Purchase a home
How to Know You Are Ready to Purchase a Home
Purchasing a home is one of your most important and expensive financial decisions. As a result, it's critical to ensure you're financially and emotionally ready before locking in your home loan with a mortgage broker. Fortunately, there are several ways to help guide you to give you the confidence you're ready to make an offer on a home.
How to determine your financial status?
Financial status is the biggest deciding factor when purchasing a home. Although it's tempting to believe that your current financial situation is stable, don't let yourself be fooled by fads or trends in your bank accounts. To fully understand where you stand financially, look at your latest paystubs, tax returns, and recent bills such as credit card statements, utility bills and any other bills you may have.
Look at your most up-to-date information (over the past two years), not just estimates or older bank statements. The biggest red flag is if you do not have enough money in your bank account to cover the amount needed for your down payment, closing costs, and housing expenses for the next year.
How long you've been at your job?
Another factor to consider when determining if you're ready to purchase a home is how long you've worked for your current employer. If you've been working at your place of employment for a long time, this is not an absolute criteria for purchasing a home. If you are starting a new job, don't let that dissuade you from looking into purchasing a home. You may still be eligible to purchase a home if you have worked as a W2 employee or 1099. Ideally, having 2 years of work in one is the goal, however, there may be programs that might meet other exceptions.
How much is your income?
Your monthly income is the basic criteria for determining whether or not you are financially stable to meet the mortgage payments. You're in good shape to consider purchasing a home if your earnings are within the set mortgage program, the ‘front-end’ is the housing cost and the ‘back-end’ ratio is the overall debt to income. At times, you may also qualify for other programs such as bank statement loans, or DSCR investment homes. That said, don't fall into the trap of thinking that having a lot of money in the bank means you are ready to purchase a home. You want to make sure that you feel comfortable enough first to make the mortgage payment. If you do not feel comfortable, then do not rush into it.
How much you have in reserves?
If you are okay with keeping some of your money in the bank and having a safety net, savings are a definite factor in determining what you're ready to purchase. Having extra cash on hand also makes it easier to move if your job or house is threatened. Make sure that you can account for your deposits, and that you are not using money hidden under your mattress as this may cause reason for concern as the origins may be untraceable.
Can you apply for a loan?
If you're unsure if you're ready to purchase a home, it's a good idea to contact MortgageQuote.com to discuss your goals and general educational items, however if you are ready to apply for a mortgage loan then get started on an application. Why Mortgagequote.com? Because we are “The First Step to a Pre-Approval”.
How to apply for a loan- include details of this process?
The initial application for a loan is a very simple and easy process that can be accomplished in a few minutes, however to get a clear-to-close can take several days or weeks to do depending on the situation. To get started, you'll need to go to the lender's website and fill out the online application. You'll also be asked to provide detailed information about your current job, financial situation, and housing goals.
If you are pre-approved, we may present you with several options to determine how much your mortgage loan would be. You can apply for a loan if you feel ready to purchase a home.
Once you have submitted your application, the next step is to wait for an appraiser who will determine how much your home is worth and whether or not it meets certain requirements. If everything checks out, you'll be one step closer to a mortgage loan. You might also get an appraisal waiver, depending on the situation.
How to decide if purchasing a home is right for you at this time?
When reviewing housing costs, mortgage programs with costs and rate, and your employment situation qualifies and is where you want it to be, it should give you a general idea to see that you might be ready to purchase a home. However, one more step in deciding if purchasing a home is right for you: make sure that you feel comfortable first more than anything, and that you are ready to purchase a home before purchasing one.
The bottom line here is that money is not the most important thing when it comes down to determining if purchasing a house is right for you. Being happy, financially sound/comfortable and being employed are a few things that are far more important than owning a house. The right time to buy is when you feel it's the right time to buy.
Savings and Debt - does this affect buying a home?
To determine whether you should purchase a home, you must avoid the wrong mindset. That mindset is that you are not financially ready to purchase a home because you just don’t know what the loan requirements are. Keep in mind, there is no harm in just getting a mortgage quote, it is free to do this with us and can help educate you on potentially your current situation or the status of programs and rates in general.
Make sure that mortgage education is something you look into first before you jump into home buying. It is suggested that you understand the basics of what a mortgage is and the commitment level of it. You do not want to make decisions that could lead to trouble in the future with your mortgage loan and home buying if you fail to educate yourself.
How to calculate your mortgage payment based on the down payment?
To calculate how much your mortgage payment will be, you first need to know your monthly housing costs and the down payment you will make to purchase a home, you can generate a few ideas and examples by using our mortgage calculator.
Generally, the down payment you make on a home is a percentage of a home's total value. It is important to know this as putting larger or smaller amounts down on your new home can change your monthly housing costs based on the type of mortgage loan/rates you are applying for.
Once you know your monthly housing costs and the down payment for your new home, you should be able to determine how much your monthly mortgage loan is going to be. The information you need to understand for a new loan is the: amount of the loan, the note rate, the term, is it fixed or adjustable (to see the future potential of payment changes), any mortgage insurance, homeowners/flood insurance, homeowners association, taxes and any other fees associated with the mortgage.
How to know when to buy - is it a seller's or buyer's market?
Generally, it's a sellers market when the market has little inventory, such as less than 4 month. Standard market is 4-6 months of inventory, and buyers market is when there is greater than 6 months of inventory of homes. When there are more homes and fewer buyers than homes, this also may be considered a buyers market, and vice versa as markets tend to change and can be unique from time to time.
When the market is more favorable to sellers, there tends to be more competition and less inventory in the market, so having the right real estate agent and mortgage broker can be crucial.