Buying your first home can cause a lot of anxiety.
How do you know when you’re ready to buy a house?
Here are 10 signs that you’re ready to buy your first home, the types of loans available, and how to qualify.
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1. You have saved enough for the down payment
There are a few up-front costs associated with buying a home. But, the biggest one is the down payment. Depending on which type of mortgage you get, you need between 3% – 20% of the purchase price as a down payment.
Down payment requirements by mortgage type
3.5% - 10%
No down payment
No down payment
5% - 20%
Conventional 97 Loan
Home Possible Loan
10% - 20%
2. You have decent credit
Having perfect credit isn’t a requirement to get approved for a mortgage anymore. But if your credit score is at least 640, your odds of getting approved are much higher. If your score is at least 580, you may qualify for an FHA loan with a 3.5% down payment.
Lenders look at more than just your credit score. If you have no more than a single missed payment in the past 12 months, this is a good sign you’re more likely to qualify.
HomeReady / Home Possible Loan
FHA 203k Rehab Loan
Conventional 97 Loan
3. You can afford the mortgage payment
The amount of home you qualify for is tied to your debt to income ratio. It’s typically recommended to keep your DTI ratio no higher than 36%. If you’re renting a home, the chances are that your mortgage payment will be close to what you’re paying in rent. Use our calculator to find out what your mortgage payment will be and how much you can afford.
4. You have steady employment
If you have had the same job with the same company for at least 2 years, you’re most likely financially stable enough to have a mortgage. It will also be much easier to get approved for a loan with 2+ years of steady employment. Having solid employment history is a good sign you’re ready to buy a house.
5. You don’t plan on moving to a new city anytime soon
Buying is cheaper than renting, but only if you don’t move within 3 years. If you plan on settling down in a city and don’t have any immediate plans on moving, then buying is a good option for you. With inflation and home prices on the rise, there’s a good chance that the home you buy today will be worth more in a few years. Buying a home really is an investment.
6. You have kids or kids on the way
If you have kids, chances are you want to settle down into a nice home in a quiet neighborhood. Your kids won’t want to move away from their school and friends. Buying a home makes the most logical sense in this scenario. This isn’t to say that if you don’t have kids, you’re not ready to buy a house, not at all. If you do have kids, that’s just an extra incentive for buying.
7. You’re tired of renting
Renting is exhausting. Paying someone else mortgage payment, helping them improve their bank account while draining yours. You can’t make any upgrades, or at least it’s a waste of time and money to do so. Buying a home does come with its own sense of pride.
You can finally take pride in your home. Make upgrades, plant flowers, paint the walls. You can finally make it your own.
8. You can afford to make repairs
Renting is easier in many respects. If anything in the home, such as your dishwasher, breaks. You make a call to the landlord, and they fix it, costing you nothing. When you have a mortgage, you’re responsible for any repairs needed. However, you can get to buy a home warranty plan, which will cover a lot of repairs for a fixed monthly cost.
9. Your partying days are over
Being a homeowner means taking on a certain level of responsibility. If you still find yourself out at the bars every night, then getting a mortgage may not be the wisest choice for you at the moment. Focusing on your savings and the future usually takes precedent over partying every night.
If some of these apply to you, then you may just be ready to buy your first home finally. It’s time to contact a mortgage lender to get pre-approved before you start your search for your dream home.
Remember to make a budget and stick to it. Right now, interest rates are still at historic lows; it’s a great time to buy. The question is.. Do you think you’re ready?
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