While most people dream of owning a home of their own, it's crucial to make sure that you're ‘truly ready’ to become a homeowner before you decide to make the purchase. The best way to find out if you’re ready right now or need more time is by understanding the ins and outs of homeownership.
This means taking a deep dive into your finances to ensure you can afford to make the purchase, maintain your home, and live the lifestyle that you desire. Here are 5 signs to help you decide if you’re ready to become a homeowner.
5 Signs You're Ready to Buy a Home of Your Own
Sign 1. Stable and Sufficient Income
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Long-term Employment: To qualify for a mortgage and meet the monthly payment obligation, it's important to have a stable job and long-term employment record. This is a sign of income reliability and shows your local mortgage lender that you have a way to pay for the home loan now and in the future.
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Income Sufficiency: If you're not sure if your income is sufficient to cover mortgage payments and living expenses, the home loan specialists at Finex will walk you through every step of the mortgage process. They'll assess your income, debt, and expenses to determine how much you can afford to spend on a home.
Sign 2. Strong Credit and Financing Ability
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Healthy Credit Score: Maintaining a good credit score is crucial for getting the best possible mortgage terms when buying a home. The better the credit history and score, the more favorable interest rate and terms will be available for your home loan. Having a healthy credit score can make a huge difference in your interest rate, which directly affects the amount of your monthly mortgage payment.
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Pre-approval from a Financial Institution: When you're truly ready to purchase a home, one of the first steps is to obtain pre-approval from your lender to buy a home. This lets the home seller know that you're ready to buy the home.
Sign 3. Manageable Debt Levels
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Debt-to-Income Ratio: Mortgage lenders use your debt-to-income ratio (DTI) to determine your ability to manage your existing financial obligations such as repaying the loans and credit accounts you owe. Your DTI is determined by dividing your monthly debt payments by your gross monthly income.
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Control Over Existing Debts: Effectively managing existing debts by making on-time payments and limiting credit purchases indicates financial responsibility and readiness to potential mortgage lenders. It allows them to better consider approving your home loan application.
Sign 4. Understanding of Mortgage Options
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Knowledge of Different Mortgages: Finex offers fixed rate and adjustable rate mortgages for members. It's important to understand the difference between the two in order to determine which would be the best fit for your needs based on your financial situation and lifestyle.
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Fixed Rate Mortgage: The main advantage of a fixed rate mortgage is that the payment is fixed, meaning it remains the same for the entire term of the loan. This is a great choice for those who want a steady long-term payment and plan to settle in the home long-term.
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Adjustable-Rate Mortgage (ARM): An adjustable rate Mortgage (ARM) begins with a lower interest rate, then adjusts as the market interest rates change. The main advantage of an adjustable rate Mortgage is that the initial interest rate is usually lower than a fixed rate Mortgage. This is a great choice for those who wish to take advantage of the lower initial payments and plan to live in the home for a short period of time.
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Sign 5. Preparedness for Homeownership Costs
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Beyond the Mortgage: It's crucial to understand that in addition to your monthly mortgage payment, there are several other expenses associated with homeownership. Here are some additional costs to consider:
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Yearly Property Taxes
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Homeowner’s Insurance
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Home Owners Association (HOA) Fees (depending on your home's community)
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Home Maintenance and Repairs
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Emergency Fund Contributions/Savings
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Long-term Financial Planning: Successful financial planning for the future includes a Savings Account with at least 6 months of living expenses, securing long-term employment, and maintaining your credit score with on-time monthly debt payments. It also includes preparing for financial obligations beyond the mortgage by ensuring you choose the right mortgage that fits your needs, finances, and lifestyle.
Are You Ready to Apply for a Mortgage and Buy a Home?
If you're ready or almost ready to buy a home, Finex can help you navigate or prepare to navigate the home buying process. We'll be happy to go over options, discuss any questions that you may have, and help you find the best mortgage for your needs.
If you’re ready to start your pre-approval or would like to learn more about the home-buying process, contact us today.
