How to Know if you are ready to buy a home

Home Ownership is part of the American dream. Some dream about it all their lives, some realize it through good planning and persistance. How do you know if you are ready to purchase a home?

Difficulty: Moderately Easy

Instructions

Things You'll Need:

• A steady job
• Determination
• Planning

1. 
    
   Make money first

   Ability to pay for your mortgage: Have a minimum 2 years of work history, plus at least 3 years of continued employment opportunity. You must demonstrate to the lender you have the ability to keep a job. Stability translates to steady paychecks. Have your recent month paystubs, last two years of w-2's and tax returns ready before you talk to a lender.

2. 
    
   Good credit

   Good credit history: a minimum of 620 credit score for a FHA loan, and 720 for a conventional loan. If you have bad credit history or no credit at all. Don't worry; start planning today and you will have your points up in a year or two. Rome was not built in one day! Check the link below to find out how you can build you credit scores fast.

3. 
    
   Debt to income ratio

   Desirable debt to income ratio: when qualifying your for a loan, lenders calculate your proposed mortgage payment, HOA fees if any, property taxes and homeowner's insurance per month plus all your credit card and loan payments. The amount is then divided by your gross monthly income (before income taxes are deducted). The ratio should be under 41% for FHA, 42% for VA or 45% for a conventional loan.

4. 
    
   Savings

   Assets for down payment: To qualify for a FHA loan, you will need to have 3.5% of the purchase price. For example, if you are buying a home at $350,000, you will need $12,250 to put down. For conventional loans, you need 10% - 20%. Down payment can be from your own savings, gifts from family members and your retirement account.

5. 
    
   Closing costs

   Closing costs: The transaction itself will cost you anywhere from a few hundreds to seven or eight thousands depending where you are buying and how you finance it. In a buyer's market, this can often times be negotiated so that the seller will give you credit to pay for it. See link below to find out what closing costs include.

6. 
    
   Tired of throwing you money away

   Tired of paying rent: Add up all your proposed mortgage, tax and insurance payments. If the amount is equal or greater than your current rent, and you meet all the above conditions, you are definitely ready to make your dream come true.

Resources

• How to raise you credit scores instantly
• How to establish credit without any credit history
• How to Raise credit scroes
• How to calculate closing costs

[karileighk]

on 6/26/2009 Good info *5

[jenng]

on 6/18/2009 Great article on how to know if you are ready to buy a home 5*