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Are You Ready to Buy?
Six Simple Ways to Tell if You're Financially Ready
Posted on 5.09.07
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Are you ready to make the move from renting to owning, but have questions about your ability to do so financially? Take a minute to look over this list to find out some more information. If you feel like you honestly have all six of these steps covered, than financially you may be ready to look into a purchasing a house.
- Are you familiar with the market? Pay attention to how much houses are listed for in the neighborhoods that appeal to you. More importantly, you have to really consider if realistically you can afford to purchase a house.
- Do you really have enough money?It is essential to have at least the money for the down payment and the closing costs. These down payments can range from 3 to 20% of the property value, the percentage is determined by the type of mortgage you qualify for. The closing cost can include taxes, points, title insurance, financing cost and prepaid items. This can range from 2 to 7% of the entire property value. Here is a template to download for Microsoft office provides a closing costs analysis, remember this is just a tool and real cost can vary greatly. You can also search for free calculators online.
- How much can you borrow?Remember that many factors go into how much money you will be lent. Your income, debt, and credit history all determine how much you can borrow. As a general rule, your monthly payment should be less than or equal to about a quarter of your gross monthly income. Likewise your debt should not be more than 30 to 40% of your gross income.
- Don't forget, you are not just buying a home, you are buying a life style.Be sure to include other cost in your calculations including homeowner's insurance, utility bills, maintenance (not just costs but the time as well!)
- What is your credit like?Is your credit report accurate? Is your credit score good? Look into getting a few credit reports before you even consider getting a loan.
- What have you bought recently?Make sure that you haven't made any major purchases like a car recently. This could affect the amount of money that will be lent to you.
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