Is there a greater dream or ambition for most Americans than have a place they call their own? There’s a good reason a whopping 65 percent of Americans are homeowners. America is one of the top countries with the highest homeownership rates.
It’s, therefore, understandable if you can’t wait to be a homeowner. However, owning a home is one of the biggest financial investments you’ll ever make. You want to make sure that you’re ready for it.
To help you avoid making costly mistakes, we’re sharing a couple of signs you’re ready to become a homeowner.
Come with us!
1. You’re Sick Tired of Being a Tenant
Here’s a plot twist.
The number of U.S. households renting has been on the rise, reaching a record-high. It’s easy to conclude that an increasing number of people are switching to renting as opposed to homeownership, but doing so is losing track of the bigger picture.
Most people who are tenants have no choice but to rent. If you’re one of these people, there’s no shame in this. However, if you’re sick and tired of being a tenant, perhaps you already have what it takes to become a homeowner.
Look, simply being tired of being a tenant isn’t a qualification for homeownership, but having that mindset is super important. There are lots of tenants who can afford homeownership, but because they haven’t developed a homeownership mindset, they’re still living in rental homes. Which, if you look at it, is not the best use of money.
Besides, homeownership isn’t just about splurging the cash. You need to be ready to take care of the property. This is how you’ll ensure it keeps appreciating in value.
2. You’ve Got the Financial Muscle to Pay Up the Deposit
You already know that buying a home is a massive financial investment. The median price of a home in the U.S. is about $250,000.
Do you have what it takes to pay this amount in cash? Certainly not!
Taking out a mortgage is the only way for the vast majority of Americans to become homeowners. And, to be honest, the easy access to mortgages is a key reason why you should buy a home.
That being said, one of the requirements of qualifying for a mortgage is being able to make a down payment. This is usually about 20 percent of the property’s cash price.
If you’re eyeing a $400K house, you’ll need to pay a $40K deposit.
So, the big question is: can you afford to pay up the deposit your mortgage lender needs? If yes, that’s a good sign you’re ready to become a homeowner.
If you are unable to pay the deposit, don’t lose hope. Most prospective homebuyers take years to save up the deposit. Start now.
3. Your Credit Score Is Good
Assuming that you’ll do with the vast majority of people do, which is going in for a mortgage, merely affording the deposit isn’t enough.
Your mortgage lender needs to know your creditworthiness. The only way to do this is to check your credit score.
What will they find?
Lenders have different credit score requirements, but you typically need to have good credit. Excellent credit is preferred.
The type of mortgage you’re applying for also plays a big role. For example, if you’re applying for a government-insured mortgage, such as a VA home loan, at least a credit score of at least 660 is required. On the other hand, a conventional mortgage typically requires a higher credit score.
What if your credit score is currently bad or poor?
That’s a bummer, but it’s not a life sentence. There are measures you can take to improve your credit score before going in for a home loan.
4. You Have a Good, Steady Income
Down payment? Check.
Credit score? Check.
What else is preventing you from getting approved for a mortgage? Your income!
It’s possible to have good credit and be able to afford a mortgage down payment and still fail to secure a mortgage. If that’s the case, it’s probably because your income isn’t steady enough.
A mortgage is a long-term financial commitment, with some loans running for 30 years. A lender needs to be sure that you’re going to at least maintain your income during this period.
If you’ve got a steady income and the documents to prove it, you stand a good chance of getting approved for a mortgage.
5. You’re Ready to Settle Down
It’s not a crime to buy a home this month and move out a few months later.
However, unless you have several boatloads of cash, you won’t afford to make such moves. If you’re anything like most people, you want to buy a home for the long haul. Perhaps you might want to sell it, but that’s after several years when it has gained a lot of value.
As such, if you’re nursing an adventurous spirit and you can’t seem to stay in one location for long, perhaps now isn’t the best time for you to consider homeownership. But if you’re ready to settle down for a long time, that’s a sign you’re ready to become a homeowner.
Are You Ready to Become a Homeowner?
Do you have what it takes to become a homeowner?
Having read this guide, there’s no doubt you’re in a better position to answer this question. But to recap, a lot goes into being a homeowner. From having a homeowner’s mindset to getting your finances right, homeownership is a big step.
And once you’re a homeowner, remember to keep reading our blog for the best renovation and remodeling tips!