The majority of Americans own homes; but there are still millions and millions of Americans who, despite wanting to own a home, are unable to achieve such an expensive feat. But what if you are able to do that buy a house and you just don’t know?
What are the indicators, financial and otherwise, that you are in the right position to own a home, perhaps after years of dreaming about it? GOBankingRates spoke with property experts to learn more about the 10 Important signs that you are ready to buy your first home.
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You have a good credit score
Potential lenders will focus on your credit score. It has to be good or better than good.
“A credit score of 620 or higher opens better borrowing optionswhile a score above 700 can qualify you for some of the best interest rates,” says Brett Johnson, owner of New era home buyers, property investor and licensed Colorado property intermediary. “Higher credit scores indicate and often lead to financial responsibility lower monthly mortgage costs.”
Your finances are in order and your debts are under control
The first major sign that you’re ready to buy a home is twofold: your finances are in order and secure, and your debts are well managed or, ideally, non-existent.
“One of the most important factors buying a house means financial stability,” said Alexandra Gupta, an employee property broker at The Corcoran Group. “If you have a stable income, manageable debt and a healthy savings account, you’re probably in a good position to consider buying.”
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You have an ample emergency fund
If your emergency fund is well stocked, you’ve checked the first box for being able to buy a house (although unfortunately there are even bigger boxes to check, which we’ll cover).
“I like to advise my clients to think about worst-case scenarios,” he says Jennifer OkhovatA property agent along Compass in Los Angeles. “If they buy a house and unexpectedly lose their job, would they be able to afford the house for six to 12 months in that circumstance? Because it can take so long to sell a house, and it can take so long to find another job.”
You have saved enough for a down payment
The traditional down payment on a home is 20%, but depending on your circumstances you may be able to put down less. That said, you still have one giant nest egg for these costs.
“You should set aside some savings for a down payment, which shows the lender that you are financially responsible and willing to invest in your future home,” Gupta said.
You understand your debt-to-income ratio
We don’t hear enough about the importance of your debt-to-income ratio (DTI). This is an important factor when obtaining a mortgage.
“Ideally, your total monthly debt (including the new mortgage) should not exceed 36% of your gross monthly income,” says Gupta. “If you have paid off or reduced your debt and your DTI is in line with the lender’s requirements, you are closer to mortgage readiness.”
You’ve done your research
Buying a house is not just a purchase, it is an investment. And it’s not just a real estate investment; it is an investment in a specific market.
“Have you researched the market, compared different neighborhoods and determined the type of home that suits your needs and lifestyle?” asked Gupta. “Understanding the local market and what you can afford will help you make a well-informed decision.”
You are stable in your career and lifestyle
Lenders tend to favor candidates with job stability and a proven track record of stable, reliable income.
“If you have worked at your current job for at least two years and have a reliable income, you are more likely to get a mortgage,” said Gupta. “Moreover, having a stable lifestyle (no major moves or drastic life changes expected in the near future) will give you peace of mind as you make this big decision.”
You have a clear vision of what you want
“Knowing exactly what you want in a home can speed up the buying process and reduce stress,” says Gupta. “Whether it’s a particular neighborhood, size or amenities, making it clear what your priorities are can help you narrow down your options and find the right place without feeling overwhelmed.”
You can cover the long-term costs of maintenance, repairs and more
You need to make sure you can afford all the other costs of homeownership – costs beyond the down payment, mortgage and property taxes. We’re talking repairs, maintenance and, if applicable, HOA fees.
“I believe one of the strong signs that you are ready to buy your first home is that you have the bandwidth and financial resources to handle the unexpected repairs and costs that can come with homeownership,” said Okhovat. “In most cases, especially if you are not buying a new-build home, there are maintenance issues that will come up: increases in homeowners’ association dues, gardening and landscapingstructural repairs and annual maintenance (including but not limited to HVAC, roof repairs, sewer hydrojet and more).”
What makes these costs extra difficult is that they often entail even more costs that you may not have saved for. Plus, they can take time, research, and strategy.
“Not only can all of these items incur unexpected costs, but they also involve project management, such as finding reliable professionals and overseeing the repair,” Okhovat said. “I always advise my clients to have an emergency fund on hand so they can tackle the bigger repairs if they arise unexpectedly.”
You feel confident and ready
If you’ve ticked all the boxes above and are in a good position to buy a home, it’s important that you feel good about it too. You’re not ready to buy until you’re confident you can.
“Another sign that someone is ready to buy their first home is actually feeling done,” Okhovat said. “I strongly believe in the instinct and confidence in yourself to know that they are ready and committed to homeownership. There is no other way to explain this than to be self-sufficient enough to recognize this. If you are confident that you can own a house, then chances are there is a house you can buy.”
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This article originally appeared on GOBankingRates.com: 10 Key Signs You’re Ready to Buy Your First Home