Homeownership involves more than getting a mortgage and paying for a down payment. Owning a home means getting ready for a new lifestyle. It involves preparing and planning for the long-term to deal with the financial challenges associated with buying a new house.
Before finally deciding to purchase your dream home, it is best to consider your finances and current lifestyle. Below are the signs that homeownership is right for you:
Owning a house is a long-term financial commitment, involving 15 years or more. It is never advisable to buy a house if you only plan to own it for three to five years. This is because the transaction cost of buying and selling properties could lose you money. Buying a home is the right move if you can stay in a single location for 10 years or more.
Getting a mortgage to finance a house means entering into a financial commitment. Econ Mortgage and other mortgage companies in Utah suggest that it is important to be confident in affording monthly payment 10 or 20 years from now. Having a stable income and a good employment history are essential to keep up with the monthly mortgage payments.
Down Payment Savings
You’ll need significant savings to pay for down payment and other moving expenses. While some lenders accept payments for as low as 3%, it is best to pay 20% to avoid private mortgage insurance (PMI). PMI protects the lender in case you default on the loan, which can cost about 0.5 to 1% of the total mortgage amount annually.
Good Credit History
Many loan companies require applicants to have a good credit score. This only means that having a poor score indicates paying a high-interest rate over the life of the mortgage. It’s always best to have a good credit history or improve your score to qualify for better loan deals.
Homeownership is a big financial responsibility that requires time and money. This makes it even more important to assess your finances and commitment readiness. Be sure that you are both financially and emotionally ready before taking the plunge.