Assessing Whether You Ready to Buy a House

Most people dreams to own a home at one point of time or another in their lives. Buying a home may well be the biggest investment decision in life. Are you ready to become a home owner?

You have a budget

Having a budget means whether you have extra money every month to pay for your mortgage, utility bills, maintenance and upkeep of your house, annual insurance and so on.

You have sizeable down payment

Usually the down payment comes to about 10% to 20% of the price of the house. The higher the down payment, the less mortgage you’ll need to take and hence less monthly repayment and vice versa.

Apart from the down payment, there are other upfront costs to consider such as insurance, legal fees, taxes, initial repairs, moving costs, decorating and renovation costs.

You have a stable, reliable source of income.

With a reliable source of income, it’ll be easier for you to get a mortgage. After all, lenders are concerned about your ability to make the monthly payments to your mortgage. If you can demonstrate that you have this ability, then they’ll be more than happy to lend you the money.

It is critical that you make the monthly mortgage payments. The consistent cash flow from your income will allow you to make the monthly payments. If you default in your payments, then the lender could sell your house for less that what it’s worth and you could be left with some debt.

You have 3 to 6 months of buffer savings

People can get unlucky sometimes and if something happens to disrupt you’re your income, then you’ll have your emergency savings to cover your monthly payments until you can strengthen your income again.

You have good credit report

If you have a good credit report, lenders will welcome you. If you have a bad credit report chances are your mortgage application will be rejected. If you have bad credit, you’ll first need to work on improving your credit score.

Ready for a long term commitment

You should be able to own and not think of selling your newly bought house for at least 5 years. In the early years, you hardly build up any equity. Your monthly mortgage payments are mostly used to pay towards the mortgage interest. Also, when you sell your house shortly after you bought it, chances are you will attract property or capital gains taxes.

You are ready to become a landlord

Owning a house comes with new responsibilities. If you rent a house, when something is broken you’ll call the landlord to fix it. If you own your house, when something is broken you’ll have to fix it yourself or pay someone else to fix it.

Related Articles:
• Pros and Cons of Renting vs Buying a Property.
• Mortgage Benefits.