Don’t buy a home now!
The best time to buy a home was yesterday!
The market is crashing!
It’s a buyer’s market!
With so many opinions being thrown around in the real estate world it can feel totally overwhelming when you are trying to decide if now is the right time to purchase your first home. At this point, we all know that buying and holding real estate is one of the top ways to build generational wealth. But how do you know when the right time to buy is? I’m here to tell you that only YOU can answer that question. I believe in being emotionally, mentally, and financially ready to buy a home. But how do you know if you are actually READY? Here are my 5 steps to deciding if you are FINACNIALLY ready to buy your first home.
(Rather watch a video than read? Head over to my Instagram for the recorded version)
#1 Check that credit score. Yes. This is going to be a HARD credit check when you sit down with a lender to chat numbers. But here is the thing. It is okay to do this. This is literally the point of having a credit score. Lenders need to know what this is to determine your risk of defaulting on the loan. Usually, the higher the credit score the lower the interest rate. You can also shop around with a few lenders during a specific period of time without docking your score multiple times. Usually this is between 10 and 14 days but talk to the lenders you're interviewing to confirm!
#2 Pay down that debt! And do your best to avoid new debit. While you’re searching for your first home, lenders really take into account your debt-to-income ratio. The ideal percentage is 36% for most lenders. But again, lower is usually better. To determine this ratio, take the amount of debt you are currently in-credit cards, car payments, student loans etc. and add that all up and divide it buy your current income. This will give you a percentage. If you are above 45%, you’re going to want to pay down some of your debt. OR up your income. Making an extra car payment or credit card payment will really help to lower this ratio and get you a better rate 😊
#3 NO SILENT QUITTING. No quitting at all. And I’m talking about your job. Most lenders want to see at least 2 years of job history that is under the same umbrella. My performer friends- this means you can bounce around on contracts because it is all under the same entertainment umbrella. For my office job peeps-don't quit your finance job and move to a job in the gardening industry. You need to have consistency in the job arena for lenders to feel like you are stable there and will have the money to consistently be paying your loan off. Lenders will want to verify your income, and this can mean a phone call to your employer a few days before (and AFTER) closing. So, if you must quit your job because you can’t stand it anymore...just wait until a week or so after you are closed on your home. But get another one asap
#4 Get pre-approved. As much as you “just want to look” at a beautiful home, this ain’t gonna happen. It is required to get pre-approved before asking for access to someone’s home. Would you want strangers looking around your home if they can’t actually afford to buy it? I didn’t think so. Get pre-approved first. This is non-negotiable.
#5. Know your budget. It’s pretty common for lenders to pre-approve buyers for a home loan that makes the buyer’s eyes bulge out of their head. But HEY! This is a good thing. It means you’ve been killing it as far as your debt to income and have a healthy down payment. But guess what? You don’t have to buy the house at the top of your budget just because you can. Talk with your lender about where you want your monthly payment to be, and they can adjust their lender letter accordingly. Speaking for myself, I also want to know where your comfort level is because I set searches below that number to make sure you feel good about the numbers and give you some wiggle room in negotiations that’s not going to make you want to throw up because you are spending so much.
Really sit down and dig through these steps to determine if you’re financially ready to buy a home. If you are that is fantastic! You can now move on to see if you are emotionally and mentally ready to buy.
Share this with someone you think will help! And of course, if you have any questions let me know!