5 Ways to Know You’re Ready to Buy Your First Home
Are you interested in buying your first home, but you’re not sure if you’re ready to do it? If you check all of these boxes, then you are ready. These are the most important things to have before taking the leap into homeownership.
1. Have a Steady Job
Having stability with your job means you have steady income. This is important to help you qualify for a mortgage and to be able to make your mortgage payments. The more years of employment history you have, the better. Having a steady stream of documented income means you as the borrower can repay their mortgage. Your work history is just one of several criteria that will be checked when you’re applying for a mortgage. Lenders will especially look at your past two years of employment history and find out if your current job has the likelihood to continue to the next several years.
2. Have a Solid Savings Account
Saving up enough money to buy a house can feel impossible at times, but you are probably closer to having enough than you even realize. Having money in the bank is very important when buying a home. This will be important for the home buying process as well as once you are a homeowner. There can be some unexpected costs that pop up when you own a home. When you rent, you can contact your landlord for maintenance issues. But when you own the home, that falls on you. You are responsible for everything with your new home so having a strong savings account is great for emergency funds.
3. Have Money for a Down Payment
The first thing you need to know is that you do not need a 20% down payment. With some loans, you could buy a home with as little as 3% down. If you do have the money to put 20% down, it will save you money over time, but it is absolutely not a requirement. Saving up for a down payment is important. The more money you are able to put down up front, the lower your monthly payments will be. Unfortunately, that might mean skipping that vacation you were going to take this year or cutting back on shopping or dining out at restaurants. The sooner you start the process of saving, the sooner you will be ready to buy a home. To find out how much home you can afford, it’s important to contact a lender first. They can help you understand your buying power and give you great insight into what steps you need to take to apply for a mortgage.
4. Have a High Credit Score
Understanding your credit score is essential in applying for a mortgage, as your credit score is an important factor in the mortgage approval process. A higher credit score assumes a person is less likely to fall behind on a bill, and vice versa. Having a high credit score can help you get a better mortgage rate and lower monthly payments. Here are some tips on how you can improve your credit score:
Pay bills consistently and on time
Apply for credit sparingly
Do not open new credit accounts during the mortgage process
Maintain reasonable amounts of unused credits (don’t max out your cards)
Check you credit report annually for errors
5. Be Ready to Put Down Roots in the Area
If you are going to buy a home in an area like Philadelphia, you’ll want to be ready to settle down here for awhile. A home is a huge investment and you want to enjoy living in it, hopefully for at least five to ten years. If that is your plan, make sure your career and family goals align with that. Of course, you do have the option to rent out the home if you had to move to another location. Investing in real estate is a great long term investment. You can have great income earning potential if you decide to become a landlord and rent out the home. Or you could house hack, which means living in one of the rooms or units and renting out the others to help you pay your monthly mortgage.
If you’re ready to start the home buying process, please reach out to us and we can help you find the home of your dreams! We can also connect you with a trusted lender.