How do you really know when you are ready to move past renting a place to live and become a homeowner? If you are finally at the point in your life where you are weighing the pros and cons then the information below will help you! We’ve come up with a few ideas to help you realize it’s time to become a homeowner.
Can you afford it?
Having a steady job is the first sign of being able to buy a home. Mortgage companies look at the length of employment as an indicator as to whether you will be able to afford and make your loan payments. If you are a freelancer or are self-employed, your W-2s will be the key to showing your ability to afford home payments.
Another key attribute to get a loan is to have a handle on your debt. While companies understand that being debt-free is difficult, they need to make sure you aren’t carrying too much debt relative to what you make. Loan companies are making sure you will be able to afford to take on another payment. You can check on this yourself before meeting with a loan professional by looking at your debt-to-income ration. To find your current ration, add together your current monthly income, then, divide that by the sum total of your recurring monthly debts. Exclude your current rent from this equation since the home loan will replace it. In most cases, your ratio should be less than or equal to 36 percent.
Down Payments and Closing Fees
Not only should you look at your spending and income, but you should also understand your savings. Buying a home usually comes with a down payment that will need to be paid at the time of closing on your home. In addition to the down payment, there are also closing costs that would include any fees to facilitate the transaction. Typically, you can work with your realtor or closing company to discuss these fees and plan for how much you will need at closing time.
Finally, you will want to make sure you are ready to settle down. Owning a home is a lifestyle change. Before deciding on purchasing a home, you will want to make sure that you intend on staying there for a while. It is suggested that if you are looking at buying a home you should be prepared to stay in that home for the next five years. Another key difference in owning versus renting is that you will need to know and be able to handle the various maintenance of home ownership.
Contact a Realtor in Detroit Lakes
If you are ready to take the plunge into owning a home, reach out to one of our agents. They would love to get you a home that fits all of your needs. Or if you are just getting an idea of homes in the area, take a look at our listings.