If You Answer “Yes” to These 5 Questions, You’re Ready to Buy a House!

Mallach and Company Real Estate Leander Homes Luxury Leander Homes Mallach & Company Tina Mallach

Buying a house is exciting and scary. But we’re here to prepare you for the process! There are many financial responsibilities associated with buying and owning a home, so here are the questions to ask yourself to gauge if you’re ready. 

1. Do I Have a Stable Income?

Figuring out if you have a stable income can be a tricky process. It’s not as simple as having a paycheck every month. A steady income also looks like at least two years of tax returns or pay stubs. Lenders will ask to see that and the money you will use for a down payment. This means the money should be deposited into your bank account for a minimum of 60 days. 

If you don’t have a stable income, then getting a mortgage will be more challenging, but it’s still possible. You’ll need to make sure you have documentation from the past two years to show lenders proof of earnings. 

2. Do I Want To Stay in the Same Area Long-Term?

Do you see yourself living in a home in this area? Will I have a family or a new job in five years, and will it still be in this location? All these questions need answers. The National Association of REALTORS® discovered the median length of homeownership is 13 years. Now, that doesn’t mean you have to live in a home for 13 years. But if you’re planning on staying local for the next several years, buying a home would be a smart investment. 

3. Am I Comfortable Managing Debt?

Buyers who have a history of managing debt are more likely to get a better loan. To manage debt, paying your monthly bills and using your available credit wisely leads to a higher credit score. A good credit score, according to FICO, is 700. But to get the best rates, you should have 740 or higher. 

Lenders will also look at your debt-to-income ratio. This ratio compares your total monthly debts to your gross monthly income. Lenders use it to determine if you can pay back the money you’re borrowing. 

Most lenders prefer a DTI of 28%, but some can go as high as 50%. But the point is the lower your DTI, the better you’ll be with your mortgage payment. 

4. Do I Have An Emergency Fund?

Experts recommend an emergency fund for three to six months of savings. While it’s good to be prepared for emergencies, you’ll now have to be ready for maintaining a house. If your home is older, you’ll need more repairs and upgrades. If you don’t have money saved for repairs, buying the house will make your finances worse. 

HomeAdvisor discovered that homeowners spent an average of $3,912 on maintenance and $1,640 for emergency repairs. A new home may put off this cost for now, but it’s wise to prepare for it and start saving now. It’s recommended to save 1-4% of the home’s value for repairs. A higher percentage should be used for older homes, too.

5. Do I Know How Much I Can Afford to Spend?

Knowing how much you can spend will determine the cost of your monthly payments, closing costs, insurance, and taxes. A mortgage calculator is a valuable tool to answer this question. You’ll be able to put in down payment amounts and interest rates to see your monthly payments. The calculation will help you determine your comfort level for how much you can pay. 

Financial experts recommend the 28/36 rule for determining affordability. It means you should spend 28% of your gross monthly income on mortgage payments and 36% on your total debt. 

If the answer isn’t a resounding yes, reflect on your needs and savings. Maybe now isn’t the time, and you need to save more. Or you answered yes enthusiastically! No matter if you responded with yes or no, call us today to help you on your homeowner journey. (512) 699-9714 or [email protected]

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