Friday, April 3, 2009

Are You Ready To Buy?

Determining whether or not you are ready to buy a house can be a daunting task. But, whether you are a renter or you are aiming to upgrade to a larger home, there are signs that will indicate whether you are ready to take the buying plunge.

So are you ready to make the move? You might be if you:

1. Are familiar with the market. If you have been paying attention to how much houses are listed for in the neighborhoods you are interested in and have a realistic idea of how much a house will cost you, you're in good shape. But if you're dreaming about that big corner house with no clue about the asking price, you may want to spend some more time becoming familiar with the market.

2. Have the money for a down payment and closing costs. The down payment is a percentage of the value of the property. Typically, the percentage will be determined by the type of mortgage you select. Down payments usually range from 3 to 20 percent of the property value. You may also be required to have Private Mortgage Insurance (PMI or MI) if your down payment is less than 20 percent. And don’t forget closing costs which include points, taxes, title insurance, financing costs and items that must be prepaid or escrowed and other settlement costs. You can expect to pay between from 2 to 7 percent of the property value. Generally, buyers will receive an estimate of these costs from your lender after you apply for a mortgage.

3. Know how much you can afford. Typically, as a general rule, your monthly mortgage payment should be less than or equal to a percentage of your income, usually about a quarter of your gross monthly income. Also, your income, debt and credit history go into determining how much you can borrow. As a general rule, your debt -credit card bills, car loans, housing expenses, alimony and child support -- should not be more than about 30 to 40 percent of your gross income.

4. Know what additional expenses will come with owning a home. This includes homeowners insurance, utility bills, maintenance costs -- roofing, plumbing, heating and cooling.

5. Have your credit in good shape and make sure your credit report is accurate. Potential lenders will view your credit history. You should get a report from each of the three credit reporting companies (Equifax, Experian, and Trans Union) and be familiar with your scores.

6. You haven't made any recent major purchases, particularly a vehicle. If you do, you may have a harder time getting a loan (or it could potentially lower the amount you'll be approved for).

1 comment:

Honest Contractor said...

Nice guide. It helps me a lot. Thanks for sharing.