Think you may be ready to write your last rent check or upgrade to that larger home you’ve had your eye on? Following are five signs that could indicate that now is the right time for you to buy a new home.
- You have good credit. Your credit score can affect your ability to get approved for a mortgage and impact your interest rate. Generally, the higher the score, the better the rate. So, if you want to qualify for lower monthly payments, it’s best to build up your credit (a score of 660 will land you in the “good” range) before applying for a home loan. You can request your free credit report from annualcreditreport.com, and get tips for improving your credit score here.
- You aren’t drowning in debt. It’s okay to have some debt. But if you owe a significant amount, your debt-to-income ratio could be deemed too high and you might not qualify for a mortgage. If the amount you owe plus the amount you want to borrow exceeds 43% of your gross income, lenders may consider you a default risk, according to the Consumer Financial Protection Bureau.
- You’ve built a “nest egg.” It’s a good idea to stockpile some savings before buying a new home. In addition to funding your down payment (learn some smart saving strategies here), be sure to set aside funds for closing costs, moving expenses and standard home maintenance. Experts also recommend having an emergency fund for any unexpected expenses that may arise.
- You’re ready to plant roots. If you’re ready to settle down for good—or at least five years—buying a new home can make a lot of sense. But if you’re not completely sold on your location or you’re uncertain about where your career will take you over the next few years, you may want to delay your purchasing decision.
- You have steady cash flow. And speaking of careers, having a secure, stable job is another indicator that you might be ready to buy a new home now. When determining creditworthiness, lenders will typically calculate average income based on pay over the past two years.
If you’d like to know more about the mortgage process, prequalify for a loan or find out how much home you can afford, contact our affiliate, HomeAmerican Mortgage Corporation, at 866.400.7126 to speak with a loan officer.