Many of us, at some point, will question ourselves whether we’ll content ourselves with being a renter or evolve towards being an owner. The question is whether one knows if it’s the right time to do so. Are you considering this move, too? Before you take the leap and buy a home, take a look at these sure-fire signs that now is the right time for you to be a homeowner.
You have well-managed debt
Owning a home doesn’t mean you have to be debt-free, no sir. Between student loans, medical debt and car payments, most loan companies and lending institutions understand that it is unrealistic to expect every borrower to be totally debt-free. Instead, what they do is ensure you aren’t financially crippled. They need to know that you can afford to take on the responsibilities of a mortgage payment.
This is accomplished through a debt-to-income ratio assessment. With this, they check how much of your monthly income goes toward paying off debts. Preferably, in order to buy a home, your ratio needs to be less than or equal to 36 per cent. You can find your current ratio by adding together your current monthly income. Next, divide that by the sum total of your recurrent monthly debts, except rent.
Your budget includes savings
More than a steady paycheck and manageable debt, the next factor that you need before you consider stopping renting and purchasing a home is having some sort of savings. You shouldn’t be surprised that buying a home includes sizable upfront costs. Thankfully, the days of having to put 20 per cent down are a thing of the past, but still, you do have to have a fair amount of cash-in-hand.
Indeed, the biggest expense that will be incurred to you is the down payment. Presently, some lenders offer a conventional loan for as little as 5 per cent down. Remember that the amount you have to pay will be based on the sale price of the house you purchase, so make sure to factor in your savings into the budget.
You’re ready to settle down
This sign is very subjective, but it’s definitely crucial. Owning a home comes with a huge lifestyle change to many, so before you take the leap, ensure that you’re ready for everything that comes with it.
A good sign that you’re ready to settle down is if you like your current location and you look forward to staying there for the foreseeable future. If you buy, you must be prepared to stay in your home for at least the next five years to maximize your investment. If you want to put down roots for that long, then perhaps you’re ready. In any case, if you think your life may change drastically in the next couple of years, you can consider continuing to rent for a while.
If you were able to answer yes and are positive that these considerations are well-met – then that’s a big indicator that you can start checking out homes you want in your preferred location! Owning a home can be likened to having children: yes, they’re blessings, but you don’t need to rush into it.
As you start house-hunting, it makes sense to use freely-available and essential tools like a simple home loan calculator to quickly assess your purchasing capability. Lenders like Newcastle Permanent offers this as well as other dedicated life stuff calculators, useful tips, and when you finally decided, a home loan to fulfill your home-ownership dream.
Buying a home is a big decision and only you know your capabilities truly. Best of luck!