Six Signs That You're Ready To Buy
Figuring out whether you're ready to buy a house -- whether you're a
renter or are aiming to move up or size down -- can be a daunting task.
But there are signs that will indicate whether you're ready to take the
buying plunge.
So are you ready to make the move? You might be if you:
Are
familiar with the market. If you've been paying attention to how much
houses are listed for in the neighborhoods you're eyeing and have a
realistic view of how much a house will cost you, you're in good shape.
But if you're dreaming about that big corner house with no clue about
it's asking price, you may want to spend some more time becoming
familiar with the market and how much houses are going for.
Have the money for a down payment and closing costs.
The down payment is a percentage of the value of the property. Freddie
Mac says the percentage will be determined by the type of mortgage you
select. Down payments usually range from 3 to 20 percent of the
property value. Also, you may be required to have Private Mortgage
Insurance (PMI or MI) if your down payment is less than 20 percent.
Closing costs include points, taxes, title insurance, financing costs
and items that must be prepaid or escrowed and other settlement costs.
Generally, buyers will receive an estimate of these costs from your
lender after you apply for a mortgage.
Know how much you can afford. Freddie Mac says that as
a general guide, your monthly mortgage payment should be less than or
equal to a percentage of your income, usually about a quarter of your
gross monthly income. Also, your income, debt and credit history go
into determining how much you can borrow. As a general rule, your debt
-credit card bills, car loans, housing expenses, alimony and child
support -- should not be more than about 30 to 40 percent of your gross
income.
Know what additional expenses will come with owning a
home. This includes homeowners insurance, utility bills, maintenance
costs -- roofing, plumbing, heating and cooling.
Have your credit in good shape and make sure your
credit report is accurate. Potential lenders will view your credit
history -- how much debt you've accrued, how many accounts you have
open, whether your payments are made on time, etc. -- to determine
whether they'll give you a loan. You should get a report from each of
the three credit reporting companies: Equifax, Experian, and Trans
Union.
You haven't made any recent major purchases,
particularly a vehicle. If you do, you may have a harder time getting a
loan -- or it could potentially lower the amount you'll be approved
for.
Once you decide you're ready, you'll need to be prepared to move quickly if you're aiming to buy in a sellers' market.
The next steps involve hiring a real estate professional and
getting preapproved for a mortgage loan. This way you'll know if you
can get approved and how much you can spend on a house. It also puts
you in a stronger position when you ultimately make an offer on a
house.
Written by Michele Dawson