Deciding if You Should Buy a House
Knowing how to decide if you should buy a house requires an honest assessment of your financial and employment situation and how responsible you are. You’ll be taking on more than a monthly mortgage. There’s homeowner’s insurance, property taxes, water and garbage pickup fees.
Make sure your financial house is in order. Have you regularly saved money and not just for the sole purpose of raising a down payment? Lenders like to see a pattern of consistent saving. This shows you manage your money wisely. How is your credit? Your chances of getting approved for a mortgage are good if you have a good payment history. One or two late payments may not hurt your chances if you provide a good explanation for it, or if they occurred during the same period, like due to a job loss or illness.
Your debt-to-income ratio is another things lenders examine. According to the FHA, your mortgage should be 29 percent of your gross income. Figure out your other monthly expenses such as credit cards, utilities, car or student loans. If your monthly debt total is less than 41 percent (per the FHA) of your income, you’re in really good shape. A steady work history will work in your favor. Lenders like to see at least two years of steady employment. You should be prepared to provide a written explanation of any gaps in employment or significant income changes.
Homeowner is one of the best investments you can make. Treat it well and you might double your investment, which you’ll appreciate should you decide to sell. Your mortgage interest is tax deductible. You can also deduct the interest paid on a home equity loan (if you get one) and your property taxes. You also pay no taxes on any profit from the sale of your home up to $250,000 ($500,000 if you’re married filing jointly). The downside is unless your total deductions equal way more than your standard deduction, that tax break may not be all that, especially if you are the 20 percent tax bracket.
Aside from finances, are you mentally up to the challenge? There’s maintenance and repairs you’ll need to do regularly if you want the value of your home to increase. Owning a house means something always needs to be done, and you can’t call a landlord to deal with it. It’s your job now. Make sure you thoroughly check out the neighborhood you have in mind because if you end up with undesirable neighbors, picking up and moving is no longer as easy as it was before. Selling a home presents its own set of challenges that make renting look like a walk in the park. If you weighed all of these points and feel confident, then go for it - and good luck.