Are You Financially Ready for a Home?
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Being ready to buy a home is about more than just a feeling — it’s fundamentally about finances. But no matter how responsible you are, how hard you work, and how much you’ve saved, not everyone has the insight or the confidence to know when it’s time to dive into homeownership. We understand that veterans have plenty on their plate, so we’ve put together a look at some of the major things first-time buyers may need to consider when looking over their finances.
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What to Consider Before You Buy a House
So where do you start when it comes to looking at your finances? There are a lot of factors at play when you’re trying to determine whether you are financially ready for a home. A home comes with a lot of costs beyond the initial investment, so you need to know not only that you have money set aside for the purchase but also that you’ll be prepared to spend throughout the length of your mortgage.
Look at your savings first. Whether you continue to enjoy a housing allowance for active military or are looking for a new home after your service, you should be in good shape for the down payment on a house. Average buyers spend roughly 7% of the home’s total sale price on their down payment. Beyond that, you need to have the ability to pay your monthly mortgage and associated costs, such as mortgage insurance and homeowner’s insurance.
Don’t assume that you will have the right job later down the road; instead, look at your current earning ability and invest based on that. Of course, you can always move to a bigger home if your finances improve drastically, but initially you should look to spend about 28% or less of your monthly income on a mortgage.
When it comes time to secure your funding, most loans will be contingent upon your credit score, so looking at your score will give you an idea of what kind of loan you can expect. In general, more favorable terms are usually available for borrowers with better credit, though for veterans a VA loan (which sees the government act as a loan guarantor) offers some flexibility.
What If You’re Not Financially Ready for a Home?
If you’re not ready to buy a home yet, don’t force it. Buying a home before you are ready is a quick way to get yourself into serious financial trouble, seriously damage your credit score, and even lose your home — which will make getting into a new home an extra challenge. But you can start preparing now.
If owning a home is your dream but the numbers aren’t yet in your favor, there’s plenty you can do to get there, like working on bumping up your credit score. This can take time, but major strides can be made relatively quickly.
Focus on your savings! Maybe this means an extra part-time job, or maybe it just means cutting back on expenses where you can. Run the numbers for what kind of home you want, see what sort of down payment that may require, and start working toward those goals in your budget. With a clear target in sight, it can be easier than you think.
Meeting the Threshold to Buy a House
When it comes to buying a home, it’s good to have concrete numbers to look at, depending on your savings, your location, and your needs and wants. It’s also good to follow a couple of rules of thumb. Keeping the 28% rule in mind for your mortgage commitment will help you work backward to come up with some goals for your monthly budget. Take a look at the average cost of homes by state to get a better idea of what you can expect based on your location or the location you hope to move to after deployment.
As far as your credit score goes, the average score needed to secure a loan is around 620, though that will vary depending on what sort of loan you want to pursue. A higher score will give you access to better interest rates. With some loans, such as a VA loan, the requirements to get a loan will be much lower, which can work to your benefit if you want to invest in a home but don’t have the kind of credit score you want.
Hero Loan Is Here to Help
Once you’re ready for the next steps, Hero Loan can help you get the help you need. Our expert team is dedicated to meeting the needs of veterans in a quick, convenient fashion, making sure you can not only get into a new home, but do it quickly. Even if you don’t meet the traditional thresholds for a home with a conventional mortgage, a VA loan is easier to qualify for — and Hero Loan goes the extra mile to help you fill out paperwork and cut down on your wait times.
Collaborating with our experts will ensure that the right lender is secured, one who understands your individual needs moving forward. Unlike many lenders, who default to simply jumping on the lowest interest rate — a competitive loan process that is hard to get approval for and can draw out your home buying journey — we seek to get to know you and match you with the loan rate that is best for you. To find out more, check out our mortgage calculator. Then contact us to talk to a loan expert and start your five-minute loan approval today!