Is It Time To Buy Your First Home?

If you’re thinking about buying your first home and getting out of the rent cycle, you may be wondering what first steps to take.  We understand the confusion, and whether you’re looking to buy your home in Northern Alabama or elsewhere, these questions could save you a lot of dead ends and frustration.

Are You Ready to Settle Down?

Ask yourself: Can you make the commitment?   When you own your own home, you are responsible for all repairs rather than your landlord.  You’re also responsible for all landscaping.

Can you handle being tied down to one place?   Do you have plenty of job opportunities where you plan to live?  Will you get bored easily by staying in one place?  These are great questions to ask yourself before you even begin looking for your first home.

Are you willing to save?  Saving involves cutting out some unnecessary expenses.  It may be a good idea to cook at home versus eating out for a few years, as well as skipping a vacation or two.   There are always ways to stockpile money for that down payment.

Once you’ve made your decision

What’s your debt to income ratio?  Mortgage lenders will want to know what percent of your income every month will go to housing costs, such as mortgage payments, property taxes, interest, HOA dues, and insurance.  In general, lenders prefer your gross income to be around two (if you have good credit) to four times the total cost of your home every month.  Lenders also factor in other debts, such as car payments and student loans, into this figure.  The lower your ratio, the better off you’ll be.

Have you managed your credit well?  Lenders look at your payment history and credit score when they determine if they’re going to give you a loan.   Having a good score can only help you get approved.

Have you saved enough?  Let’s say your gross income is about twice what you pay in housing costs per month.  If half your monthly income goes to housing and you don’t have savings, you don’t want to find yourself stuck with this payment if you lose a job, have a medical emergency, or experience some other financial woe.  In fact, it may be good practice to wait for a house that will require less than half of your income each month.

You’ll also need savings to cover a down payment for your house, which will be, at minimum, 3% of the house’s price.  There are cases where you can get into down payment assistance programs, especially if you’re a veteran or moving into an undeveloped area, but you will still have closing costs of 1-3% when you make the purchase.  It’s also a good idea to have three times your monthly payment stashed in the bank.

When you answer “yes” to all of these questions, you are ready to make the leap and purchase your first home in Decatur, AL and beyond.  Contact us today to get started.

Looking to Buy a Home?

*Required field

Mortgage Calculator

Please enter numbers only without commas or spaces.