If you’re thinking about buying a home, but you’re just not sure. You’re probably better off listening to your gut. That looming credit card debt, or personal loan, that you just can’t seem to kick whatever the case may be here are five reasons you might want to think about waiting to purchase a home and more importantly what to do about it.
Buying a home these days is no easy feat. Income is paramount. A credit score is important and depending on the loan program cash is also important as well. You have to be able to afford the mortgage at the end of the day. Here are five signs maybe you should put the house project temporally on hold.
- You don’t have any savings at all. If you purchase a house, it takes all of your cash and you don’t have a fallback that could be problematic. Having money in the bank, ideally 3 to 6 months of payments is a generally good rule of thumb. This money can be in your own personal savings end or in a 401(k) for example, or retirement fund. Or even money at home and safe. The point is to have financial backing if possible.
- Your job might be changing. This is a big one. People don’t buy houses if they’re not feeling optimistic about their income and the future of their job. If there have been rumblings about layoffs at your employer, you might want to think about pulling back on the house project. The last thing that you want is to buy a house and then get laid off from your job.
- Your income is just simply not enough to buy the house you want with the cash you have. Your income is one of the biggest drivers of your ability to buy a home and if your income and or your household income is not high enough it might mean having to wait to purchase a home or re-channel your efforts into a different area. For example in Sonoma County California generally speaking you need at least $100,000 a year to purchase a home if you have significantly less than 20% down. However, looking in a different area could radically change your entire scope, and you could always buy outside the area work on your income and finances, and re-position back to the area you wish when your financial situation supports it.
- Your debt is just too much. If you have a good income, but all of your income is eroded by debt, that’s problematic. Credit cards, car loans, and student loans all of these things mortgage your income meaning they take your income away which otherwise could be used towards qualifying an affordable house payment. It’s a ratio of 2 to 1 so for example if you have a car payment of $500 a month it takes $1000 of income needed to offset it. Pay off debt. Possibly could be a really good move. Depending on how much cash you have in relation to the income you have to generate the down payment.
- You’re looking for the deal the needle in the haystack. Let’s say you qualify for the loan, but at the end of the day, you have to get a deal that nobody else can get because you’re more educated you’re more sophisticated, or sharper than the average bear based on the research you’ve done. The reality of it is that hindsight is 2020 and real estate is a buy-and-hold game. Continuing to rent because you can’t find the deal you need in order to satisfy that desire to get a deal is a financial burden indeed as you’re continuing to pay rent while you’re trying to search for the trophy home that may, or most likely may never actually come versus buying a home. If you were to compare 3 to 4 years of trying to find the one home versus what you were paying rent and let’s say your rent is $3000 a month you’re talking about $60,000 of cash or more down the drain essentially financing a dream. The reality of it is the underlying issue here is fear and fear comes from a lack of understanding about the moving components and how to use leverage points to gain wealth for you and your family.
If you were desiring to buy a home, but you’re just not sure based on any of the five talking points above speak to a lender who can take a proactive look at where you are holistically financially today, and give you a long-term pragmatic plan for the future. Applying with a lender who has this long-term forward-thinking approach is your first step in helping you overcome whatever financial challenge you have today to best position you for tomorrow. Get a no-cost quote today!
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