Taking a home loan to buy our dream house can sometimes be accompanied by negative consequences such as heavy debt or possible bankruptcy. However, for the vast majority of us, getting a home loan is the first step towards home ownership, and most of us are at a point where we are ready to take on the responsibility. This article aims to help you identify when that point is for you.
#1. You Know What You Can Afford
When it comes to securing the finances you need to purchase a house, one of the most crucial factors is affordability. However, you will notice that buyers are often tempted into pricey homes that they are not able to afford in the long run. In order to figure out how much you can afford when choosing a home and home loan amount, it’s best to work backwards and find comfortable monthly repayment figure.
Let me give you one important tip to consider: your repayments should never amount to more than one-third or 33 % of your monthly salary. Suppose you earn $ 5000 a month. The ideal repayment amount will be approximately $ 1650. With this repayment figure, you would be able to afford a home priced at $ 410 000 (with a loan rate of 4.2%, a 10 % deposit and a maximum repayment period of 35 years).
#2. You Have Saved a Deposit
Although it is now possible to buy a house without a down payment, I think it is much better and financially healthier to have at least 10 % of the property value saved up for a deposit.
Placing a down payment shows financial responsibility. It clearly shows that you have made proper plans for the purchase and have a steady income that allows for savings. Besides, isn’t it obvious that the more you pay upfront, the more you will save on interest rates?
Remember that if you don’t have a down payment ready, your options for home loans will be more limited and the whole purchase process will become more expensive. You might also have to depend on governmental affordable housing programs.
#3. You Are Aware Of All the Costs
It is important to remember that when you are buying a home, there are other financial costs rather than the deposit and monthly repayments only. For example, you will have to expect to pay legal fees for the sale and purchase of the property, loan contract, valuation fees and stamp duties. These can already amount to a significant sum of money (depending of course on the buying price of the house and the loan amount).
People are often unaware of these costs and hence are more likely to make the wrong decision. However, rest assured as the team at Sunland Capital Mortgage Corporation can definitely help you out with this issue.
#4. You Have a Healthy Savings Account
Honestly, do you think that a person who has been living from paycheck to paycheck without even a cent saved up is ready for a home loan?
Indeed, a healthy savings account shows good money management skills and a large savings account represents a nice backup plan. For instance, imagine if tomorrow you lose your job or suffer a huge financial setback. It is evident that you wouldn’t want to be in a situation where you lose your home because you were not able to pay up your home loan payments. But if you have an emergency fund, then whatever the circumstances, you would still be able to sort out your finances and pay the loan installments.
#5. You Have Low Debt Commitments
Before you consider a home loan, you need to make sure that your finances are in order. Aside from having a healthy savings account and good credit, it is vital to ensure that you are not in heavy debt.
For example, how can you consider a home loan when you already owe a hefty sum for unpaid credit card bills or are still paying previous borrowings? Even the bank may be reluctant to grant you a loan when you already owe too much.
#6. You Have Steady Employment
In order to repay a loan, you must have some form of income. And, employment is one of the most significant factors to look at when you are considering a home loan. For instance, if you have a stable job with regular income earnings, you will be completely ready for a home loan.
If you find yourself ready for a home loan, get in touch with the financial wizards at Sunland Capital Mortgage Corporation today for the best deals.