Four Signs You’re Ready to Stop Renting & Buy
Although renting provides the freedom most people are seeking throughout adulthood, it’s not uncommon to find yourself dreaming of owning your very own home. We’ve put together a few indicators that you might be ready to quit renting & finally buy!
#1: Your debt-to-income ratio is low.
If your monthly debt payments (auto, student, medical, etc.) are lower than your monthly income, your debt-to-income ratio will also be lower, therefore better qualifying you for a mortgage. Although there is no standard set of requirements of what the debt-to-income ratio must be, most banks would lend if the DTI were around or below 40%, and that includes all monthly debt payments and the new mortgage.
#2: You have a satisfactory credit score.
This comes without saying that the higher your credit score is, the better your chances of securing a home loan. Higher credit scores also oftentimes come with the advantage of lower down payments & rates. When applying for a conventional loan, a credit score of 620 or higher will give you a better chance of securing a loan while anything below 620 might result in not being approved or being required to pay a higher monthly payment.
#3: You have the funds for a down payment & additional costs.
Banks of Florida, 1920s | Source: State Archives of Florida
When it’s your first home, the money for a down payment often doesn’t come from the proceeds of selling your previous home, but from saving earnings from your hard work. The amount of the down payment depends on the nature of the mortgage loan you secure. The Federal Housing Administration (FHA) also has loan programs unique to first-time homebuyers. Additional costs of buying a home may include inspections, appraisals, closing costs, etc.
#4: You have a strong sense of stability.
Stability is a key factor in determining whether you’re prepared to purchase a home. Loan officers typically check into employment history to see if you historically keep your jobs and remain financially stable to give you the appropriate mortgage rate for your lifestyle.
These aren’t requirements for first time homeowners, these are just signs that typically indicate that you’re ready to make the jump into homeownership!