How to Know When You’re Ready to Buy a Home Rather Than Rent2/11/2011 If you’re a first time home buyer and you’re considering a home purchase, don’t starting hunting for your new home just yet. Buying a home is a major decision to make. It’s much different than renting, in a number of ways. Take a look at your financial situation and your personal goals to make sure you’re ready to buy a home. Your monthly and yearly expenses will likely increase when you purchase a home. Make sure you’re prepared for this. Though buying can be cheaper than renting in some cases, these homebuyers often end up paying more money in closing costs and maintenance fees than they save. Most buyers simply pay more in the first place. Take stock of your financial abilities and make decisions accordingly. You need a high credit score. If you want to purchase a home, you need a high credit score. This is the cold truth. If you have a shaky payment history or you’ve made poor financial decision in the past, you may not qualify for the loan amount you need. There are specialized loan programs available to individuals with low scores, such as the FHA loan program, but if you want the lowest mortgage rates, you should take time to repair your credit before you apply for a loan. It’s also important to establish a significant credit history. If your score is high but you’ve only ever made one or two minimal purchases with credit, you still probably won’t get approved for the loan you want. Build up your credit to show a significant, successful history. Make your rent payments on time for at least a year. A single late or missed rent payment may prevent you from getting a mortgage. Make sure you’ve paid your rent on time for at least a year before you apply. What are your plans for the future? If you’re planning to purchase a home, make sure you plan to live in it for a while. Five years is a good minimum. If you think you might lose your job or move to a new area in two or three years, you probably shouldn’t buy a home. Home ownership isn’t for everyone. If your job requires you to move from place to place every year or two, don’t buy yet. Make sure your plans for the future include owning a home. |
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