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Are You Ready To Buy Your First House?

After renting your home for several years and being answerable to a landlord, the idea of owning your own house seems idyllic. However, there are a few tradeoffs; if anything breaks or stops working, you’re the one who has to pay to fix it. And that’s only if you manage to buy a house at all; there can be several unforeseen costs when getting a mortgage, despite all your careful planning. So, to make sure you’re ready to take this big step, here are a few questions you should ask yourself.

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Can you afford to buy a house?

This is the first, most important question, and it is usually where most discussions about buying a house end. Chances are if you’re struggling to pay your bill while you’re renting, you won’t be able to afford mortgage repayments.

If you’ve managed to save ten or twenty percent of a down payment, you should also ask yourself how easy it was to save all that money, and how long it will take you to feel financially secure again if you begin to buying process.

Do you know where you’re going to live?

The best-laid plans of mice and men often go awry. Even if you’re absolutely certain that your current town is where you’re going to stay for the next five years, unforeseen circumstances may come up that will require you to move to the other side of the country. These could range from a new job, or a need to move closer to your or your partner’s family. When planning to buy a house, it makes sense to plan for long-term ownership. Suppose you need to put a lot of work into the house; if you sell it after three years there is very little chance that you will break even. If you’re committed to buying, look for a house someplace where you know you’re going to stay for a minimum of five to seven years. The longer, the better.

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How’s your credit?

You may not have given it much thought before now, but you have a credit score and it will factor heavily into your ability to get the best interest rate available. If you’ve decided the time is right for you to take this step, start things off by getting a free credit check.

Can You Calculate An Affordable Payment?

The 43% debt-to-income ratio rule is generally used by the federal housing administration (FHA) as a guideline for approving mortgages. Although it can often change depending on market conditions, this ratio is the best way to determine if the borrower can repay the mortgage.

All your debt payments plus your new housing expenses – mortgage, homeowners association fees, property tax, homeowner’s insurance, etc. – shouldn’t equal more than 43% of your monthly gross income.

If you need a loan to buy a home, you need to speak to a mortgage professional before you speak to a real estate agent. Agencies such as StlRealEstateLLC.com, will ask you what your criteria are and set up a search for you, but they will also advise you to get pre approved by a mortgage professional before proceeding further, so it’s best to get the mortgage checked off your list first. More importantly, a mortgage pre approval will make your purchase offer more credible, and it will let you know exactly how much you can afford to borrow.

You should make your calculations based on what you can definitely afford. It won’t do you any favours if you factor in any future income; you might not get that job promotion or raise that you were promised, and then you’re trapped in a repayment plan you can’t afford.

Are there any hidden expenses?

As a first-time buyer, there are bound to be things you don’t know that seasoned buyers will know to watch out for. Have you factored council tax and home insurance into your budget? Could you still afford your car payments if you had a mortgage to pay off?

If you’re used to renting, you may not have considered that you are now solely responsible for making sure the house doesn’t fall down around you. Have you checked for any potential problems with the house that you will need to pay to have fixed? Paint jobs, plumbing, and fixing broken roof tiles are potential expenses, but you save money on some projects by taking them on yourself.

Even if your home seems to be in tip top condition when you first buy it, make sure you have a nest egg in case unforeseen expenses make themselves known at the worst possible time.

Is it the right time to buy a house?

When you find a new house, you may just want to jump right in, but timing is a crucial element in homebuyer readiness. If your current lease doesn’t expire for many months, or you need to move out within 30 days, then you don’t have a practical timeframe for beginning the buying process. You have to find the right balance between ready and raring to go, and taking your time. Waiting is especially good if a seller is fielding multiple offers; you don’t want to get caught up in a bidding war if you know you realistically can’t afford to go higher than your offer.

The right time doesn’t just refer to your personal circumstances; sometimes the cost of a house can climb up and down, much like the price of a holiday depends on whether or not it’s peak tourist season. Ideally, you should buy a house in the off-season i.e. when people don’t traditionally want to move home. If you’re choosing to buy in an area with lots of families, wait until October when the kids have gone back to school. If you’re looking in an area with a high student ratio, look to buy before and after the summer, when they’re still settled into their shared accommodation.

Buying a house is a life defining moment. If you’re going to do it, do it right.

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