Are You Ready to Buy a New Home?
Homeownership has many rewards. It’s an excellent way to build financial security and ensure you have a sound investment you can rely on in the future. Owning your own home also gives you stability in your living situation and allows you to turn it into a space that reflects your personality. And, most importantly, there’s nothing like coming home to a house that’s truly yours. However, buying a home is a major decision that needs to be considered carefully. Read on to understand the key signs that indicate you may be ready to buy a new home.
1. Your Needs Have Changed
As you enter different stages of your life, your lifestyle and housing needs are likely to change. Instead of finding a new home to rent, why not think about buying instead? Many people choose to buy a home when they start planning to have children or as their family grows. Others need to downsize when they go through a transition, such as a divorce or their children heading off to college. In other cases, a new job or a decision to move to a new town or city may spark the need for a new home. Whatever the reason, if your current living situation does not match your needs, you may need to find a new home, and this may be the ideal time to think about buying.
2. Your Life is Stable
Buying a home is a long-term commitment. Many upfront costs are involved, and it takes many years to see a return on your investment. Therefore, it’s essential to consider how stable your life is before you buy. Firstly, you will want to consider the stability of your job or other income sources, as this determines your ability to make ongoing mortgage payments. You also need to think about whether or not you want to live in the city or town you are considering buying in for the long term. Another factor to consider is how your children’s or other family members’ needs may change over time.
3. You Are Financially Ready
Your dream of owning a new home can only become a reality if you can afford it. The financial ability to buy a new home is dependent on several factors, including:
a. You Have Enough Saved for a Downpayment
One of the most significant steps towards preparing to buy a new home is saving up for a downpayment. Conventional loans require a downpayment of 20%, but there are several options for those who don’t have that much saved. Lenders now accept downpayment amounts as low as 3%, with the average buyer putting down somewhere between 5 and 15% of the purchase price of their home. Government-backed loans, such as FHA, VA, and USDA loans, are another great option that offer lower downpayment requirements for eligible buyers.
b. You Have a Healthy Credit Score
Your credit score is calculated based on your history of making on-time payments to creditors and is used by lenders to determine their risk in lending to you. The better your credit score, the better the rates and terms on your mortgage will be. It is, therefore, essential to consider the health of your credit score and work to improve it if necessary before buying a home.
To learn more about credit scores and homebuying, read our article How Your Credit Score Impacts Your Mortgage Rate.
c. Your Debt-to-Income Ratio is Low
Your debt-to-income ratio is the way that lenders will decide whether or not you qualify for a mortgage. Understanding your debt-to-income ratio is therefore important in deciding if you are ready to buy a new home. The debt-to-income ratio is calculated by adding up all your monthly payments on your debts and dividing this by your gross monthly income. The higher your debt-to-income ratio, the less likely you are to be able to make mortgage repayments.
Most lenders require a debt-to-income ratio of 43% or less, meaning that all of your monthly debt payments need to equal 43% or less of your monthly gross income. Some lenders may adjust this figure based on their policies and the current economic and real estate market conditions.
d. You Can Afford the Ongoing Cost of Homeownership
If a pipe bursts or your HVAC system breaks down in your rental home, your landlord is responsible for covering the repair cost. When you own your own home, you are 100% responsible for all the ongoing homeownership costs, including property taxes, home insurance, HOA fees, and maintenance costs. While you can accurately predict some of these expenses, others may come up unexpectedly, and you need to have enough funds available for them.
Learn more about the expenses you may face as a homeowner in our article Cost of Homeownership.
4. You Know What Type of Home You Want to Buy
From condos to multigenerational homes, there are many different types of homes you can choose from when you are ready to buy. The right type of home for you depends on the size of your family and your personal needs and preferences. The location where you want to live may also affect the types of homes available to you and how affordable they are.
Learn more about home types in our article Types of New Construction Homes.
Start Searching for Your New Home with NewHomesMate
When you decide you’re ready to buy a new home, NewHomesMate is here to help. On our platform, you can search for and tour all types of new construction homes in your area. We can even help you get pre-approved for a mortgage so that you can find out if you’re financially ready to buy. Learn more about us and start searching for your new home with NewHomesMate today!
