No matter what age you are right now, buying a house is a big decision that will affect your future finances. If you are thinking of buying your first house, you must determine if you are financially ready for it. Here are the signs that could mean you are:
1. Good credit standing
Reputable lenders who offer a great mortgage refinance rate in Salt Lake City require their customers to have a credit score within the “good” range. Having an ideal credit score increases your chances of buying a home since it is a reflection of how capable you are to pay off your debts. That said, improving your credit score as much as you can before buying a house is a great way to get a mortgage with a lower interest rate.
2. Minimal to no debt
Debt-to-income ratio is a significant factor that lenders look into when you’re applying for a mortgage. The lower your DTI is, the better chances you have at securing a mortgage, especially one with low interest rates.
Needless to say, having minimal or zero debt is a good sign that you’re ready to buy a house. This means that you have more cash flow available to pay your mortgage and other expenses associated with buying a home, such as taxes and maintenance costs.
3. Sizeable down payment
To qualify for a home loan, you must have enough money saved for a down payment. More than that, you must have the cash for closing costs, repairs, taxes, and other expenses before and after you buy the house.
Ideally, you should have at least a 20% down payment saved, but you can opt to save more than that. The higher down payment percentage you have, the more money you will save in the long run due to lower interest.
4. Good and steady income
In general, it is recommended that you spend no more than 30% of your monthly income on your housing costs. This means that if you earn $5,000 a month, you should only spend a maximum of $1,500 a month on your mortgage.
Having a steady job that gives you a good income is another good sign that you’re ready for a house. Keep in mind that lenders also look at the length of your tenure with your current job, as well as how much money you make. If you don’t feel secure with your current employer, it may be wiser to find another job that will give you a better income and employment security.
5. Financial responsibility
As mentioned before, buying a house is a huge responsibility, and in order to be ready for one, you must be financially responsible. If you can budget your income, save consistently, and put off wants over needs, you are more than likely to become a responsible homeowner.
No one should buy a house without determining if they are financially ready to do so, as taking on a huge financial responsibility prematurely can put you into a huge debt. If the signs mentioned above apply to you, then go and buy that dream house of yours.