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Thinking about buying a home, but not sure where to start? Navigating the complex housing market can be tough. The best time to purchase a home is dependent on your financial situation.

buying a home

Here are a few important questions to consider before buying a home.

How much house can I afford?

A mortgage calculator is a great resource for determining how much house you can afford. Start by figuring out how much you earn each month. Next, list any housing costs, down payments, property taxes, housing insurance costs and the loan term. Most loan terms are 30 years, although some people opt for shorter loans. Lastly, tally up your expenses. Be accurate with how much you spend monthly, as this will dictate what you can reasonably afford.

Debt ratio requirements vary depending on the type of loan you are applying for. A good rule of thumb is to follow the 29/43 percent guideline. This guideline states that you should spend no more than 29 percent of your gross monthly income on housing expenses and no more than 43 percent on total debt.  

Is my debt under control?

You may have some sort of debt – credit card, student loans or something else. However, if you are on your way to becoming debt free, it might be time to think about investing in a home. If you have too much debt, it will be more difficult to get a loan and may cause interest rates to rise. As you pay down your debt and prove yourself to be a dependable borrower over time, your credit score will go up. A FICO credit score of 620 is typically the minimum credit score needed to buy a house. The average credit score is 620-680, very good credit is 680-740 and over 740 is spotless.

Is my income stable?

Having a stable and reliable income is important when buying a home because you can anticipate how much money you will have each month. This gives you an accurate idea of how much you can really afford. Having an emergency fund, which covers 3-6 months’ worth of living expenses, is important because you can use this to cover any unforeseen costs you might run into while purchasing and owning a new home.

What does my local real estate market look like?

Every real estate market is different. Determining the best time to buy a home in your market depends on its specific conditions. November may have better prices but less homes to choose from. April usually is the opposite, with more homes to choose from at a higher price. Every season has its pluses and minuses, so make sure to consider what’s best for your situation. Many markets are currently experiencing a home inventory shortage so having a pre-approval letter from your bank will enable you to submit a purchase offer quickly and with confidence!

At SmartBank, we have qualified team members who are ready to guide you through the process of purchasing a new home. For more information on personal mortgages, and to start your home buying process, visit https://www.smartbank.com/personal-banking/personal-mortgages/.

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