Becoming a homeowner is a milestone many aspire to reach, and it’s an exciting goal! But it can be hard to decide if you’re ready for the commitment of being a homeowner or should renew your lease for another year. Here are some signs that you’re prepared to buy a home!
1. You Have Money for a Down Payment to Buy a Home
This first step is one of the most challenging obstacles homebuyers face when purchasing a house. While 20% is recommended, it’s not always possible or sometimes needed, depending on your loan. Some loans may require less of a down payment, like 3-5%, while the industry’s average is between 6-8%. The benefit of putting down a larger down payment is the ability to pay off your mortgage earlier. That’s why it’s important to research multiple mortgage lenders and find the terms suitable for your goals and finances.
2. You Have a Good Credit Score
A high credit score is anything above 700 and considered excellent. Mortgage lenders use your credit score to determine your interest rate. A higher credit score will save you money long term since you’ll receive a lower interest rate. Banks and other monitoring tools will offer free credit score tracking. The available balance and credit for your accounts, as well as the length of time the accounts have been active, are two significant impacts on your credit score.
3. You Have Money for Closing Costs
Another sizable financial obstacle besides a down payment is closing costs. For buyers in Texas, there are title company fees that include the escrow fee, endorsements, recording fees ($120-$160), loan origination charges (amount depends on loan), appraisal fee ($500-$700), credit report ($50-$70), lender’s document preparation ($100-$120), and upfront mortgage insurance. There are also escrow account fees if you put less than a 20% down payment. This includes homeowners insurance ($900-$2,000/year) and property taxes for the rest of the year. As you can see, all the fees add up and can cost up to thousands of dollars, depending on various factors. Typically, closing costs about 1% of the purchase price.
4. You Get a Good Loan to Buy a Home
You’ll have to research several mortgage lenders and companies to see which loan will give you the most favorable terms. Loans will vary in length, interest rate types, and loan types. These factors will determine how much you’ll pay in interest for the next upcoming years. That’s why you must find a lender you trust and can work with. Interest rates are low now, but housing prices are high, so you want a loan that will accommodate both factors. Click here for our favorite Austin-area lenders.
Once you have all 4 steps, you’re finally ready to buy a home!