It can be difficult for potential first-time homebuyers to decide when the right time to purchase that new home is. A high-supply, low demand real-estate market is traditionally seen as the best time to buy, but with the housing market in places like Austin and Dallas promising to be hot for a while, is one supposed to wait forever?
While it's easier for buyers to negotiate a deal in a cooler market, a hot market shouldn't discourage people from buying, necessarily. Many other factors play huge rolls in whether it's time to purchase a home or not. Here are some questions to ask yourself before deciding to look for homes for sale in Austin, TX, or homes for sale in Dallas, TX.
1. Do you have a budget? Do you actually "stick to" your budget?
- Owning your own place can come with a whole lot of new expenses. Things like homeowners insurance, property taxes (ESPECIALLY here in Texas), home owners association fees, higher utility bills, and maintenance costs can add a whole lot more to your monthly expenditures. You need to be ready for this if you're considering buying your own home. If you have your set monthly budget, and you stick to it, a good idea is to create a mock-up of what your budget will look like once you own a home. For the next few months to a year after that, set aside the extra money you would be spending as a homeowner and put it into savings. This is a great way to make sure you can really afford it, not to mention give you some extra cushion for when you actually move in.
2. Have you saved up a down payment?
- The traditional amount you'll need to put down for a down payment on a home is 20%. That means if you want to purchase a $250,000 home, you'll need $50,000 dollars to put down. While this may seem like a lot, it's the smartest way to go about buying your new home. Now, zero or low-down loans do exist, but they could end up costing you in the long run. You will more than likely have to pay extra for private mortgage insurance, or have to take out a piggyback loan with much higher interest than the original. Do yourself a favor, and save up the money beforehand… you'll be glad you did.
3. Are you in debt?
- This should go without saying, but before you even think about purchasing a new house, you should make sure you have your debt under control. In order to get a mortgage, your debt needs to consume no more than 33% of your monthly gross income. Mortgage companies like to make sure that your TOTAL debt payments, including your mortgage, credit cards, student or auto loans, and the like will remain below 38% of your total pay. For this reason, it's best to make sure you pay as much outstanding debt off as possible before applying for a mortgage.
4. What about your credit score?
- You by no means have to have perfect credit to become a homeowner, but the better your credit score, the better your interest rate on your mortgage is likely to be. Lower interest rates mean lower monthly payments, so make sure you check your credit score before applying for a mortgage. There are tons of places to check online, some free, and some for a small fee. If you see errors, correct them, and if you think you can improve your score… then maybe you should wait a bit.
5. Do you have a reliable, consistent source of income?
- Buying a home is one of the most long-term financial commitments one can enter into, so before taking the leap, it's best to make sure your source of income is extremely reliable. Factors like being in school, having a less-than-reliable job, or plans to start a family can effect the amount of money you need to spend per month. You want to make sure that you can afford your mortgage payment not only now… but 10 years from now! It's also helpful to have a rather sizable rainy-day fund set up in case an emergency forces you to stop working.
These are just a few of the most important factors when considering buying a home for the first time. Other things to think about include commitment to your location, and the understanding that you are now becoming your own landlord (which includes maintenance, yard… the whole shebang.) Buying a home can be one of the most rewarding things you do in your life, but you want to make sure you are truly prepared before jumping into a mortgage.