Signs That You're Ready to Buy
If you are thinking about buying, you're not alone. So are you ready to make the move? You might be if you:
1. Are familiar with the
market. If you've been paying attention to how much houses are listed
for in the neighborhoods you're eyeing and have a realistic view 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 it's asking price, you
may want to spend some more time becoming familiar with the market and
how much houses are going for.
2. Have the money for a down
payment and closing costs. The down payment is a percentage of the value
of the property. Freddie Mac says 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. Also, you may be required to have
Private Mortgage Insurance (PMI or MI) if your down payment is less than
20 percent. Closing costs 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. Freddie Mac says that as a general guide, 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 -- how much debt you've accrued, how many
accounts you have open, whether your payments are made on time, etc. --
to determine whether they'll give you a loan. You should get a report
from each of the three credit reporting companies: Equifax, Experian,
and Trans Union.
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.
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Six tips that tell you it's time
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