Ideas To Know If You’re Now Able To Buy A Home In Texas
The “perfect” timing in buying a home varies depending on one person to another. Is the time right for you?
In general, there’s no specific answer to questions on when the perfect time is in buying home. It simply means that it all depends on one’s personal decisions, along with several factors to be taken into consideration.
Consider these five indications below in helping you decide whether you should pursue buying a home:
1. You Have A Stable Source Of Income
The majority of lenders will want to make sure that you can pay your mortgage and that you can do so, not just within the year, but in the near future as well. One proof for these lenders is that you have a stable source of income, coming from the same employer.
Typically, lenders will ask you to submit your W-2s for the past two years. For those who are self-employed, make sure that you are prepared with your records of tax returns over the past two years. Additionally, lenders may also require you to present any 1099s that you acquired over the course of 2 years.
2. You Have Little To No Debt
Another factor to take into consideration is if have a DTI that is not more than 45%. Another factor that lenders check before they approve your mortgage loan is your DTI, also known as your debt-to-income ratio. Your DTI simply shows your capacity of being able to handle an additional loan, considering all your current debt payments. This is compared alongside the additional income and money you have left after settling the monthly debt payments.
If you have a current DTI that’s more than 45%, you have to work on improving on that ratio before you even consider making a house purchase.
3. You’ve Saved For The Rainy Days
How much is the total cost of the house you’re planning to get? If you have more than 5% of that amount in your savings, it’s a good indication that you’re ready to purchase a home.
Aside from making sure that you have enough money to pay for your mortgage every month, the majority of lenders will also take into consideration how much you currently have in your savings. This amount will go towards the upfront costs such as:
- Down payment: Most houses require a 20% down payment – although you may find some realtors that may require a little bit less than 20%.
- Closing costs: These are miscellaneous fees that the home purchaser will need to settle to close the home. There’s no specific amount, and the overall cost will be shouldered both by the seller and buyer. Typically, closing costs range from 2-5% of the overall house price.
- Reserves: This refers to the total amount of money that will be left to your bank account after the down payment and closing cost deductions. Lenders are most likely to approve your mortgage if you have enough money in your bank, at least 2 months’ worth of your mortgage. There’s no harm in having a larger amount for a buffer, as it increases your chances of getting that mortgage approval.