So You Think Youre Ready To Buy
(The cooling market is prompting a lot of renters to consider the prospects of purchasing their very own home.)
There is a surplus of homes on the market and prices are on the way down, so it seems like there could not be a better time to make that first big purchase.
But, before you jump on the buyer’s market “homeowner bandwagon” you must think about this very carefully, since buying a home is one of the biggest decisions and financial commitments you will make in your adult life.
A September 8, 2006 article by Erin Burt of Kiplinger’s, “8 signs you’re ready to buy your first home,” gives some helpful tips to people who are toying with the idea of homeownership.
“Interest rates are rising and home price appreciation is slowing, so fewer buyers are looking for new homes. That gives landlords the upper hand to raise rents. Meanwhile, the real estate market is starting to turn from the seller's favor toward the buyer's. So if you're a renter who has been dreaming of homeownership, is now a good time to take the leap?”
“Sure, a cooling real estate market is good news for buyers because it's easier for them to negotiate a deal. But it shouldn't be the main reason that pushes you into your first home. In fact, buying your first home is a personal decision that you should make independent of what the market may or may not be doing.”
Obviously, the first step in deciding whether or not to you are ready to buy a house is by analyzing your individual financial situation.
“Owning your own place comes with a slew of new expenses, so good money management skills are a must-have. You need to know where you are financially -- where your money is coming from and where it goes every month -- to know exactly how much you can afford to spend on a new home.”
Having a sizeable down payment is also an important aspect, so you will not have private mortgage insurance. Traditionally, most lenders require a 20 percent down payment, which can add up to a pretty hefty sum.
Before you even think about buying a home, you must have a reliable income as well as some savings tucked away – just in case.
One of the most important factors that will decide whether or not you can buy and finance a home is your credit score. You also must look at how much debt you are holding right now, including credit cards, auto loans and student loans.
“Nowadays you don't have to have perfect credit to become a homeowner, but a decent history can help you get a lower interest rate on your mortgage and a lower monthly payment. The government allows you to check your credit history free once a year from each of the three main credit bureaus at AnnualCreditReport.com. So take a peek to find out what lenders see about you. If you see any errors, correct them now. If you see room for improvement, find out how you can boost your score. ‘Don't be sloppy the year or two before you buy the house,’ says Baldwin. You don't want any missed payments or other black marks that could lower your estimation in the eyes of lenders.”
