Are You Ready to Buy a House?
Posted by Sarah at 6:01 pm in Finance, Home Improvement

Sometimes it stinks to be a renter. You’re trying to get to sleep when the guy in the apartment next to you starts in on his band practice. Or you’d really like to paint the living room green and install a wet bar, but the landlord says no. Maybe you’d just like to settle down and enjoy the comfort and financial appreciation of owning your own home. But are you really ready to make that leap? Here are a few questions to keep in mind:

Can you afford it?

It’s tempting to think that buying a home just means replacing your monthly rent payment with a monthly mortgage bill. But there are a lot of other financial commitments that come along with buying a house. First, you’ll be expected to put down a down payment when you first purchase the home. This may be as much as 20%, although new mortgage arrangements make it possible to buy a home with much less down. Next, you’ll be required to purchase homeowners insurance and possibly insurance on your mortgage itself, depending on your financing.

You’ve also got to have a safety net when you purchase a home. When you’re renting, if something breaks down, you just call maintenance and it’s taken care of. But when it’s your home, you’re responsible for anything that goes wrong. Think about what would happen if part of your roof broke and you were responsible for the repairs. If a $5,000 repair bill would throw you into bankruptcy, you might want to think about renting for a bit longer and saving up some money.

To see if you’re financially ready to buy a house, run some calculations. Start off at Bankrate.com. In their “calculators” section, you’ll find a number of tools, including one that takes all your assets, income and financial commitments into account and determines how much house you can afford. You can also use the Bankrate website to start learning about the different types of mortgages and financing arrangements available if you think you might be ready to buy a house.

How stable are you?

If you’re working in a field with little job security, or if you’re thinking about moving across the country within the next few years, think again about buying a house. A mortgage is a basically a really big loan – if your income isn’t that stable, you might want to reconsider entering into such a contract. If financial disaster strikes, it’s much easier (and much less damaging to your credit score) to get out of a rental lease.

Also consider how stable you are in your living arrangements. Are you planning to stay put for a few years or are you itching to move wherever the next big opportunity takes you? Buying and selling a house is a big deal – much more so than the move-in, move-out process of a rental unit. And with the current downswing in the real estate market, selling a house can take more than a year in some areas. Make sure you’re ready to be tied to one place before you sign on the dotted line.

What’s your credit score?

Just like any other loan, you’ll pay interest on your mortgage. Although mortgage interest rates are currently low (typically between 4-8%), the money really adds up when you’re considering a 30-year loan! Your credit score will directly impact whether you qualify for a mortgage and, if so, what rate you’re eligible for. Getting the lowest possible rate will save you a lot of money in the long run.

If your credit score isn’t great, take some time to improve it before you jump into the wild ride of homeownership. To learn how to fix your credit, visit the Carreon & Associates website for tons of great information about debt management and repairing credit on your own. They also offer an e-book titled “Credit Restoration & Debt Negotiation” that’s really helpful if you plan to negotiate with the credit bureaus over any incorrect information in your credit report by yourself.

Buying a house is a big commitment, but it does have many rewards. For one, real estate values increase over time (or “appreciate”), so the house you buy now may be worth a lot more in the future. It’s also nice to be able to come home and fix up your space to meet your needs. If you think you might be ready to buy a house, meet with a mortgage broker in your area to see get an exact estimate of what you can afford. Be realistic with yourself and you’ll soon be on your way to the joys of homeownership.

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