3 Reasons You Should Wait to Buy a House
Here are three reasons why you need to wait to purchase a home.
- You’ve got too much debt
You might make a reasonable income, but before you apply for a home loan, you must also weigh how much debt you hold. So will your lender. A formula called debt-to-income ratio (DTI) is used by them. You need a DTI of 43 percent or less to apply for most mortgage loans.Do you want to learn more? Visit www.rishona.net/2019/10/12/buy-or-rent-a-home/
By writing down all your loans, such as a student loan, car loan, a minimum credit card balance, and any other debt, you will find out what is yours. Full that. Find out how much money you put in then.
You calculate and apply investment or incentive income to your gross income. Divide your debt according to your revenue. The lower the DTI is the better. If it is big, before you buy a home, you will need to pay off some debt.
- You’re not happy you’re going to settle here
If you were to get a raise or (surprise!) have a baby who needs more space, you can’t just pick up and move once you buy a home. Well you can, but you’re going to lose a lot of money.
All those closing costs and the new furniture and blinds that suit the house perfectly will be money you waste unnecessarily. Plus, in the early years, the mortgage payments go more into interest. It takes a couple of years to begin to make a dent in the theory.
You may not be able to sell the house immediately, either which means you may have to drop the price, selling it for less than it’s worth. And don’t forget the fee of between 4 percent and 6 percent from the real estate agent that you will need to pay when you sell. For buying a home, a reasonable rule of thumb is that you should remain in it for at least five years. You’re probably better off renting, otherwise.
- You have not saved a big down payment,
You could buy a house with a down payment of less than 20 percent saved. Ask yourself, though, if you should. If you put less than that down, you’ll need to pay the lender for mortgage insurance. When you have less than 20 percent invested in the house, they charge you… In the event that you default.
For private mortgage insurance (PMI), plan to pay between 0.3 percent and 1.5 percent if you get a private loan. If you get a loan from the Federal Housing Administration, no matter how much down payment you make, you will still pay for mortgage insurance.
You would pay an initial premium of 1.75% of the value of the loan, and then an annual premium of 0.45% to 0.85% of the loan. Once you have 20 percent equity in the home, the only way to avoid paying mortgage insurance on an FHA loan is to refinance into a private loan.