How to Know When You Are Ready for Home Buying

Across the United States millions of people are thinking of either buying a home now or in the future. A home is a good investment and your monthly payments towards it go towards increasing your net worth. On the other hand the monthly rent payments are a loss in the sense that they don't add anything to your net worth. Hence many people think of buying a home at sometime in their life. However home buying requires a lot of financial and mental preparation beforehand. You should not foray into home buying until you are fully prepared both financially and mentally to go through the whole process. In this context you must know when you are ready for home buying.

Before you can even think of buying a home you should start saving so as to have enough money to cover down payment, closing costs and some other expenditures like agent, broker and inspection fees. Your down payment will usually be around 15% of the value of the property. However, you should be prepared to pay 20% if necessary. The more down payment you can give the lesser will be your monthly payment burden and you interest payments will also be lower. The closing costs will usually be around 5% of the property price. Thus you should get a good faith estimate and start saving a little more than required so as to cover any unexpected costs.

You should start cutting your credit card bills and unnecessary expenditures, to help you to build up your savings faster. Make sure that you don't buy any expensive item like an expensive car, just before you think of buying a home, as this will pull down your credit rating drastically. If your credit rating is low, you must take steps to improve it if you wish to minimize your interest payments. You will also have to pay less down payment if your credit rating is very good. There may be some mistakes in your credit report, so be sure to check it out thoroughly and get it corrected if necessary. You should not suffer unnecessarily because of a faulty credit rating as it can increase your financial burden for no fault of yours.

Before buying a home, it's important to have an idea about what your FICO credit score is and the condition of your credit. You can find this information out by ordering your credit reports from the three major credit reporting agencies; Trans Union, Equifax and Experian to review your credit reports.

A different option would be to have a mortgage loan officer pull your credit and discuss the status of your credit with you as well as your credit scores. This might be a good route to take because your mortgage loan officer is the one who would be working for you to get an approval for a mortgage loan so that you can buy a house. He or she would be able to tell you whether you are ready to buy a house according to your credit status and credit scores at that time or not.

If you're in a situation whereas your credit and scores need some improvement first before you can qualify for a home loan, then your mortgage loan officer may be able to share with you and work with you on what you can do to improve your credit status and scores to help you get to the place to be able to buy a home. It may take a little while, but as you remain patient and diligent to do everything that you need to do, you will see that your credit status and scores will continually improve and once your credit has improved and you've reached your target credit scores you will be able to buy your first home. The key is to never give up.