 Figuring
out whether you're ready to buy a house -- whether you're a
renter or are aiming to move up or size down -- can be a daunting
task. But there are signs that will indicate whether you're
ready to take the buying plunge.
If you are thinking about buying, you're not alone.
David Lereah, NAR's chief economist, said the housing market
has reached a new plateau. "Over the last few years, it's become
apparent that the level of home sales will generally remain
at higher levels than what was common in the mid-1990s," he
said. "The fundamental change is a growing population with a
rising number of households entering the age in which people
typically buy their first home. In short, we have the need,
desire and ability for people to buy homes."
So are you ready to make the move? You might be if you:
- Are familiar with the market. If you've been paying
attention to how much houses are listed for in the neighborhoods
you're eyeing and have a realistic view of how much a house
will cost you, you're in good shape. But if you're dreaming
about that big corner house with no clue about it's asking
price, you may want to spend some more time becoming familiar
with the market and how much houses are going for.
- Have the money for a down payment and closing costs.
The down payment is a percentage of the value of the property.
Freddie Mac says the percentage will be determined by the
type of mortgage you select. Down payments usually range
from 3 to 20 percent of the property value. Also, you may
be required to have Private Mortgage Insurance (PMI or MI)
if your down payment is less than 20 percent. Closing costs
include points, taxes, title insurance, financing costs
and items that must be prepaid or escrowed and other settlement
costs. Generally, buyers will receive an estimate of these
costs from your lender after you apply for a mortgage.
- Know how much you can afford. Freddie Mac says that
as a general guide, your monthly mortgage payment should
be less than or equal to a percentage of your income, usually
about a quarter of your gross monthly income. Also, your
income, debt and credit history go into determining how
much you can borrow. As a general rule, your debt -credit
card bills, car loans, housing expenses, alimony and child
support -- should not be more than about 30 to 40 percent
of your gross income.
- Know what additional expenses will come with owning
a home. This includes homeowners insurance, utility bills,
maintenance costs -- roofing, plumbing, heating and cooling.
- Have your credit in good shape and make sure your credit
report is accurate. Potential lenders will view your credit
history -- how much debt you've accrued, how many accounts
you have open, whether your payments are made on time, etc.
-- to determine whether they'll give you a loan. You should
get a report from each of the three credit reporting companies:
Equifax, Experian, and Trans Union.
- You haven't made any recent major purchases, particularly
a vehicle. If you do, you may have a harder time getting
a loan -- or it could potentially lower the amount you'll
be approved for.
Once you decide you're ready, you'll need to be prepared
to move quickly if you're aiming to buy in a sellers' market.
The next steps involve hiring a real estate professional and
getting pre-approved for a mortgage loan. This way you'll know
if you can get approved and how much you can spend on a house.
It also puts you in a stronger position when you ultimately
make an offer on a house.
- Written by Michele Dawson
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