Buying a home is a major financial purchase. In fact, it is often the largest investment many people will make over the course of their lives. So, no pressure, right? The fact that it is a weighty decision with real consequences can cause a lot of anxiety for many potential homebuyers, sometimes even paralyzing them from pulling the trigger on a home purchase. If you worry about the size of your down payment, and what happens if you can’t make your mortgage payments, you are among the millions who face the same fears every year. While buying a house can be daunting, it can also be smart and rewarding. Here are some tips for helping to get past those first-time home buyer anxieties and to feel like you are truly ready to jump into the market.
Having too much debt can put a strain on your resources when you’re trying to buy a house. With the average U.S. household carrying several hundred dollars’ worth of student loans, auto loans, and credit card debt each month, it can feel overwhelming to take on a new, larger payment as well. Learning to budget so that you have money left over after all your current debt requirements is essential to being ready for homeownership. Debt consolidation is one step that can help you start on that path. Just remember, it is still possible to carry debt and successfully manage a home loan as well. Most lenders like to see a debt-to-income ratio of 36% or lower, so if you are there or close to it, you can put that anxiety away.
Having a decent credit score is important for being approved for mortgage financing as well as for getting good interest rates and terms. While most loans require a FICO credit score of 620 or higher, there are some types (i.e., VA loans) that will accept lower numbers. If your score is too low right now, you can lay this anxiety to rest by building it up over the next several months. The fastest and most effective way to raise your credit is by paying all your bills on time. It is also important to keep your credit card balances low and not apply for any new credit as much as possible until your home loan process is complete.
The way house prices are rising today, it may feel impossible for first-time buyers to ever save enough for a down payment. While this is a valid concern, potential buyers should know that there are plenty of mortgage options that do not require a full 20% down. FHA loans for example only require as little as 3.5% and VA loans often require nothing. You can calm this anxiety by speaking with a mortgage lender about the various choices available for your financial situation.
Another anxiety many first-timers worry about is whether they can afford the mortgage payment. There are calculators online that can help you figure out how much you can reasonably add to your budget, but sometimes they do not include all the added costs, like property taxes and homeowners’ insurance. Again, talking with a mortgage lender will help you get an accurate picture of what a mortgage payment in your area and your price range would look like. Most lenders prefer that your housing expenses add up to no more than 30% of your gross monthly income. If a proposed home purchase would allow you to stick to that kind of budget, you can check off that worry as well.
If you fulfill all the requirements for buying a home, there still may be worries even after the purchase. Home maintenance and a mortgage contract are serious responsibilities, but owning your own home can also bring freedom and peace of mind when you are ready to take the plunge.