Homeownership is a dream for many people. Maybe you just got married, or you're starting a family. Or maybe you've been renting for a while, and now you're looking for a place of your own. You know that you want to buy a home, but how do you know if you're financially ready for homeownership?
Here are some signs that it may be time to take the next step and start looking for a home:
1. You're prepared for the unexpected
An emergency fund is for those “life happens" moments—like unexpected medical bills, car repairs or even a job loss. Generally-speaking, it's recommended to have at least three months of your basic monthly expenses set aside in an emergency fund. If you don't have a fully-funded emergency fund yet, you may want to consider delaying home-buying until you do.
2. You've saved enough for a down payment, and more
Depending on the type of mortgage loan you qualify for, a down payment can range from 3% to 20% of the home's sale price. But this is only part of the cash you will need at closing time! There's also closing costs, insurance and taxes that can contribute to the total cash you'll need. Beyond that, keep in mind that you might also want a little extra money set aside for furniture and décor too.
3. Your credit score is in good shape
Lenders use your credit score and other financial information to determine whether you qualify for a mortgage loan. In general, the higher your credit score, the better your mortgage loan terms will be. Before you go house hunting, check your credit score. If it's lower than you'd like, you can always take steps to improve your credit score.
4. You have a home-buying budget
Using a mortgage calculator will help you understand what you can comfortably afford to spend on a home. A good rule of thumb is for your house-related costs not to exceed 25% of your take-home pay.
Along with monthly mortgage payments, there are other living costs you should factor into your home-buying budget. For example, if your rent payment included utilities, water or trash, don't forget these will also be part of your monthly expenses.
At Wright-Patt Credit Union (WPCU), we're here to help you achieve your dream of homeownership. Our friendly, knowledgeable Mortgage Loan Originators will guide you through the entire purchasing process and answer your questions every step of the way. Contact us or visit your nearest Member Center to get started.