When to Purchase Your First House


Most renters dream of owning a home. Yet the dream sometimes seems impossible to achieve. How do you decide when the time is right? Because buying a house is a huge financial commitment, it’s important to consider certain factors before acting to make your dream a reality.


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Here are five key factors to review before coming to a final decision.

1. A stable household income is necessary. If your household income is sporadic or uncertain, it may be unwise to consider buying – unless you have sufficient savings to bridge the gaps. In addition to assessing your employment stability, consider your plans for the future. If you and your spouse are thinking about having a baby, or if one of you hopes to return to university, interruptions to your income may be inevitable.

2. You must have sufficient savings to afford an adequate down payment. Normally the minimum is 5 percent of the cost of the house. However, most financial advisors recommend that the down payment be closer to 20 percent. Whatever amount you devote to this purpose, making the down payment should not completely exhaust your savings.

3. Your household income must be sufficient to cover not only the mortgage payments but also ongoing non-mortgage costs. Keep in mind that the costs of home ownership extend far beyond the down payment and the mortgage. There are utility expenses, property taxes, and home insurance. Some of these costs – for example, utility expenses – rise in an unpredictable way, so you can’t necessarily predict future expenses by referring to the amounts paid in previous years.


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4. Ensure that your credit report is clean. However high your income and/or your savings, you will not be able to obtain good mortgage terms unless your credit report is respectable. Obtain a free credit report from each of the reporting agencies, Experian, TransUnion, and Equifax. If there is a problem, rectify it and then – if your schedule is flexible – wait until your credit report is clean before applying for a mortgage.

5. Your existing debt should be low and manageable. Because you’ll be taking on a massive new debt, it’s important to ensure that your existing indebtedness – from credit cards, student loans, or car loans – is under control.

A careful review of these five criteria is necessary prior to making the house purchase decision. If you pass this test with flying colors, you are well-positioned to move from renting to buying. If not, it is prudent to work on fixing the problem(s) before you make a decision to buy your own home.

Gina Wilson

Another post from Gina Wilson – Credit & Loans Specialist Blogger.

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