Buying a house has always been a significant part of the American dream. Today, potential home buyers are getting younger, with the millennials accounting for majority of the homebuyers.
With monthly rents on the rise, buying a house may actually be a good choice. However, it is important to check your entire financial picture before you start looking at houses.
Here are 3 warning signs you’re not yet ready to buy a house.
You don’t have an emergency account
A house is one of the largest purchases you will ever make. You may be earning enough money now to pay off your monthly mortgage, but sometimes, things happen unexpectedly. You may lose your job, a family member may get sick or you may get divorced. Situations like this can keep you from paying off your monthly mortgage.
If you are considering buying a house, we urge you to start by building an emergency fund. Make sure that you have at least 6 months worth of your living cost. This way, you’ll have no problems settling your home loan in case you find yourself in a compromising situation.
You have a low credit score
Lenders will evaluate your financial picture when you apply for a mortgage. Your credit score is a measurement of your creditworthiness. The higher your credit score is, the higher your chances is of getting approved for a home loan. Poor credit score indicates some sort of financial problem, which makes it difficult to get approved for a mortgage.
Getting a mortgage with bad credit can be a challenge, but it’s possible. If you are considering buying a house in the future, we urge you to act now. Take steps to improve your credit score, so when the time comes that you’re ready to buy a house, applying for a mortgage will be a breeze.
You don’t have a solid plan for the future
Most first time homebuyers opt for a starter house. They would buy a small and then move to a bigger house later on. In order to recoup your investment, you need to stay in the house for 5 to 7 years.
If you still don’t have a solid plan for the future and you’re not sure if you’ll be staying in that house for a long time, buying a house may not be the best right now. Unless you have a stable job and you are certain that you’re not moving across the country, you might as well reconsider your plans of buying a house.