Buying a home is a serious commitment-likely the biggest financial decision you’ll ever make—so it’s important to make sure you’re absolutely ready. Ask your selves the following questions, they will guide you in knowing if it is the right time for you to buy.
Why do I want to buy? Everyone has their own reasons for going into homeownership. Whether you are ready to be landlord- free or want more privacy, it is a great way to invest in yourself. Those monthly rental payments do not allow you to take any kind of tax deduction or offer any investment growth opportunity. Understanding your motivation on buying is important. You should feel comfortable to contact one of our real estate professionals to discuss your goals and seek out advice for what would be the best move for you.
Where do I want to buy? This is a lifestyle choice. The more you understand your priorities in your life and/or how you like to live, the easier it will be for you to narrow down where you want to buy. Logistics is a huge factor for most, potential growth rate, and type of community where you want to live—such as a rural area without nearby neighbors, a high-rise building with luxury amenities, a low maintenance town home with rooftop deck and skylines views. Or perhaps you’d prefer a home within a planned community with exemplary schools. Whatever you style, take time to explore Houston, the city and surrounding areas have a lot to offer.
Am I sticking around for a while? The general rule is that you want to be sure you’ll be in the same location for at least five years. Otherwise, you’re probably going to take a hit financially. The first hit is your closing costs. This can easily add up to thousands of dollars, and limiting how often you have to pay that kind of money is always a good idea. You take a second hit when you look at your mortgage statement to see exactly where your payments are going. You typically pay much more interest in the first few years, it isn’t until you’re about five years into paying down your mortgage that you’ve made enough progress on the principal to make the deal sweet. Five years is a generality. If you add in other factors, you can make buying a house that you don’t plan to stay in long-term a better choice. Turning the property into a rental is a great option for most Houston neighborhoods. Our real estate professionals always look into the rental comps as well as sales comps when working with a buyer so you may consider this factor that will void the 5 year rule.
Is my financial house in order? Saving money and preserving or improving your credit history are essential elements to homeownership. In order to qualify for a mortgage to buy a home, you’ll need good credit, a pattern of paying your bills on time while still saving money and a maximum debt-to-income ratio—your gross monthly income compared to the minimum payments on all recurring debts—of 43% or less.Some lenders have stricter guidelines, so the lower your debt-to-income ratio, the better your chances of a loan approval. It also is very wise to have cash reserves on hand after you buy. You not only need your down payment (3.5%-20%), but you will need some savings prepared for closing cost, moving expenses & earnest money deposit.
What can I afford? Remember, when you’re a homeowner, you also need to include home owners insurance, property taxes and homeowners association dues in your housing costs. You should use our home affordability calculator to help you estimate what you can pay for a home. In addition, you should think about your plans for the future and how you spend your money—along with your comfort level with a mortgage payment. A lender will tell your buying power, but that lender won’t know how much you spend on travel or golf. Your ability to place a larger down payment from savings or gift (gift with FHA programs) also directly effects your payment.