ll be responsible for maintenance and replacing anything that breaks, which is incredibly expensive. If you’re ready for all of that, don’t be shy about buying.
Do You Have A Savings?
Keeping a savings account should be as natural as any other part of your finances. You should be able to regularly deposit a percentage of your paychecks so that you can use it in emergencies. If you want to save for a down payment or closing costs, you should save that money separately. An emergency savings account should always have at least three to five thousand dollars in it to keep you afloat for a month or two.
What Does Your Credit Score Look Like?
Your credit score makes a large impact on how much can be lent to you, which lenders will consider you, and how high your interest rate will be. If your credit score is higher, you will save money in the long run, you’ll be able to increase how much you can borrow, and you’ll be more likely to go through this process without trouble.
If instead, your credit score is below 640, you may struggle.
If you have time, consider putting off buying a home by a year or two until you can build or improve your credit.
What’s Your Debt to Income Ratio?
Most people have debt. Although it would be easier if you had none: you need to do the math on your debt to income. If your debt currently takes up more than ten percent of your income, it may be a good idea to wait to buy a home until you’ve paid more of this off and have more available income.