Purchasing a house is one of the biggest dreams every person has. It’s also one of the biggest investments you’ll make in your life. If you’re planning to make this type of purchase, it’s crucial that you ensure you can secure a reasonable interest rate and keep up with mortgage payments.
It’s a lot better to wait and improve your financial stability instead of rushing into a case that leads to long-term issues.
It’s easy to convince yourself that you can handle the long-term commitment and costs of purchasing a house. Unfortunately, the decisions you make today will influence your finances for a lot of years to come.
Before you search for homes for sale in Fayette County TN, you need to look at your situation first. Today, we’re going to talk about several signs that indicate you’re not ready to buy a new house.
You Can’t Afford at Least a 20% Down Payment
If you can’t afford at least 20% of the overall cost as a down payment, the lender will require you to buy PMI (private mortgage insurance) to protect them from nonpayment. PMI can range from 0.5-1.5% of the loan. This depends on the amount of your down payment and your credit rating.
This can cost you a lot of money each year. You might have to reconsider buying a new house if you can’t afford at least a 20% down payment. You might have to look for ways to generate more income.
Savings Account Has No Regular Deposits
If you can save money from each paycheck, even if you already reached your savings goal, is an indication that you’ve got a stable flow of cash. It means that you have reached financial security.
On the other hand, you might have to wait to purchase a house if you have a hard time saving money due to your monthly expenses.
You Don’t Have Enough Emergency Savings
You can assume that you’re financially secure with a stable job. However, life is unpredictable. There are a lot of things that can happen. Money emergencies and financial setbacks are unavoidable.
In general, financial planners agree that having the equivalent of a year’s worth of living expenses in a savings account earning interest is required to protect you against unexpected events.
Mortgage Payments Per Month Exceed 30% of Your Income
You’re putting your finances in a tight spot if your mortgage payment every month takes more than 30% of your income. If this is the case, you will have a hard time when emergencies occur.
There are a couple of exceptions. However, according to professionals, you shouldn’t spend more than 1/3 of your monthly income on mortgage payments.
Low Credit Score
The first thing you’ve got to do before you buy a house is to examine your credit rating. Your credit score will help decide if you’re qualified for a home loan.
If your credit rating isn’t high enough to secure a mortgage loan, it’s best to build up your credit first before you purchase a new house.