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Have you ever thought to yourself that it’s time to buy your first house? Then this post is for you!
Twenty-somethings have a reputation for being adamant house renters, devouring DIY shows like macaroni and cheese. Not yet homeowners but they can’t get enough of HGTV. It’s a way of experiencing the American Dream through the eyes of others. The shows make it look so simple: take on a tour of a few homes, mull over your options, and walk away with a new set of keys. Maybe the dream isn’t as far away as imagined.
Are you wondering if homeownership is a viable option for you? If that’s the case, this checklist can help you figure out if you’re ready to buy a house. Here are 7 Fortunate Signs To Buy Your First House.
1. You’re debt-free (for the most part).
Have you managed to pay off the majority of your credit card debt? What about your student loans, are they still unpaid? Too much debt is a dangerous sign for mortgage lenders, and it could indicate that you aren’t ready to buy your first house. Debt is a symptom of a larger problem: a lack of funds. Do not buy a house if you use your credit card often or if there always seems to be more month than money.
Take your gross revenue and divide it in half to see where you stand. Subtract all of your monthly payments that aren’t rent, utilities, or phone bills. What’s left is the maximum monthly payment most lenders will allow you to have. You could be ready to buy your first home if that sum is close to the mortgage payment you had in mind.
2. Your credit is fantastic.
It’s a proven truth that people with the best credit obtain the best mortgage rates. For an FHA loan, you’ll need a credit score of at least 620, which is pretty much the lowest you can get away with. However, it’s best to aim higher. Increasing your credit score to the upper 700s will help you get a cheaper interest rate.
3. You have a positive cash flow.
It’s a frequent misconception that a mortgage payment is the same as a rent payment. It’s easy to believe—but not true—with rents rising at such a rapid pace. Homeowners must manage a variety of expenses in addition to their mortgage payment, such as the median $33 per month spent on property maintenance. Do you have more money coming in than you need to pay your expenses and live comfortably? Then you’re in luck because it may be time to buy your first home. Check to see if it’s enough to cover:
- Payment on a mortgage
- Taxes on real estate
- Insurance for homeowners
- Fees charged by the homeowners’ association
- Upkeep of the house
- Water, sewage, and rubbish collection
4. You’ve got a lot of money saved up
To begin, you’ll require a down payment. If you put down 20%, you’ll get the best interest rate, but an FHA loan can demand as little as 3.5 percent. That’s at least $7,000 on a $200,000 property. But spending all of your savings to make a down payment? Not advisable. Wait till you’ve saved up enough money for:
- Home repairs—at least enough to cover the $840 average cost of repairs.
- Closing costs, relocation charges, and other one-time costs
- Emergencies – have at least three to six months’ worth of income on hand.
Read all about FHA loans here.
5. You intend to put down roots
Are you willing to give up your mobility for the time being? That’s what you’ll be doing when you buy your first home. Purchasing a home entails establishing roots. When you factor in the realtor fees, closing costs, and interest, it takes years of mortgage payments simply to break even when you sell. Conventional wisdom has it that you should take a break for at least five years, however, many experts now think seven years is the minimum.
6. You don’t mind having a steady job.
Let’s face it: young professionals enjoy changing jobs. Six out of ten millennials say they’re open to new work chances, and 21% have changed jobs in the last 12 months. However, many lenders need you to work for at least two years before qualifying for a mortgage.
Leaving your career becomes considerably more difficult once you buy your first home and have a mortgage to pay. Find something you enjoy doing enough to keep doing for a long time.
7. You’re handy.
Have you ever had to repair a leaking pipe? Have you ever unclogged a drain? Have you replaced your HVAC filter? There is no landlord to call when things go wrong after you buy your first house. Unless you have the financial means to have every problem professionally resolved, it is your responsibility to undertake simple repairs. You can usually find out how on YouTube, but you may have to learn how to use the tools yourself.
If you think you’re ready to buy your first house, the next step is to get pre-approved for a mortgage. Many agents will not show you a house unless you have received pre-approval. You can begin looking for your spectacular first house after you know how much you can afford. Don’t overlook the basics of buying your first home. Ashley Lyon can help you buy your first house. Contact us today.