5 Questions to Ask Yourself to See If You Are Ready to Buy a Home
Rents are on the rise and the National Association of REALTORS® is projecting that rents will rise again by an average of 4% this year. If you are like most renters you tired of paying your landlord’s mortgage and have thought about purchasing a FishHawk Ranch home of your own.
Besides the rising rents, there are many reasons to want to own a home. Has your family gotten larger and you need extra space? Are you looking for a great way to build equity for your future? Are you looking for a tax write-off? If you answered yes to any of these, you might be ready to buy a home.
Buying a home is most likely the largest financial purchase you and your family will ever make. Buying a home is exciting, thrilling, and sometimes terrifying but don’t forget that it is a huge responsibility.
How Do You Know If You Are Ready
Ultimately you and your family will be the only people that can truly determine if you are ready to purchase a FishHawk Ranch home. Here are 5 questions to consider that may help you with this important decision.
- Can You Afford a Home? – Let’s face it, money is usually the single largest motivating factor on whether or not to purchase a home. If you are living paycheck to paycheck, it is not the right time for you to buy a home. Being a homeowner brings with it many new expenses. In addition to your mortgage, you could be paying for hazard insurance, utilities, homeowner association fees, CDD fees, property taxes, unexpected repair and maintenance costs. If you don’t already have a budget, you may want to start one. It is a good starting place to help you manage your money. It will also give you a good understanding of how much you can pay per month for a home. Once you have a monthly amount you are comfortable paying, get with a mortgage professional, get a pre-approval, and determine how much money you will qualify for to purchase a home.
- Do You Have the Money for the Down Payment & Closing Costs? – Purchasing a home comes with some upfront expenses. For most homes, you will need to have a down payment and closing costs. Keep in mind that mortgage lending guidelines are continuously changing so what may be true today may not be true tomorrow. Rates are historically low but not everyone will qualify for a mortgage. In an effort to open up lending Fannie Mae and Freddie Mac are now offering home loans with as little as 3% down. The guidelines for this loan will be strict. Applicants will need a minimum of a 620 FICO credit score and offer complete documentation of their income, assets, and job status. You will be required to receive homeowner counseling. FHA offers home loans that begin with a down payment of 3.5%. For all of these low down payment loans, you will be required to obtain mortgage insurance. If you would like to avoid the cost of mortgage insurance a 20% down payment would be required. In addition to the down payment, you will need enough money to cover your closing costs. Closing costs, in general, vary greatly from state to state, city to city, even lender to lender. I specialize in FishHawk Ranch real estate and do a lot of business in the Tampa Bay, Florida area. I advise my clients to anticipate closing costs in the range of 5% of the sales price of the home. This estimate is generally on the high side but it is better to be safe than sorry. If my buyer requests it I try to get the seller to contribute money towards my buyer’s closing costs so my buyer has fewer out-of-pocket expenses. There are lender restrictions involved with seller contributions but most lenders will allow at least 3% seller contributions. Your mortgage professional should be able to give you a pretty accurate closing cost breakdown if you ask them.
- How is Your Credit Score? – Your credit score, also known as a FICO score (Fair Isaac & Company), can range from 300 to 850. In order to provide the most accurate data on a borrower, most lenders use three major credit reporting agencies to pull credit reports on mortgage applicants. These agencies are TransUnion, Experian, and Equifax. Generally, each of these agencies will have similar but different FICO scores for you. Most lenders will use the middle score as the score to use for your loan. If your middle credit score is below 620, you’ll likely have a tough time getting a loan. A lot of lenders will still require at least a 640 middle score. There are many different types of mortgage professionals. You can go to a credit union, bank, or mortgage broker. The credit union and bank will typically have fewer options so if you are turned down by one of them you may want to give a mortgage broker a try. They typically have more loan products to choose from. If your credit score isn’t great, you should take some time to repair your credit and raise your credit score. Federal law requires you access to a Free Credit Report once a year.
- Do You Have a Steady Source of Income? – If you are thinking about quitting your job or if you are worried about possible layoffs at your company, this may not be the best time for you to purchase a home. Once again buying a home is a huge responsibility and has a large impact on your future. Make sure you feel you will have a steady and reliable source of income for the foreseeable future.
- Have You Picked a General Location to Live? – Unless your local real estate market is on fire you will typically need to live in your new home for at least three to five years before you recoup the transaction costs incurred when buying a home. If you are new to an area think of a short-term rental so you can get the feel of the area and different neighborhoods before you buy. If you are familiar with the area try to narrow down exactly where you want to live. Keep in mind, you should be in this house for a while!
Well, do you think you are ready to buy a home? If you have any additional questions feel free to reach out to me. I will be happy to answer them for you.
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About the Author
The above Real Estate article “5 Questions to Ask Yourself to See If You Are Ready to Buy a Home” was written by Jeff Gould.
Jeff is a top-selling, nationally recognized real estate broker, REALTOR®, and local FishHawk Ranch real estate expert.
In addition to the FishHawk area, Jeff sells homes in the entire Tampa Bay area. Including Lithia, Riverview, Valrico, Apollo Beach, Brandon, and the rest of the Tampa Bay area.
If you are looking to sell or buy a home anywhere in the Tampa Bay area, Jeff is your local and trusted professional.
Jeff can also be reached via text or phone at (813) 421-3007.
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