One of the biggest purchases an individual will make in their lifetime is a home. Preparing to buy a new home involves research, planning and a commitment to own. The home-buying process can be exhilarating and daunting, especially for first-time buyers. If you’re financially fit, it may be one of the many signs that you are ready to buy a home.
You’re Seeking Out a Solid Investment
If you’re looking for a good investment for your future other than the stock market, you’re not alone. A recent study by the Federal Reserve Bank of New York found that most households view housing as a good investment in comparison to the stock market. Many home owners count on their home equity to fund retirement, their children’s education and other important needs.
You Built Up Your Savings
During the pandemic, many Americans spent less money on discretionary items, such as travel expenses and dining at restaurants. With an ample amount of savings, you could have the funds for a down payment and closing costs towards a new home. While the conventional wisdom is to save 20 percent for a mortgage down payment, there are other options available. The amount needed for a down payment can depend on the type of loan and a lender’s requirements. You’ll need to do some research to find out what option works best for you.
You Know Your Credit Score
Your credit score will impact your mortgage terms. The higher the score, the more financing options and lower interest rates will be available to you. Borrowers with scores in the low 600s and even high 500s can still find lenders who will qualify them, but as a borrower, you should strive for scores in the mid- to upper-700s to land the best rate.
You’ve Paid Down Your Debts
Not only have Americans saved money during the pandemic, many took the opportunity to pay down debts which can lower your debt-to-income ratio (DTI). Your DTI is what lenders use to evaluate how much of your monthly income is devoted to debt payments. As a borrower, lenders want to know if you can pay back a loan and prefer to offer mortgages to individuals with a low DTI.
You Know What You Can Afford
If you have crunched the numbers and know how much you can afford monthly, you’re in a position to start thinking about purchasing a home. In addition to your monthly mortgage payment, make sure to factor in additional costs such as property taxes, insurance or a home owners’ or condominium fee.
To learn more about the benefits of homeownership or to help you build a new home that is right for you, contact your local association here.