Buying a home is one of the biggest decisions in your life. Not only because it’s the place where you’ll lay your head each night, but it’s because your home is one of the largest purchases you’re likely to make. Purchasing a home especially for a first-time buyer can be stressful, but it can be exciting too. Over the past few years, the housing market has improved, and there are telltale signs that a client is financially prepared to buy their first home. That’s why if you're thinking about being a homeowner, you can consider these five things.
Signs that you are ready to buy your own home
- You Have Positive Cash Flow
Having a positive cash flow means that you are bringing in more income than spending on everyday items and debt payments. The debt to income ratio is one way that lenders measure your ability to repay debt. You can calculate it by dividing the total recurring monthly debt by your gross monthly income. However, this uses gross income, which means income before taxes, when we pay bills with net income after taxes. If you are carrying a great deal of debt, you need to get your debt in order before taking on additional debt. If you pay off your credit balances monthly and would still have room in your budget, then you can be a candidate for buying a home.
- You Have Saved Enough for a Downpayment
Some home buyers take money out of their 401(k) or individual retirement account to cover up the down payment. This is a costly mistake that can hurt your retirement savings. Taking money from your IRA or 401(k) will deny years of impounding interest and have to be paid with post-tax money. You can instead dedicate a savings account, which is more liquid, to be used for a down payment.
- You Have Job Security
If you have a job or a steady stream of income with a high degree of predictability, then you can reliably generate enough income to withstand a monthly mortgage payment. Monthly rent can be comparable to the principal and interest payment of a mortgage, but mortgage payments also include property taxes and higher insurance costs. The upside to a mortgage payment is the tax deduction, and as a result, less money may need to be withheld from your paycheck.
- You’re Ready for Commitment
Probably, you have given a lot of thought to the house itself, but first time home buyers should also take supplementary expenses should be taken into account. According to Deena Pantalone Toronto, unlike renting, there’s no landlord to fix the appliances and do maintenance. Additional expenses include home maintenance repairs and replacements, and the expense of selling the home if and when you ever do. You should also be prepared to pay the additional expenses and not be shaken by the possibility that you may eventually have to replace the roof. You are excited to make the place your own and identify what means to you.
- You’re Ready to Put Down Roots
Before you jump into the idea of buying a home, do your due diligence. Your home can be viewed as an investment, but that is not the purpose of buying one. You will want the stability it provides and the home that you own. Depending on how long you plan to live there, you should look at it as more than just a way to build equity.
If you understand the buying process of a new home, then you’re on the right track. Of course, if you’re all prepared and need some help, find a real estate agent to give you advice and tips in finding the perfect home for you or your family. Visit here to make finding help easier.
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