Buying your first home is one of the biggest decisions you are going to make in your life. A lot of people relate buying the first home to the current market condition. However, the main factor to consider is your personal finance. Are you financially ready for your first home?
5 Signs you are ready for your first home
- You are ready with a budget: Homeownership comes at a cost and it is important to be financially ready for the house. Do some research and get an idea of the cost of homeownership in your area. You need to consider the additional expenses such as utility bills, property taxes, maintenance cost, home insurance, and homeowner association fees. If the total cost is within your budget, you are ready to buy your first home.
- Reliable income source: Buying your first home will put you under a long-term financial commitment. You will require a regular cash flow for the monthly payment and other expenses that come along with the home. Would you be able to make monthly payments after six months or six years? What are your expected responsibilities after four years? You should consider these factors prior to buying a new home.
- Your debts are under control: Ever lender consider the debt-to-income ratio of the applicant and it is important to maintain an impressive ratio. Generally, 33% is a good average and your mortgage payments, loan, and taxes should not exceed beyond this level. For first-time homeowners with a large debt, it is best to pay off the debt as soon as possible. It will ensure that you qualify for the amount of loan you need for the house. You should avoid any new loans one year prior to the purchase because any new loan can damage you debt-to-income ratio.
- Healthy credit report: It is not required to maintain a perfect credit score, but it certainly helps in getting a lower interest rate. You can check your credit history free once in every year. Get your credit history and take care of any errors or corrections in your credit report. It is best to start working on your credit report a year or two prior to the purchase.
- You are ready for a long-term commitment: Owning a house requires some commitment and you should be able to wait for at least 3 to 5 years before changing your house. Selling before that period would cost you money. Moreover, you would be required to pay capital gains taxes if you move before 2 years. In some cases, renting can be a better option for people planning for a specific goal such as going back to school or planning to switch careers.
If you believe you're ready to take that step towards homeownership, CONTACT ME so we can start searching for your new home!
Provided courtesy of Yvette Belisle
Alaskan Spirit Realty of Real Estate Brokers of Alaska
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