As the famous saying goes, nothing can be said to be certain, except death and taxes…and stress when you’re ready to buy a house. Oh, you haven’t heard that last part?
Regardless, purchasing a home isn’t always easy and breezy.
Before you can call yourself a homeowner, there are several things you need to do. You need to organize your finances, qualify for a loan, and continue to make enough money to afford the property. Though it may never be easy, there are certain indicators that prove whether or not you’re prepared for this commitment.
Read on for three signs that you’re ready to buy a house!
1. You Have a Low Debt-to-Income Ratio
One of the biggest factors that lenders and sellers look at when you’re buying a house is your debt-to-income ratio.
A healthy debt-to-income ratio will show these institutions that you’re responsible when borrowing money. If your ratio is too high, lenders may be wary of accepting your mortgage request. You can calculate your debt-to-income ratio using three easy steps.
Add up debt
First, you’ll want to add up all your monthly debt. This may include bills, credit card payments, and any other loans you have, such as student loans.
Find your gross income
Your gross monthly income is the money you make before deducting taxes.
To find your debt-to-income ratio, you’ll want to divide your total debts by your gross monthly income. For example: If your monthly debt comes out to $500 and your monthly income is $5,000, then your debt-to-income ratio is 10%.
Most mortgage lenders won’t accept candidates with a debt-to-income ratio that is higher than 43%, though these standards can vary case-by-case.
2. You Qualify for a Mortgage
The real gatekeeper to be ready to buy a house is the mortgage lender.
Most people can’t afford to buy a home unless they qualify for a loan. Fortunately, there are options for mortgage plans—and some may offer more flexible requirements than others.
A conventional mortgage is a standard loan agreement between a lender and a borrower. A bank will loan you the money needed to purchase a home, but only if you meet the credit, down payment, and income requirements.
Veterans and active military personnel may be eligible for a VA purchase loan. This is a government-backed mortgage that offers low-interest rates, zero down payment, and flexible credit qualifications to help service members afford their homes.
An adjustable-rate mortgage refers to a loan with fluctuating payments and interest rates. This type of loan may offer lower payments early on, but potentially higher rates as time passes.
If you can tick the box beside any of these mortgage types, then you’re on the right track.
3. You Have a Career
Financial stability is crucial when buying a home.
When you get a mortgage, you’re committing to payments for the next 15-30 years. This means a steady income is not only important now but also for decades down the line.
There is a surefire way to ensure you’ll be financially stable for the remainder of your loan: only buy a home once you’ve established a career. This means considering factors like:
- Whether or not you like your current job
- How long you plan to stay with your company
- Opportunities for growth within your position
- Possible salary fluctuations in the future
If you feel confident that you’ve found a sustainable career, then buying a home is a reasonable next step. On the other hand, if you’re unsure about the job you’re currently working, you may want to hold off on this purchase for the time being.
You’ll Know When You’re Ready
In addition to the financial elements, many people know in their hearts when they’re ready to buy a home.
If you feel you’re prepared to take on this commitment, then go for it! Just make sure you have the resources available to actually afford a house. Once you have all the pieces in place, you can begin your search for the home of your dreams. Good luck!