When It’s Time to Be a Homeowner

Maybe you’re ready to settle down in your city, or perhaps you want to invest in a property that will pay for itself. Either way, if you’re thinking about becoming a homeowner, then read on to see if you qualify! 

1. You have a good credit score.

A credit score over 600 is a sign you might be ready to be a homeowner. This is the last item lenders look at when you get pre-approved for a loan. Your loan will vary depending on the exact score. For example, a conventional loan usually requires a score of 620 minimum. 

No matter what your score is now, try to improve it before buying. A better score will give you better interest rates! To improve your score, start with a free credit report to know where you stand currently. Then make a plan to pay your credit cards on time, avoid opening any new credit lines, and not letting your balances exceed 30% of your maximum credit limit.

2. You have enough for a down payment.

Down payments can range from 3.5-30%, but the sweet spot is between 10-20%. As a homeowner, putting down 20% or more means you don’t have private mortgage insurance, which only adds more money to your mortgage without a benefit to you. Plus, being able to put down more for a down payment increases your odds of being approved for a loan and receiving better interest rates. 

Have a smaller down payment? An FHA home loan with a down payment of as little as 3.5% may be a great fit for you. Contact us today to learn more.

3. You have money in your savings.

Most first time homeowners have a tight budget after purchasing a house because, well, it’s expensive! After a down payment (of hopefully 20%), there’s closing costs, relocation costs, and home improvements. 

Closing costs range from an additional 2-5% of the home’s purchase price. Relocation costs will vary depending on your current location, if you rent a moving truck, and if you hire movers or bribe your friends for help. 

Home improvements will vary as well. Some improvements should be made before moving in, like painting, flooring, and ceiling work. In contrast, smaller cosmetic upgrades can wait. So it’s essential to have money in your savings to cover more than just the house’s purchase price.   

Plus, it’s always good to have extra saved in an emergency, and something breaks, and you have to replace it immediately. Having plenty in your savings will also give you that extra reassurance you might need when you make a big purchase like a home.

4. You’re committed to where you live.

Buying a home and being a homeowner doesn’t mean you have to live there forever, but if you plan on staying for more than five years, it’s a smart investment. It’s a huge financial investment and commitment, so reflect on if you’re ready to settle down for a couple of years in your city. 

5. You have a stable employment history.

Before you try to apply for a loan, ask yourself how long you’ve been at your current job. Lenders want to be confident that you can pay the mortgage and will continue to do so. This proof is your employment history. 

6. Your debt is managed.

Another factor lenders look at before helping you become a homeowner is your current debt to income ratio. This ratio measures the likelihood of being able to afford another loan, in addition to your other loans, and how much money you have coming in. 

The formula for debt to income ratio is (total monthly payments divided by monthly income) x 100 = DTI ratio. Lenders typically want a rate that’s equal to or less than 45%. 

If you think you’re ready to make the leap to a homeowner or even thinking about it, contact the Sage Wilson Property Group at info@sagewilson.com or call us at (512) 828-7074. We’re happy to help you make a decision. Meet and connect with our team today! 

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