Buying a home is a goal of many. But before getting to attain that ideal property, many factors should be considered, especially the finances. Making this purchase is a big deal, and sometimes, waiting for the perfect time is a better option.
If you think now is the right time to buy a house, think twice before taking the leap. Here are the signs that you are ready to buy your very first home:
1- You have a sufficient amount of savings
A home is one of the biggest purchases you can ever make in your life. It obviously doesn't come cheap, so you have to be ready with a decent amount of savings. A good rule of thumb is to have saved more than five percent of the average cost of a home in your price range.
If you are applying for a housing loan, your lender will want to verify that you have a decent amount of savings to shoulder the upfront costs of buying a home. You also need enough money to cover the following:
- At least two months of your home mortgage payments
- At least 20 percent of your down payment
- Closing costs, or any fees required to close on your home
Make sure to have enough reserves or the funds that you have left in the bank after paying your down payment and closing costs.
2- You have a stable employment history and source of income
A job that pays well is a good sign that you might be ready to buy a house. You must have to be working for at least two years at the same job.
Lenders seek peace of mind and reassurance that you have a stable source of income. You have to be able to cover the cost of mortgage payments and will continue to do so in the future without problems. To get approved for a home loan, you must prove that you have a stable employment history.
Present your last two years of W-2s as proof of your employment history to your lenders. On the other hand, you have to show your tax returns and any 1099s that you have received for the last two years if you are self-employed.
3- You have a handle on your debt
Your debt-to-income ratio (DTI) plays a major role in your home loan approval. This measures your capability to afford another loan based on your current debt obligations and the amount of your monthly income.
To compute your current DTI, sum up all of your recurring monthly debts, including your student loans, car payments, credit card debt, and more. Afterward, divide that total by your monthly income and multiply it by 100.
You have better chances of having your loan approved when your DTI is less than or equal to 45 percent. If your current DTI is higher than that, consider prioritizing having a better handle on your debt.
We Make Getting a Mortgage Easy
It's thrilling to fantasize about buying your own home, but jumping into the real estate market isn't as easy as you think. Aside from ticking off the signs mentioned above, you can turn your dream property into reality by securing a home purchase loan.
If you need a guide throughout the home loan process, you can rely on our mortgage brokers in Austin. We can help you choose the best mortgage option for you. Request a quote today!