Maybe it’s because you’re addicted to HGTV or because your best friend just bought a new home, but you’ve got house fever. Your rental isn’t cutting it anymore, and you’re ready to own your own home. But are you ready for the responsibility and added expense that can come with homeownership?
Here’s how to figure out if you’re ready to call a real estate agent and buy a home.
YOU’VE GOT A STEADY JOB
Mortgage lenders will look at your employment history as part of the application process. Not only do they want to see your income level, but they want proof that you’ve got steady employment. Working at the same job for at least two years looks good on your mortgage application. Constant job changes or in types of earning (say from salary to commission) can make lenders nervous and less likely to approve your application.
YOU’VE GOT SAVINGS
Needing a 20 percent down payment is a myth. Plenty of new home buyers can put down as low as 3.5 percent when they buy. But you’re going to need more than the down payment. You’ll also need enough for all the closing costs and your moving expenses. Mortgage lenders are much less likely to green light your application if your entire savings will be wiped out at the closing table. Plus, without enough savings, you won’t have any money to move, buy new furniture, or fix up your new home.
YOU’VE GOT GOOD CREDIT
While you can get a mortgage with a good or fair credit score, in the 650 range, it’s better to have a higher credit score. Not only do you look like a better credit risk to lenders, you’ll also get a better interest rate. Your interest rate determines a big portion of your mortgage payment. The lower your credit score, the more money you’ll pay – if you even get approved for a mortgage. Paying your bills on time and not carrying too much debt will go a long way in increasing your score.
YOU’RE LOOKING FOR A LONG-TERM COMMITMENT
We don’t mean in a relationship. Plenty of single people buy homes, too. Buying a home is a long-term investment and commitment, especially if you want to make any money when you sell it in the future. If you’re still going wherever you find an interesting job or figuring yourself out, maybe it’s better to rent. But if you’re in a steady job and ready to stay in place for at least a few years, you might be ready to buy.
YOU CAN AFFORD MORE THAN THE MORTGAGE
Your exact mortgage payment is different than what you’ll likely pay every month. A basic mortgage payment is the amount you owe the lender and the interest, but there are also taxes, home insurance, mortgage insurance, and HOA or COA fees to consider. For most homeowners, these are paid through escrow as part of your monthly mortgage payment (COA and HOA fees are paid separately). So while it’s important to know if you can afford the mortgage every month, you also need to know if you can afford everything else.
YOU CAN AFFORD TO FIX THINGS
As a renter, it can be a hassle waiting for the landlord to fix things. But you also don’t have to pay for repairs or worry about replacing the big stuff like the air conditioner or roof. When you buy a home, all of that becomes your responsibility. When you look at a potential budget for buying a home, those repairs need to be factored in. Things tend to break at the worst possible moment, but they still have to be fixed, repaired, or replaced.
Buying a home and owning one are two separate things. And just because you can buy a home doesn’t always mean you should. Not everyone wants to worry about fixing things and some people want to be able to pick up and move at a moment’s notice. But if you’re ready to settle down in one place and have a home to call your own, the next step is to figure out if you’re ready to be a homeowner.
Part of the buying process involves choosing a home insurance policy. When you need a quote, contact us at Charlotte Insurance. As an independent insurance agent, we work with a variety of companies so we’re able to get you the policy that’s right for you at a price you can afford.