Things to Consider When to Buy a House

Although housing inventory is scarce, there is a lot of demand. With mortgage rates at an all-time low, many homebuyers find themselves in bidding battles and sometimes even competing with all-cash offers.

According to housing experts, homes are selling for much more than the asking price in most competitive markets. They claim that 2020 has been an extremely strong seller’s market and that 2021 will likely be the same.

It’s possible to be contemplating buying a home. Experts believe there is no ideal time to purchase a house. However, the best time for you to do so is when it makes sense.

This is especially true when the U.S. remains in recession due to the coronavirus pandemic.

Adriana Buenrostro is a Santa Rosa-based real estate agent who advises people on low-interest rates. She states, “That’s great, if your down payment, steady income, and reserves are sufficient.” “If you don’t have enough money, or your job is insecure, then it all becomes a mess.”

These are the things you should keep in mind when deciding whether or not to buy a house.

When is the right time to buy a home?
It can be dangerous if you don’t have the right financial resources to purchase a house. Here are five signs that you’re ready for a home purchase.

Stable income is yours
Financial security is essential before buying a home. A steady stream of income for at most a few years is a good indicator that you’re ready for homeownership.

Lenders will want to see a steady work history to determine if they have the money to pay the mortgage. Lenders will typically ask for W-2s for your last two years. Some lenders may ask for payslips for up to one year.

You Can Take Charge of Your Debt
Next, you need to consider your debt to income ratio (DTI). This measures how likely it is that you will be able to afford your monthly mortgage payment given your monthly income and current debt.

DTI usually includes student loans, car payments, credit card debt, and credit cards. But it doesn’t include daily living expenses like food and gas. The Consumer Financial Protection Bureau states that although the maximum DTI limits can vary from lender to mortgage type, most lenders look for a DTI of less than 43%.

The better, the lower it is. Do not invest in real estate if your DTI exceeds that level.

There is enough money to go around
Your lender will also verify that you have enough money to cover the initial cost of buying a house.

Particularly, save enough money for closing costs and the down payment.

Depending on what type of mortgage you have, the down payment maybe 3.5% to 20% of your home’s purchase cost. Closing costs are usually an additional 2%-5% to the purchase price of the home.

Lenders will also want to see enough money in your accounts to cover future mortgage payments as well as emergency expenses.

Your credit score is excellent
Lenders determine how risky a borrower is using their credit scoring models. According to Dan Moralez (a mortgage lender and regional vice-president at Northpointe Bank, Michigan), good credit was defined as having a score of 600 or 700 before the pandemic. It’s now in the mid 700s and higher, he explains.

Before buying a home, you should verify your credit report as well as your credit score. Every year, you can access your credit reports from all three credit agencies free of charge. This is also true for every week up to April 2021. Visit a free credit score site to check your credit score. In many cases, you can also access it online through your credit card account.

Lenders are more cautious because of the pandemic. Therefore, make sure to review your credit report carefully for any errors that might impact your creditworthiness.

Are you ready to settle down?
A house purchase is expensive. Your down payment and closing costs will also be included in the cost of your home.

If you know you will be staying for an extended time in the same place, then you should buy.

Moralez says, “It is important to consider your longer-term goals.” “First-time homebuyers often just start in their careers. Do they plan to stay close to home or do they want to change jobs that will allow them to move?

You should also remember that selling your home in the future could be difficult and costly, as the seller often pays commission to a realtor.