So, you think you’re ready to become a homeowner? Making the transition from renting to owning is an exciting time, but before you jump in and bite off more than you can chew, there are a few things to think about to ensure you’re really ready to make one of life’s biggest commitments.
- Have you paid down your debt? While savings is always emphasized in financial planning, when considering buying a home, it’s important to pay down as much of your existing debt as possible before saving for a down payment. Not only will this lower your debt, it will make you look favorable to creditors, who tend to give the best mortgage rates to those with good credit.
- How much can you afford? Before making a commitment to buying a home, it’s essential to determine whether or not you can afford it. The accepted rule of thumb recommends that your mortgage payment – including taxes and homeowner’s insurance – not exceed 28% of your gross income. Calculate it, and if you can’t afford it, consider buying at a later time.
- Are you going to seek pre-approval? Typically, agents will take you more seriously if you visit a property with a pre-approval in hand; however, be aware that pre-approval figures often are not an accurate reflection of the amount you can actually handle. Always do the math yourself to determine what you can really afford as a first time homeowner.
- Is it the one? When considering a home, don’t shy away from encouraging your agent to show you your top choices multiple times to determine whether your final choice is really the one. Be confident that the home you choose has been thoroughly evaluated and is up to your standards. Multiple visits can also open your eyes to things you may have previously overlooked.