When Are You Truly Ready to Purchase a Home?
Buying a home is an exciting endeavor, but realizing this dream requires a long-term commitment. To avoid drowning in debts that you might be unable to repay, it is critical to assess if you are truly ready to purchase a home. For that, you need to ask the following questions to know your readiness as a home buyer. So, let’s get started.
Questions to Ask Before Buying a Home
What is the status of my credit score?
A high credit score can help you get a more ideal interest rate. If your credit score is low, take some time to improve it so that you can qualify for a better interest rate. Once your credit score is improved, you are more likely to enjoy a lower monthly mortgage payment.
How long have I been in my current job?
Though every job comes with some level of uncertainty, the years you have spent on the same (current) job reflect if your job is reliable enough to backup your homeownership decision. Since home loans are sanctioned for around 15 to 20 years (a maximum of 30 years), the assurance of regular income becomes a necessary parameter for home loan assessment.
Changing jobs frequently may result in a higher income but give a negative impression to lenders. Thus, if you are planning to buy a home in the near future, it is highly recommended to not change your job.
Am I going to get a raise in my current salary?
To ensure that you can make your ends meet, it is advised to not utilize more than 30% of your monthly income. You can increase the share up to 50% toward mortgage payment; however, in this case, you might need to live lean if your salary is low. If you are assured of a significant raise soon, you will have a better opportunity to make more funds available. The raise will help reduce your financial vulnerability.
Can I obtain financing from my financial institution?
Never apply for a home loan at multiple banks at the same time thinking that at least one of them will accept your application. Remember that if one bank rejects your application, it can impact your credit score. As a result, it will negatively influence the application processing at other banks.
So, before you try at other banks, inquire your bank first to know if they can help you obtain financing for a home purchase. If they inform you of any issue, get it rectified before applying for a home loan at the same or other banks.
Do I need to seek outside loan support?
See how much loan you can afford, and how much loan your bank is willing to provide. Now, check the difference between the amount you need to buy a home and the amount you will get through a home loan. See whether it is sufficient or you will need outside loan support, which could be anything, such as utilizing your fixed deposit, or taking another debt from a non-financial institution.
What outstanding debts do I have in addition to my potential house payment?
If you already have other debts, such as car loans, personal loans, or outstanding credit card bills, you must repay them first. Otherwise, they will reduce the fund amount you will have for a monthly mortgage payment. Not having other outstanding debts will also help you cover additional expenses, such as property tax, homeowner’s insurance, maintenance, and so on.
Do I have emergency funds and savings for unexpected expenses?
Always expect the unexpected. Having extra savings and emergency funds means you are in a good position to buy a home. If not, plan for this in advance and work on putting sufficient amounts of funds for emergencies aside before you take a home loan.
It is highly recommended to finally get professional advice from a reputable consultant with rich experience and knowledge in this field to see if there are any additional costs or aspects you might have overlooked.