Are You Ready to Buy a House?
Buying a new home is a BIG decision. It can also be extremely daunting. There is a lot to think about. But it doesn’t have to be so stressful.
The key to taking the worry out of buying a new home is knowing if you are ready. There are some clear guidelines you can follow in order to easily determine if you are ready to take the plunge into home ownership.
Debt-to-Income Ratio – Can You Afford a New Home?
The first step to buying a new home is understanding what debt-to-income ratio is and where you fall. This lets you know if you can afford to purchase a house.
The Federal Housing Administration (FHA) typically uses a 43% debt-to-income (DTI) ratio as a guide for approving mortgages. This means all of your housing costs should equal less than 43 percent of your monthly income. This includes your mortgage, house insurance, and taxes. So, if you make $5,000 per month you should be able to afford about $2,150 of that to go toward home ownership. Keep in mind this number does not take your other financial responsibilities into account, so be real with yourself about how much of your income really can be set aside for a mortgage including escrow. Owning your own home is great, but you’ll want to be able to pay your utility bills and buy groceries.
Can You Afford the Down Payment?
If you have at least a 10 percent down payment saved, you are ready to buy a house. It’s even better if you have 15 to 20 percent because you can avoid paying private mortgage insurance (PMI) with that higher down payment amount. PMI can cost between 0.5% and 1% of the entire mortgage loan amount annually and is added on to your mortgage payment.
Current interest rates will greatly influence the amount of your monthly house payment. Interest rates tend to fluctuate, so it is important to check on them to see how they will influence your monthly mortgage payment.
Currently interest rates seem to be sticking at around 3% to 5%. So, let’s look at a 30-year mortgage at 3% interest. If you take out a $200,000 loan, your monthly payment will be about $843.20 (plus taxes and insurance). The lower the interest rate, the lower your payments will be.
Are You Ready for More Responsibility?
Buying a new home comes with a lot of responsibility. Sure, you can paint and landscape however you want but are you ready for the maintenance and upkeep?
Once you own a home, it is all up to you. When your grass is tall, you mow it. When something breaks, you fix it. It’s no longer up to a landlord to take care of. Don’t let that hinder you-just be prepared. Owning your own home comes with many benefits that far outweigh the cost in time and money you’ll pay in maintaining your house.
Buying a new home is a huge investment that should be for the long-term. Most traditional mortgages are 30 years, so you should plan to live there for at least five to ten years. This is enough time to build a little equity and sell for a little profit instead of breaking even, or worse, losing money on your investment.
This doesn’t mean you have to live in the home you buy forever. It simply means you should plan on sticking around for a while, so make sure you really like the house and the area.
It’s Go Time
Researching will only get you so far. Once you have checked all of the boxes we’ve discussed you are probably ready to move forward. Now is the time to get a great real estate team on your side.
Let Amberwood Real Estate eliminate some of the anxiety that comes with buying a new home. We bring expert knowledge, valuable experience, and a well-defined plan to help you reach your real estate goals. As real estate specialists, we understand the home buying process and will be with you to support you every step of the way.
Are you ready to realize the American dream of buying a new home? Contact Amberwood Real Estate today and take a big step closer to homeownership with us.