Owning a home is part of the American Dream. Everyone wants to own a piece of property that they can call their own. But not everyone is lucky enough to have a stable financial setup and a good credit score that will not put them in more debt. The huge number of foreclosures in recent years has dampened the ability of Americans to get approved for a home mortgage. Low salary, debilitating student debts, and consumerism have all led to our inability to own a home.
While you can look for a reputable HUD multifamily lender, you also need to prepare yourself and your finances for the big responsibility of paying a home mortgage. Here are the four things that you must consider before applying for a housing loan:
The Housing Market
A house is a big investment. You’re not only going to pay the monthly amortization. You’re also going to maintain the house, upgrade and fix it, and pay its taxes. You should look at the housing market before you decide to purchase a home. It will also do you good to plan in case you might want to sell it in the future.
For example, couples who had bought a house for $20,000 50 years ago were able to sell it five to 10 times its original price 30 years after. But some couples lost money when the real estate market dropped in 2006. They were only able to sell the home at the same price they’d bought it. In effect, they lost money because of upgrades, maintenance, and renovations done thereafter.
Your Financial Status
How are your finances? Banks will require you to make a 20% down payment of the overall amount of the home you’re trying to purchase. If you can’t afford it, you’ll have to pay private mortgage insurance (PMI), which protects the bank in case you renegade on your loan. It doesn’t make sense to pay an insurance policy. If you don’t have money for the down payment, reconsider if this is the right time to apply for a house loan.
At the same time, your expenses should make up only 40% of your gross monthly income. If you’re making $4,000 a month, you should have a total monthly expense of $1,600. That includes utility bills, mortgage, auto loan, credit cards, and phone bills.
Your Financial Future
Banks will require that you have been with your current employer for at least one or two years. If you have any plan of changing jobs in the future or if you’re expecting a big medical expense, this is not the right time to buy a house. You need solid financial footing to be able to afford a house. If something goes wrong with your current employer, do you have the money to pay for the house for at least a few months until you find another job? How about your living expenses?
Your Future Plans
Are you planning to stay in the state for a long time? Do you see yourself retiring there? If there is a reason to believe that you’ll leave for another city or country in the next couple of years, you should put off buying a house. If you think buying a house is tough, try selling one. It’s even tougher to get back your investment when you put the house on the market. You may have to short sell the house and lose money that you’ve invested there. If you’re not planning to stay for a long time, just simply rent an apartment.
The word “affordable” doesn’t just mean that you can pay for the mortgage now. There are a lot of considerations that have to be made, such as the financial and lifestyle changes that you need to take. Here’s the clincher, though: When you find the perfect house at the perfect price at the perfect time, take the plunge.