- You have a reliable source of income. Home ownership requires paying regular bills, and being prepared for unexpected expenses. If your income fluctuates wildly, you may want to save up a significant reserve fund before thinking about jumping into the market.
- You have saved a down payment. Do not – I repeat, do not – borrow your down payment. You should not be thinking about buying until you have saved up at least 5%, plus closing costs.
- You have a low debt load. A mortgage is a significant debt to take on. Be sure that other debts are paid out, or at least significantly paid down, before buying a house; at the very least, this will get you a better interest rate.
- You understand the numbers. You should budget for your mortgage payment, insurance, property taxes, utilities, and a maintenance fund, and add on more for emergencies. You always want to have more money than month, and home ownership can be more expensive than you think.
- You can get the mortgage on your own. If you need a parent or other relative to guarantee the mortgage, at least have a plan to get them off the mortgage quickly. Sometimes, especially if you are young, lenders aren’t sure if you are able to handle a mortgage. If you know that it’s just for the first five years, that is one thing, but don’t plan on having mom on title for 20 years so that you can have a house. That’s not fair to anyone.
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