Ready to Buy a House: Financial Things to Consider

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Few things are more exciting than buying a house and making it your home. Knowing when it’s the right time to buy derives from your personal circumstances, but some external elements and market realities affect when it’s right to buy too.

Here are some of the things that can affect your decision to purchase a home, and the timing to do it.

  • Interest rates. Right now, interest rates are low, making housing affordable. Keeping an eye on rates can save you money. You can get pre-approval for a mortgage that locks in a low rate, so check out the programs offered by various lenders to see which one has the most useful option for you.
  • Inventory levels. Listed homes in your area that fit your budget, and your criteria, ebb and flow. Develop a relationship with a qualified real estate market specialist to keep tabs on inventory levels, so you know when to buy.
  • Increased prices. Supply and demand drive up prices, so if prices begin to increase it may be time to step into the market. Again, your real estate agent can keep you apprised of price fluctuations in the market.
  • Income levels. You might simply be waiting for a promised raise or that bonus to plump up your down-payment cache. When that’s the case, notify your agent of your expectation and the timing so that they begin looking for you just ahead of when you’re ready to make the purchase.
  • Income tax refunds. Although using the IRS as a savings account is a poor financial strategy, sometimes, you end up with a bigger refund than you’d anticipated. When that happens, and you receive the extra funds, it might be time to make homeownership a reality.
  • Investments. When an investment gives you an unexpected return, it might be time to reinvest it into a home.

If any of these are true, you may be financially ready. When making any financial decision—especially huge ones such as buying a home—it’s essential to contemplate the reason behind your decision. What do you believe a home provides you? How does it fit into your future goals? Are you willing to tie up your funds in a non-liquid investment? Are you prepared to handle the maintenance? Do you have time for upkeep?

When you feel positive about your answers, reach out to your agent for advice, and to start looking for your new home. 

Why Employment History Matters When Buying A Home

There are so many factors that go into buying a home. How much money do you have saved up? What is your debt amount? Hw much money do you make each month? Can you afford the neighborhood that you’d like to live in? All of these questions are swirling around the minds of all first-time homebuyers. Did you know that how long you have been at a job is just as important as your income as a factor in getting approved for a mortgage? 

Your ability to repay is why the lender is looking at so many different numbers and factors about your financial situation. Employment overall plays a large stake in the mortgage application. Lenders will look at your past employment history along with the job that your currently have. They are also concerned with your future employment status. Your lender will get an idea of your overall plan for your career and employment through looking at your history. 

As a first-time homebuyer, you most likely don’t have the employment history of more seasoned homebuyers. Generally, most people who are buying a home for the first time are pretty young in their careers. As a rule of thumb, lenders will look at your employment history over the past two years. The lender wants to see your industry focus. Maybe you have stuck with one career direction, or maybe you have hopped around a bunch. As a hint, jumping around from job to job and field to field doesn’t look very good to mortgage lenders. Job floaters tend to appear as if they have no plans for the future. 

Good Career Moves

Staying a software engineer, but moving from the medical industry to the financial industry is an acceptable and smart move in the eyes of lenders. Yet, leaving your stable job in accounting to pursue a career in acting would not be looked upon favorably in the eyes of a mortgage lender.

It doesn’t matter how much money you have saved up, often, without employment history, a lender may not consider you as a dependable buyer. Your lender wants to see that your income is stable for a period of at least three year’s time.

Income Matters 

You won’t have the same work history as a first time homebuyer as you would if you were a bit more seasoned. When lenders look at your income history, not having a lot of work history can be a detriment to many factors. If your income is an annual salary, for example, your lender will divide that salary by 12 in order to get a monthly income. If you haven’t been at the job for a full year or took a pay cut during times of training, those numbers will be affected.

For hourly employees, overtime may be a problem as it may not be factored in with the equation if there isn’t a history of at least two years on the job. 

While it isn’t impossible to buy a home with a short employment history, it’s advisable to wait until you have some significant time under your belt before you dive into the home buying process.