A study showed that 36.6 percent of households are renting their home. The recent number includes groups less likely to rent, such as adults aged 45 to 64. Sixty-five percent of these people rent because of financial reasons, while 32 percent of the rent as a matter of choice.
However, despite these numbers, the primary goal of most renters is still to own a house. But if you’re one of the 32 percent renting by choice, how would you know when it’s time to buy your home?
Rising Rent Prices
Rising rent prices are typical, especially during an all-time low economy. It makes it more difficult for people who rent to budget for monthly housing costs while saving for other financial goals. Although renting might be a better option, it might be time to figure out which loans you qualify for to maximize what you pay for every month.
Being financially stable is a sign that you are ready to own a home. Some are motivated by the idea of owning a place and having more control over it. Look at the possibility of buying a house instead of renting—especially with today’s escalating monthly fees and low mortgage rates.
Improved Credit Score
Owning a house seems to be a better option than renting. However, most people applying for a mortgage do not get approved because of their low credit scores. Having a history of late payments and too much debt hurts your score, and it may take a while to build it up again. Therefore, once you’re back on track, you can apply for a mortgage loan and secure the house of your dreams.
Borrowers with a credit score of at least 500 can qualify for a home loan. However, the financial company might request a more significant down payment and a higher mortgage rate. A good credit score is a way to get the best results out of a financial agreement.
Good at Debt Management
Before applying for a mortgage loan, applicants should know and understand their responsibilities after getting approved. Lenders will screen mortgage applications along with the applicant’s debt-to-income ratio. Therefore, if it’s possible, clear out as much debt as you can before applying for another loan.
The higher an applicant’s debt-to-income ratio, the more risk you pose to a lender. Most lenders allow a DTI of up to 50 percent. However, some lenders only allow up to 43 percent. Meanwhile, if you previously had a high DTI ratio and paid off some of the high balances, you’re in a stronger position to get a mortgage.
Can Afford Housing Costs
Down payment is the biggest hurdle to homeownership. Aside from the monthly mortgage, people trying to buy a house need to pay for a down payment, which differs depending on the financial institution. People interested in purchasing a home should compare loan programs to see which institution offers the best rates for your budget.
Ready to Settle Down
Buying a house might mean you are ready to settle down. It’s either you’re getting married and building a family or retiring from the workforce. The process of owning a place to live involves many upfront costs that might take a few years to recoup. Therefore, if your savings are enough to cover the costs associated with buying a house, it is the most significant sign that you’re ready.
Buying a house is for people with a steady stream of income and plans to start fresh. Although it might sound more expensive than renting, think of it as paying for where you live and owning the property after the contract is over. Instead of spending thousands of dollars renting a property, if you can afford a house of your own, do it.
Sam Lends Money aims to help borrowers in Central California achieve their dreams of homeownership. Through our lowest rates and best terms for mortgage or refinance, we can make it happen. We’ll match you with a home loan that makes the most sense to you and your situation. Apply for a mortgage loan on our website today.