Everyone knows that buying a home is a big milestone in life, so if your heart is set on becoming a homeowner, it’s important to keep in mind of the many red flags that might indicate that you aren’t ready to make the leap just yet.
Whether its too much debt or a lack of savings, there a several reasons why potential homeowners might want to wait on purchasing a home. Below are a few of them, as well as ways to overcome them.
Too much debt
Getting approved of a mortgage means you have to be able to show that you can handle all the expenses of owning a home (including the ones that aren’t rolled into your monthly mortgage payments). Meeting your financial obligations can be a challenge if you already have a mountain of debt to deal with. So, if that’s the case for you, consider paying down your debt to a manageable level before searching for a new home.
There are online tools that can help you strategically consolidate and pay down your debt, such as the debt consolidation calculator found on Bankrate.com.
Your credit isn’t stellar
Your credit score and credit card history are all closely associated with the mortgage pricing you’ll receive, which in turn impacts your monthly payments for the life of the loan. With that being said, it’s important to keep in mind that if your credit score is not optimal, you’ll end up paying more for the mortgage.
If you happen to be dissatisfied with your current credit score, there are ways to improve it. Some of which include making sure to pay your credit cards and other debts on time, as well as avoiding opening new credit lines unless you’re looking to establish a credit history.
Not enough savings
Having to pay a down payment that can range anywhere from 3 percent to 20 percent is old news to those who are looking to purchase a new home, but there are some hidden costs that can be surprising. Some of which include homeowner’s association fees, routine maintenance, utility bills, and major repairs.
If you don’t have the cash on hand to account for these expenses, its best to reconsider going forward in the home-buying process and start adding more money to your savings accounts. Depending on your income and credit profile, you may even be able to qualify for home-buyer assistance programs that can help you pay for the down payment and other closing costs.
Moving around a lot
If you’re someone who moves every so often, buying a home might not make the most sense financially. If that’s the case for you, it’s important to be aware that trying to sell your home could be a great hassle. Home values are consistently changing over time so there is no guarantee that you’ll be able to sell right away.
Take the time to consider your lifestyle factors that could impact your housing choices, including whether you plan to move a lot, your ability to pay for maintenance, your commute, and family needs. It’s important to remember to take your time and consider how you stand with all the factors that are mentioned above before buying a new home.
Many of the signs above can be difficult to determine on your own, so its also important to reach out to a trusted mortgage adviser for extra assistance. A trusted mortgage adviser can help you decide whether to rent or buy as well as provide you with the proper steps needed to be financially prepared before buying a new home.