Owning a home is one of everyone’s dream. However, not all are capable of a home purchase right now. Buying and owning a house means you’re saying yes to a huge financial commitment. And if you plan on applying for a mortgage to finance your home, it becomes an even bigger responsibility on your part.
But what if you’re already entertaining the idea of a home purchase with the help of a home loan? Before you make any move, it’s essential to think about your situation. How would anyone know whether or not you’re ready for a mortgage?
The Only Reason for Your Home Purchase is Because You Treat It as an Investment
While it may be true that owning a house and holding on for it for a couple of years can increase its home value, buying one just because it is an investment should be a no-no. There are things to consider as the real estate market can fluctuate depending on the location, condition of your house and other factors. Also, there are lots of expenses associated with owning a house – from bills to maintenance and repair costs to taxes.
Good Read: 8 Reasons to Buy a Home
You Haven’t Worked on the Same for At Least Two Years
Lenders would make sure you’re financially able enough to pay regularly for a mortgage. One way they do this is by checking on your employment history. Most lenders usually seek at least two years worth of your monthly average income. If your record shows you have a sporadic and job-hopping history, this won’t look good on your application. Why? The reason is simple. If you can’t stay long enough on a job, there’s a huge chance you can’t pay for the home loan which means saying yes to your application means increased risk on their part.
Your Savings are not Enough
Every type of home loan has a different requirement. While some mortgage programs like the FHA loan Texas offers as little as 3.5% down payment, a borrower should have enough reserves after the DP is taken out of their savings account. The usual required savings amount should be at least six months worth of your monthly mortgage payment. It is worth remembering that the down payment, interest rates, and monthly mortgage are not your only expenses, as there are other fees and taxes you need to worry about.
You’ve Got Too Much Debt
Having a credit history is vital when applying for a home loan. However, if you currently have too many credits and you have a poor credit history, then you’re not yet ready for a mortgage. If you want to get approved, make sure to clean up your credit history, pay up on time, pay in full when your budget allows and to refrain from adding new and unnecessary debts. While you don’t need to close your credits, make sure that you maintain your Debt-To-Income Ratio to a maximum 43% for higher chances of getting approved for a mortgage.