At least 8.3 million first-time homebuyers will get their first home between 2020 and 2022, according to TransUnion. But how do you really know if you’re ready?
It’s easy to get caught up in the idea or pressure of homeownership, but it’s important to make sure you’ve looked at every angle of what it means to be a homeowner before you make a decision.
Here are some of the key ways to know when you’re ready to buy a home.
You’ve Taken Charge on Your Debt
To measure how much debt is too much debt, you need to figure out your debt-to-income ratio. If the only debt you currently have is a student loan and a mortgage, you’re typically in OK standing. However, credit card debt, medical bills, and other types of debt can hold you back from getting loan approval. It’s desirable to have a debt-to-income ratio that is less than 15%.
You Understand How Much You Need to Put Down On a Home in Your Market
Having 20% of the sale price to put down on a home is suggested. This is because the amount you put down on a home will ultimately calculate the amount of interest you will owe on a home over time. But some people can get by with only putting 5% or even $0 down, it depends a lot on the market, the loan to home value, your credit history, and more.
You Have a Credit Score of 620 or Higher
Technically, you only need a credit score of 500 to get approved for a Federal Housing Administration loan. But most banks require at least 620, and when you’re shopping for loans, the more options you have available to you, the more competitively you can play. A 670 is considered a good FICO credit score ranking. So if you are able to hold out and raise your score to at least a 670, even better.
You Have a Generous Monthly Budget for Home Ownership
It’s important to understand that paying for a home only begins with the down payment. From monthly HOA fees, repairs and renovations it’s important to have a realistic budget available for actually owning a home. Here are some of the key things you need to budget for:
- HOA fees
- Property taxes
- Repair and maintenance
- Yard care
- Pest control
You’ve Reached at Least a Mid-Level Status in Your Career
How stable is your current job situation? Are you on a career trajectory? Or are you just working gigs to pay the bills? Since buying a home is a long-term commitment, it’s important to have a career that you’re in for the long run.
Ready to buy a home? Our dedicated team is here to answer your questions and help you every step of the way on your journey! Learn more about us or call Anne Dresser Kocur at 303.229.6464. She would love to hear from you!