Questions to Consider
Are you ready to purchase a home?
Home ownership not only means you can decorate your house how you want it to look, but it also means maintaining and repairing your home while you own it. On top of monthly payments, you'll also need to take care of your lawn, maintain appliances, repaint the exterior of your home, and more. But with these added responsibilities comes a rewarding experience!
What can you afford?
It's important to have a realistic idea of what sort of home you can afford, especially on a monthly basis. Having a big monthly mortgage payment may get you a bigger house, but sacrificing most of your monthly income can quickly dampen the joy of your new home. It's much better to buy a simpler home now and save up for your future "dream home".
What's your debt-to-income ratio?
Your debt-to-income ratio is something that lenders seriously consider when deciding on giving you a loan. The exact percentage may differ depending on the lender, but there are a couple of percentages to aim for. For a front-end ratio (aka "housing ratio"), your housing payment shouldn't be more than 30% of your income before taxes. For a back-end ratio, it shouldn't be more than 38% of your income (this includes car loan, student loan, credit card, and housing payments). Your debt-to-income ratio could determine where you can afford to live. For example, $250,000 can buy much more house in a rural area than in a more urban area.
What are your wants vs needs?
Do you want to take care of your lawn or would you prefer to hire someone else to do it? Would you like to live in a community with rules about garbage cans, recreational vehicle visibility, paint colors, and more, or would you rather be able to do what you like on your property? Knowing your answers to questions like these will help you narrow down your search for the perfect home for you and your family.