{"id":483,"date":"2022-05-20T02:08:43","date_gmt":"2022-05-20T02:08:43","guid":{"rendered":"https:\/\/blog.thinkwallet.com\/?p=483"},"modified":"2022-05-20T04:04:56","modified_gmt":"2022-05-20T04:04:56","slug":"how-to-know-you-should-buy-a-house","status":"publish","type":"post","link":"https:\/\/blog.thinkwallet.com\/how-to-know-you-should-buy-a-house\/","title":{"rendered":"How to Know You Should Buy A House"},"content":{"rendered":"\n<p>Taking the first step towards buying a home is super exciting. But before you start picking out new furniture and fixtures, you should take some time to evaluate if you\u2019re in the right financial and life situation to make that big purchase.<\/p>\n\n\n\n<p>Here are some ways to know if you\u2019re ready to buy a home.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><a><\/a>You have savings<\/h2>\n\n\n\n<p>One of the first things you need before buying a home is a decent amount of savings. In most situations, you\u2019ll need savings to cover the down payment and closing costs.<\/p>\n\n\n\n<p>Exactly how much you\u2019ll need can depend on a few factors:<\/p>\n\n\n\n<ul><li><strong>Type of loan<\/strong>&nbsp; \u2013 Different types of loans have different down payment requirements. You can buy with as little as 3% down with an FHA loan or even with no down payment with a USDA or VA loan.<\/li><li><strong>Size of down payment<\/strong> \u2013 Beyond what is required of your loan, you may want to put down a bigger down payment. Remember that if you put less than 20% down, you\u2019ll need to pay mortgage insurance (PMI).<\/li><li><strong>Cost of the home <\/strong>\u2013 A more expensive home will have higher down payment requirements and closing costs.<\/li><\/ul>\n\n\n\n<p><br>Closing costs can range between 2-5% of the cost of the home but can sometimes be split between the seller and the buyer.<\/p>\n\n\n\n<p>In addition to your down payment and closing costs, it\u2019s also best practice to have additional savings or an emergency fund to cover unexpected costs along the way.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><a><\/a>You have a stable income<\/h2>\n\n\n\n<p>In order to qualify for a mortgage, you\u2019ll need to prove that you have income coming in every month. Lenders will want to ensure that your income is stable and will continue to cover the cost of your potential monthly mortgage payments.<\/p>\n\n\n\n<p>There are a few ways lenders can verify your income.<\/p>\n\n\n\n<p>If you have an employment history, they can verify this through W-2s. In addition, they might ask for letters of employment or recent paystubs.<\/p>\n\n\n\n<p>If you\u2019re self-employed, you will likely need to present two or more years of tax returns to calculate your monthly income.<\/p>\n\n\n\n<p>In addition to your employment income, lenders can often consider other regular income such as child support, commissions, or extra additional income.<\/p>\n\n\n\n<p>Once you have proof of your income, they&#8217;ll use that to calculate your debt-to-income ratio.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><a><\/a>You have a good debt-to-income ratio<\/h2>\n\n\n\n<p>There\u2019s a common misconception that you can\u2019t buy a home if you have debt. From student loans to car payments, a lot of people carry some level of debt when buying their first home.<\/p>\n\n\n\n<p><br>That being said, as part of the mortgage approval process, lenders will look at your debt to income ratio. This tells them how much you can afford based on the amount of money you need to set aside to repay your debts.<\/p>\n\n\n\n<p>Typically lenders want to see you have a debt to income ratio of 45%. This includes all your current debts and your potential mortgage costs.<\/p>\n\n\n\n<p>It\u2019s absolutely possible to buy a home with debt, but if your current debt ratio is high, you should consider paying some of it down before searching for a home. Plus, if you have high amounts of debt you might find it significantly lowers your purchasing power.<\/p>\n\n\n\n<p>You can take steps toward reducing your debt in many ways. One of the easiest things to do is get a personal loan with a lower interest rate to help you pay down your debt faster. ThinkWallet can help connect you with lenders quickly and securely.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><a><\/a>You have a solid credit score<\/h2>\n\n\n\n<p>Your credit score tells a lender how likely you are to pay back the money you\u2019ve borrowed. A higher credit score is always better, but lenders like scores of 600 or higher.<\/p>\n\n\n\n<p>If you have a good credit score, you\u2019ll also qualify for more types of loans and lower interest rates. Your credit score can be the difference of several hundred dollars in interest on your mortgage payments every month!<\/p>\n\n\n\n<p>While you can certainly qualify for a loan with a lower credit score, depending on how low your score is, you may want to spend some time improving your score before buying a home. You can do this by making all your payments on schedule and lowering your credit utilization by paying off your debt.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><a><\/a>You can handle the expenses<\/h2>\n\n\n\n<p>Buying a home comes with more than just the initial expenses. There are many monthly (or yearly) expenses you should budget for ahead of buying a home. Some things you should consider when evaluating your expenses include:<\/p>\n\n\n\n<ul><li>Mortgage payments<\/li><li>Property taxes<\/li><li>Homeowners Association (HOA) fees<\/li><li>Repairs (minor and major)<\/li><\/ul>\n\n\n\n<p>Just because a lender says you can afford a home, doesn\u2019t mean it actually makes sense with your lifestyle. Before beginning the process, you should look closely at your home-related and other expenses to make sure that you can actually handle the expenses.<\/p>\n\n\n\n<p><br>If not, you may want to consider reducing your budget or wait a little longer to buy your home.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><a><\/a>You\u2019re ready to make the commitment<\/h2>\n\n\n\n<p>Buying a home is one of the biggest commitments you can make in life. Typically for your new investment to make sense, you need to live in your home for at least 3 to 5 years.<\/p>\n\n\n\n<p>Maybe you\u2019re someone who likes to move cities often. Or maybe you just don\u2019t want to live in the same house for more than a year or two. If that\u2019s you, you may want to consider waiting to buy a home.<\/p>\n\n\n\n<p>But if you love your job and your neighborhood, it might be a good time to take the plunge!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\"><a><\/a>The bottom line<\/h2>\n\n\n\n<p>Buying a home is a huge decision. There are a lot of factors that influence whether or now you should be buying a home. From your lifestyle to your finances, you should feel 100% ready before jumping into the home buying process.<\/p>\n\n\n\n<p>The good news? By taking the time to review your home buying decision, you\u2019re already one step closer to getting the keys to your dream home!<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Taking the first step towards buying a home is super exciting. But before you start picking out new furniture and fixtures, you should take some time to evaluate if you\u2019re in the right financial and life situation to make that big purchase. Here are some ways to know if you\u2019re ready to buy a home. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":501,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[12],"tags":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.4 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>How to Know You Should Buy A House - ThinkWallet<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/blog.thinkwallet.com\/how-to-know-you-should-buy-a-house\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"How to Know You Should Buy A House - ThinkWallet\" \/>\n<meta property=\"og:description\" content=\"Taking the first step towards buying a home is super exciting. But before you start picking out new furniture and fixtures, you should take some time to evaluate if you\u2019re in the right financial and life situation to make that big purchase. Here are some ways to know if you\u2019re ready to buy a home. 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