Are you ready to quit renting and own a home?

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Are you ready to quit renting and own a home?

Postby Dolphin » Tue Jul 25, 2017 5:46 pm

Owning a home can be a smart financial move, but is it right for you, right now?

It’s happening all across the UK right now: hordes of tenants, innocently perusing their social media accounts, are noticing a theme. It’s not that everyone is getting married or obsessing over spiralized vegetables — they’re posting pictures of newly purchased homes.
But like your mother always said, just because everyone is doing it doesn’t mean you should — or should you? There are certainly pros and cons of becoming a homeowner, and stumbling across just one dreamy listing of a home in Brixton, London with the perfect open-concept kitchen and fenced-in garden can leave you thinking about little else. But then you realize you’d rather save your money for a travel adventure. Don’t jump the rope and assume you should buy a house. Here’s some truth talk: You might not be ready to buy.

Ask yourself these seven questions that reveal whether you’re ready to buy a house or not.

1. 1. Do you make enough money?
You might think you make enough money to buy a home, but crunch the numbers first and see what your costs would actually be — a mortgage calculator can come in handy here. You need both a deposit and ongoing money, says Lisa from rentdirectuk.co.uk. “Upfront money includes having enough for the deposit and completion feests and enough left over for an emergency fund,” says Ma. “On an ongoing basis, a buyer’s salary will need to be enough to pay for mortgage interest and principal, service charge, insurance, and council tax.” These costs, according to many financial planners, should be less than 28% of your gross income.

2. 2. Do you have too much debt?
Let’s say you do make enough money to afford to buy a house and make your monthly mortgage payments. You also need to factor in any debt you might have. Hint: If all your credit cards are maxed out, you may want to get those bills under control before entering homeownership. Lenders typically want your total debt load (which includes your potential mortgage payment) to be less than 36% of your gross income. “Take a hard look at your spending habits and change them to improve your chances of being able to support a mortgage.

3. 3. Do you have enough savings?
If you’ve saved enough for the deposit, you’ve made it over one big hurdle. But you need more than just that. What if your home needs an emergency repair? Would you have the money to pay for it, or would a surprise expense put you in debt? “Expect the unexpected,” says Peter from Dolphin Real Estate in London. “Your boiler may die on a cold weekend, or a blocked drain.
And then there are those costs that aren’t necessarily unexpected but that you might not have considered. “Not only does a prospective buyer need money for completion fees and the first few months’ mortgage payments, they also need money for moving costs. You will also need money for furnishings and decorating the new house..” As you can see, you don’t want to drain your savings on just the deposit payment.

4. 4. Have you been on the job long enough?
Most mortgage lenders like to see that you’ve been working the same job for at least two years. In fact, they calculate your average income based on your job history for the last 24 months. Being on the job that long shows a certain stability, and changing jobs or having an income gap signals insecurity. A major job change, such as moving from salary to commission-based pay, may cause your income to fluctuate and can add to uncertainty about your readiness to buy a home. Even if you qualify based on expected income, what if you don’t make that money in your new position?”

5. 5. Do you have poor (or no) credit?
A bad credit score indicates some sort of financial problem, such as skipping out on paying a bill or two, filing for bankruptcy, or carrying too much debt. Take a close look at your credit before making a decision to buy. A mortgage lender may have questions about payments, loans, or other debts and may make suggestions that could require time to resolve. If it takes six months to fix, you might not be ready to buy just yet.
Having little or no credit can also be problematic. A tip: “Lenders take into account ‘alternative credit trade lines.’ These types of credit are anything from rental history, car insurance, utilities, monthly subscription services, and mobile phone. They look for a pattern of good credit with those companies for 12 months or longer.

6. 6. Do you know what type of home you want?

Generally speaking your finances dictate what type of home you can afford, as a starter home it might be best to go for a flat, they are normally cheaper than houses but be aware of the service charges that come along with flats. You might be able to purchase a shared ownership property too, the advantage of this is that you can put down a smaller deposit but be in the know that you have to pay rent on the part you don't own. What about that lovely pet dog you currently have , pets can also influence what you can buy. Ideally a big dog needs a garden to play in, the flat you might want may also have leasehold rules that prevent dog ownership. You might have thought only about buying a property with an extra room that you currently need and you could rent that extra room to get some extra money and also some company in a flat mate. “Each has unique considerations for upkeep and responsibility. It’s hard to say, ‘I’m ready to buy’ without knowing what each type of home has to offer.

7. 7. Are you ready to stick around?
Unless you’re pretty sure that you’ll want to stay in the area for the next three to five years, you’re not ready to buy. If you buy a house and have to sell the next year, you’re likely to lose money because appreciation won’t catch up to the completion fees and post-purchase expenses during that short time. If your job is in limbo, or you’re considering moving a few hours away to be closer to family in the near future, it’s wise to hold off on buying a home.
Dolphin
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Joined: Tue Apr 19, 2011 8:09 pm

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