Buying a home is one of the biggest steps you’ll take in life, and you want to make sure it’s a positive experience. Taking on a mortgage and home repairs are fine when you’re ready and know what to expect, but how do you know if now is the best time or if you should keep renting? Our real estate agency in Minneapolis is sharing six signs you’re ready to buy a home (and three signs you’re not).
Five Signs You’re Ready to Buy a Home
If you can say “Yes!” to these five guidelines, you’re most likely ready or on the right track to owning your own home.
You Have a Good Credit Score
Before you start considering a mortgage, you may want to run a credit check and find your credit score. Not only will you see if there are any red flags you didn’t know about, but lenders check your credit score to approve mortgages and determine interest rates. Generally, a score of 700 or above will put you in a good place for approval.
You Have a Stable Income
If you’ve stayed at the same job for a few years or you’re self-employed and have record of consistent, steady income, this is a good sign that you can buy a home. Not only will lenders look at your income history and bank statements to approve you for a mortgage, but having stable income will provide you peace of mind that you can keep up with your bills.
You Want to Stay in the Area
Buying a home is an excellent way to put down roots and establish permanence in an area. It’s also smart if you plan on living in a location for several years. From a financial perspective, owning a home works best when it’s long-term. The longer you live in a house, the more likely you are to be in a stronger financial position after selling.
You Have an Emergency Fund
From refrigerator failures to sewer line breaks, houses require expensive maintenance. If you have an emergency fund established that you can rely on to cover those repairs, that will help you significantly as a homeowner.
You Know What Goes Into Home Ownership
Buying and owning home is an amazing experience, but it can also be stressful. If you’ve done the due diligence and understand the process, including making an offer, closing on the house, and keeping up with costs and expenses, you should be in excellent shape to buy a house.
Three Signs You Should Rent an Apartment
Homeownership is a major commitment, and not just financially. If you’re not sure, consider these factors that show it may be better to rent an apartment for a little while longer.
A Large Portion of Your Income Would Be Your Mortgage
A general guideline is you don’t want to spend more than 30 percent of your after-tax income on your mortgage. Otherwise, you may struggle to keep up with other expenses or not have money set aside for retirement, repairs, or other expenses. Consider exactly what you need from a home, including the number of bedrooms, baths, and location and research their prices and how much your payments would be. If you don’t believe you can find what you need without making yourself financially vulnerable, you may want to keep renting for a year or so.
You’re Only Considering the House Price
Buying a house isn’t just paying the mortgage for the building. You also need to factor in the costs to buy the house as well as annual costs. This includes, but isn’t limited to:
- Down payment
- Closing costs
- Annual property tax
- Private mortgage insurance (PMI)
- Homeowners insurance
If you haven’t factored these added costs into homeownership, these expenses may go beyond your current budget.
While you don’t need to be completely debt-free to buy a house, too much can prevent you from getting approved for a mortgage. Lenders look at your current debts, including car payments, student loans, and credit card debt, and combine that with the amount of your mortgage to determine your debt-to-income ratio. If the ratio is too high, lenders may consider you a high risk.
Find Your Dream Home or Rent an Apartment in Uptown Today
Whether you’re ready to buy your first home in Minneapolis, or you think it’s best to keep renting for a bit longer, the team at Stutsman Realty, Inc. can help. We are experienced Realtors who are dedicated to helping our clients find their dream homes, and we also have beautiful apartments for rent in Uptown. To learn more or get started, reach out to us today at [phone] or fill out the form below to get started.