Before you can become a homeowner, you need to know how much house you can actually afford. Not sure how to do that? Here are five essential questions to ask yourself before you sign on the dotted line.
What Will It Really Cost?
The cost of homeownership can’t be neatly summed up in a house’s sales price. There are other factors to consider. Unless you’re exceptionally wealthy, you’ll almost certainly need to take out a mortgage loan, which means you’ll be paying interest. A house payment calculator can help you get a sense of just what that will cost you. Taxes, utilities, and insurance costs should also be taken into consideration.
What is Your Credit Score?
When applying for a mortgage, one of the biggest things that lenders look at is a potential borrower’s credit history. If you have bad credit, you might find buying a house difficult. Luckily, there are things you can do to improve your standing, such as settling your debts, making bill payments on time, and correcting any errors that might appear on your credit report.
How Much Have You Saved?
Although mortgages can help ease your financial burden by covering the bulk of a home’s sales price at the time of sale, you will still be expected to pay a significant percentage of the total cost yourself. This is called the down payment, and it usually adds up to about 20% of the total sales price. The best way to prepare for this is to make sure that you have enough money saved up beforehand. If you don’t have enough to cover the down payment, you’ll probably need to keep shopping or keep saving.
Do You Have a Stable Income?
Mortgage loans can take a long time to pay off, with many of them having repayment periods of between 10 and 30 years. Fall far enough behind on your mortgage and you could lose your house completely, rendering all the money you put into it over the years pointless. That’s why it’s crucial that you have a stable income when you buy a home, and that you are confident that your income will remain stable far into the foreseeable future.
What Condition Is It In?
Among the hidden costs that too many buyers overlook when purchasing a property are repair and maintenance expenses. If a house is in poor enough condition, it might end up costing you more to fix it up than the amount you paid to buy it in the first place. Before committing to a property, thoroughly inspect it to get an idea of how much additional work it may need.
