Whether you are tired of renting or just ready to bury your roots somewhere, purchasing your first home can be an exciting milestone in life. However, it is also a huge financial commitment and involves lots of big decisions. Here are 7 signs you are ready to take on your first home:
You have a steady job and income
Among other things, to be approved for a mortgage loan you must have proof of a steady income. A steady job also ensures your ability to pay for any other home expenses that may come your way. As a rule of thumb, if you have been at the same job for two or more years, you most likely are financially stable enough to afford a mortgage.
You’re ready to settle down
You have the next few years f your life planned with no upcoming major changes. You have a stable job (see#1 above) and aren’t looking to change jobs anytime soon. You’ve realized renting can be expensive, and you are ready to have a place to call your own. These are all signs that you are ready to settle down. Generally, if you are planning on staying in the same place for the next 5-10 years, you have enough commitment to the area to purchase your first home.
You have good credit
Credit scores for mortgage loan decisions can range from 300-850. While having perfect credit isn’t a requirement to get a mortgage, a higher credit score means qualifying for a better interest rate and the opportunity to make a lower monthly mortgage payment. Calculate your possible interest rate based on your credit score with SouthEast Bank here.
You have solid savings and an emergency fund
Life has a way of throwing you the unexpected. With home ownership comes the prospect of repairs and expenses: faulty appliances, broken air conditioning or heating system, fixing leaks and clogs, etc. Ample savings and an emergency fund can help you stay prepared and limit stress in the event of an unanticipated financial need. Read: How to Save for a House in 10 Simple Steps.
You saved enough for your down payment
The down payment can be the biggest upfront cost when purchasing a home. Most home sales require a down payment between 3% and 20% of the cost of the home, depending on the type of loan. However, the bigger your down payment is, the more appeal you may have to a mortgage lender and the better mortgage rate you might qualify for. In addition, you might have more negotiating power with the seller.
You have good budgeting skills
To own a home, you have to consider all your expenses and be able to budget accordingly: utilities (gas,electric, water), mortgage payments, unexpected repairs, and any other debts(e.g., car loan, students loans) you may already have. This means being able to plan and stick to a monthly budget. If your budgeting skills are sub-par, you may want to reconsider your ability to purchase and maintain a home.
You know what you want and what you can afford
Chances are you already have a good idea of what you are looking for in your future home, but when cost and ability to pay clashes with wants and needs, what are you willing to compromise? When looking to buy a new home, it is important to do ample research on mortgage loans, house prices, and location. If you set your priorities and your budget straight before looking for a home, you are more likely to stay disciplined during your search.
If any of these signs apply to you, you may be ready to take the plunge and purchase your first home. At SouthEast Bank, our mortgage consultants are there for you every step of the way. When you are ready to take the first steps to new home ownership, contact our mortgage team and let us walk you through the process.